Pbemag june 2014 virtual

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VOLUME 2 NO. 6

JUNE 2014

www.PBEMag.com

How crowded are our roads? 8

Local Companies Invest in

Midland’s Future

New study shows

Texans among the most content residents in 16 the nation

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PBE PROFILES:

Jim Henry 20

Advice for Mineral Owners from Permian Basin Land Girl 28 • U.S. RIG COUNT • TOP 35 Drillers & Operators

Industry Data

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News

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Events

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Auctions

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Calendar

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RESTAURANT BITES

Travel

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Tips

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Energy

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Tech

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

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JUNE 2014

contents

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Pbe Features 8

How Crowded are our Roads?

12 Local Companies Invest in Midland’s Future 16 New Study Shows Texans among the Most Content

Residents in The Nation

Other Editorials

15 Calendar of Events 20 PBE Profiles: Jim Henry

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24 Conferences in June - July 25 Upcoming Auctions 27 Safety Tips - If You See It You Own It! 28 Advice for Mineral Owners from Permian Basin Land Girl 32 Festivals and Events in Texas 34 PBE Cares - The Life Center, Pregnancy Resource Center 36 Tech Bites - Steering Driverless Cars to Market 38 PBE News Briefs:

Basin, Shale, State, Government, Nation, Offshore & World 42 Restaurant Bites - Summer Time B-B-Q is just

around the Corner...

44 PBE Inspires - One Thing Duct Tape Won’t Fix 46 By The Numbers: Texas Rig Count, Top Drillers, Top Operators 49 This Month in Petroleum

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

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LETTER FROM

THE EDITOR “Nearly all men can stand adversity, but if you want to test a man’s character, give him power.”

- Abraham Lincoln

When I saw this verse posted inside a local business, I knew it was the perfect fit for my letter this month.

During such prosperous times as we’re facing now, you really get a chance to see people’s true character shine through. It shows through their actions, their reactions and in how they treat their friends, family and fellow employees.

That’s one of the reasons we decided to start a new featured section this month called PBE Profiles. Many of us recognize the names of the leaders behind the large, successful oil and gas companies but few people know how those leaders got to where they are today. That’s what we’re hoping to shed a light on in this new section. Not only the adversity and challenges that most of these men and women had to face to find success, but also the character that has prevailed as they have risen to positions of power and influence and decided to give back to their community.

Another good example of this can be seen in another feature story this month about the handful of companies who have committed to invest in their community’s future by supporting an incentive program for teachers. It’s also safety awareness month so we would be remiss if we didn’t take the time to recognize how important safety is in our industry as well as highlight a huge safety issue right now related to road and traffic safety. In addition to these stories, you’ll also be updated on what’s making headlines around the world, nation, state and basin as it relates to our industry as well as get your monthly does of encouragement from local pastor Daniel Stephens.

Hopefully as you finish reading through the issue this month, you’ll not only be informed, encouraged and inspired but also reminded about what makes a great leader and how in times of great accomplishments, power and success, we find our true character is tested and what we really stand for will ultimately shine through.

Carlos Madrid Editor in Chief/Publisher sales@pbemag.com

/PBENERGYMAG @PBENERGY

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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EDITORIAL CONTRIBUTORS

PBE MAGAZINE CONTACTS VOLUME 2 NO. 6

EDITOR IN CHIEF/PUBLISHER Carlos Madrid sales@pbemag.com 432. 559. 5886

AUDRIE PALMER

Taryn SnideR

FREELANCE WRITER

FREELANCE WRITER

Midland, TX

tarynsnider@gmail.com

audrierpalmer@gmail.com

ART DIRECTOR/LAYOUT & GRAPHICS Luke Pawliszyn Lukasz Design Studio West Hollywood, CA luke@lukaszdesign.com ADVERTISING For advertising info call 432. 559. 5886 or email sales@pbemag.com

MORRIS BURNS FREELANCE WRITER

ACCOUNT EXECUTIVE Tiffany Clemons tiffany@pbemag.com 432. 978. 2393

morrisburns@sbcglobal.net

SUBMISSIONS Submit story ideas & other news to haley@pbemag.com PUBLISHED BY: PBE Magazine, LLC. Permian Basin Energy Magazine 4500 Erie Drive Midland, TX 79703 Main Phone: 432. 559. 5886

www.PBEMag.com

/PBENERGYMAG

DANIEL STEPHENS SENIOR PASTOR Mid-Cities Community Church • Midland, TX daniel.stephens@midcities.org

@PBENERGY

Copyright © 2014 Permian Basin Energy, Inc. • Mad Ads Media All rights reserved.

Reproduction in whole or in part without the written permission of PBE MAGAZINE, LLC is strictly forbidden. The greatest care has been taken to ensure the accuracy of information in this magazine at time of going to press, but we accept no responsibility for omissions or errors. PBE Magazine welcomes any comments, feedback, suggestions, and/or submissions for consideration for publication. These may be submitted to: sales@pbemag.com.

JUDY ROUSE Executive Director of the Life Center

Kimberly Smith CEO Development Resources, Inc.

Tiffany Hokett Vice President American Safety Services, Inc.

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How crowded are

our roads?

by Audrie Palmer

Smaller communities like Big Lake, Crane experience bigger impact from oil boom.

If you've driven through any smaller West Texas town recently, you've definitely noticed an increase in traffic, specifically a rise in commercial vehicles in this energy sector-driven part of the state.

And while an additional 1,000 vehicles may not make much of an impact in the traffic in areas like Midland and Odessa, towns such as Big Lake and Crane, that boast populations of 7,500 total for their counties, that additional 1,000 vehicles are definitely noticeable.

"One of the good things of the oil field is the booming economy, but the price is that there's heavier traffic all across the district," said Gene Powell, area spokesman for the Texas Department of Transportation.

Powell oversees a 12-county district in the Permian Basin from Andrews and Crockett to Winkler and Ward and all in between.

Knowing that at least a hundred vehicles are needed for the production of an oil well, Powell said smaller towns are having to deal with an increase of traffic in their areas just from the oil industry.

"It's definitely a challenge and people aren’t used to it.

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And the oil economy moves so quickly, it's hard to predict where the traffic will increase," he said.

And with the added traffic comes the deterioration of our highways and state roads.

Texas A&M’s Transportation Institute researcher David Ellis told Texas lawmakers earlier this month, the new estimated cost of maintaining the roads that the Texas Department of Transportation will be needing for the 2015 legislative session and it's a high bill - a total of $28 billion. And that doesn't include fixing the roads that are in desperate need of repair in the energy sector regions like the Eagle Ford Shale.

The reason for the almost $4 billion increase from the last two years? The rising cost of construction supplies and materials.

In November, Texas voters will have the chance to decide to provide TxDot with $1.3 billion from the state's Rainy Day Fund.

Approximately $100 million is needed for rehabilitation on the roads in the Permian Basin, according to Powell.

While the vast majority of the roads here have the four-

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

foot shoulders unlike in other parts of the state, the primary focus, he said, is in preserving the assets the area has to make sure our roads are in good condition.

The new road project will create a two-lane county road that covers 7.6 miles to help with industrial traffic on South Highway 349 and provide an alternative to I-20.

"We don’t really need to add capacity. Just rehabilitation and maintenance," he said adding that he values what legislators are doing and that voters will have the chance this fall to vote against or for a measure that will add more funding to state agencies.

The money came from a $225 million state allocation for road projects in energy-impacted areas, according to officials.

It's the stress issues from the increased on many state roads especially in the energy sector that is taking its toll.

The agency and counties have applied for rehabilitation funding and are eager to make improvements.

"Heavy commercial vehicles impact the road conditions," Powell said.

The Permian Basin has already received $35 million for the energy sector and have applied for three times that amount for additional funding, Powell added.

Locally, Midland County was granted in May $5.9 million from TxDot for the development of southern county roads.

And with the increased traffic Powell reminds drivers that there is an even greater need now to adopt more defensive and safe driving habits. While there are more commercial vehicles on the roads, Powell said drivers need to remember that they can’t stop as quickly nor speed up as quickly as smaller vehicles.

Drivers should be patient and protect themselves by driving defensively. More than 90 percent of traffic fatalities worldwide are caused because of driver error, Powell said, and drivers must drive differently and carefully so we can each go home at night. " I can't stress enough that drivers need to change their driving habits," he said. "There's more traffic and we have to protect ourselves."

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Local Companies Invest in Midland’s Future

by Taryn Snider

Oil and gas companies have a reputation for their generosity so it was no big surprise when Midland ISD announced that they received grants from local oil and gas companies and Midland foundations to be used as incentives for teachers.

While the high paying oilfield work may be the driving force in our thriving economy, those oilfield jobs alone cannot sustain a community. Competitive pay has caused a shift in the workforce as more and more people in the community have left jobs to go work in the oilfield.

The increase in population has driven housing costs up. Whether people are renting or owning, they’re paying more. Midland ISD Superintendent Dr. Ryder Warren recognized last summer that teachers’ paychecks couldn’t keep up with the cost of living in Midland. The school board sprung to action and began an initiative to purchase mobile homes and create a “man camp” for teachers at a mobile home park on the edge of town. It was then that the Scharbauer Foundation and Midland ISD formed a partnership called “Live Here, Teach Here.”

In an effort to ensure a fully staffed school district, the Scharbauer Foundation granted $3.3 million to the Midland ISD Education Foundation to provide rental assistance for teachers. The benefits include 40% rent assistance, up to $500 per month for qualifying teachers during the 2013-14 and 2014-15 school years.

Dr. Warren also saw the need to make teachers’ salaries more competitive over the past four years and, with 12

the support of the school board, has raised salaries accordingly but despite all efforts to remain competitive, the cost of living in Midland remained a looming obstacle, impossible to compete with. Always consistent with their willingness to give and better our community, a group of local oil companies and foundations invested $6.25 million to fund a teacher incentive program.

The program will offer $10,000 signing bonuses to 325 new teachers to be paid out over the course of 36 months and $2,500 re-signing bonuses to 1,200 current teachers who choose to return for the 2014-15 school year. Elana Marion, Community Engagement Specialist at Chevron said, “Chevron believes that for people and communities to thrive, nothing is more important than education. We’ve been part of the Permian Basin for 90 years and plan to be here for many years to come.

Attracting and retaining educators strengthens our community; it is an investment in our future.” A venture like this is something that doesn’t happen in most places outside of Midland but anyone who deals with these companies on a regular basis knows that we live in an area where community involvement initiatives are common practices among companies and people alike.

David B. Leaverton, Public Affairs Supervisor of Pioneer

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

Natural Resources said, “As just one of many programs and organizations Pioneer supports throughout West Texas, we are proud to support the Midland Independent School District’s efforts to provide the best education possible to its rapidly growing student body. We hope that the MISD teacher incentive program will bring new talented educators into the region and that they will become long-term residents of the area, ultimately adding to the number of great educators in classrooms across West Texas.”

Of course, not even a great partnership between Midland’s current workforce and the future of our community can escape without controversy. It was recognized that a third of the $10,000 sign on bonus combined with the beginning salary of a new teacher would propel his or her salary past the salary of a second or third year teacher even after the $2,500 retention bonus was factored in.

When asked, Dr. Warren said that the teachers have no issue with the fluctuation the bonuses will cause in the salary schedule. The teachers are very appreciative of the bonuses and will be glad to have the help the incentives will bring in.

Another concern is that with Ector County ISD having

the same struggles as MISD keeping staff employed, there is the potential for ECISD teachers to leave Odessa to come work in Midland. Dr. Warren has stated that he plans to recruit from outside the Permian Basin.

One thing that might actually come to a surprise is that this is not the end of what Dr. Warren has in store for MISD. He has hinted that there is more to come but is keeping the details of any future partnerships and initiatives under wraps for now. “When things die down in the coming months we will come together as a group and map out the next steps.”

Participants of the teacher incentive program are: Concho Resources Pioneer Natural Resources Apache Corporation Warren Equipment Company Chevron The Abell-Hanger Foundation The Henry Foundation The Scarbauer Foundation

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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OBSERVANCES AND CELEBRATIONS

JUNE 2014

Hurricane Season: June 1 to November 30

Birthstone: Pearl Flower: Rose National: Safety Awareness Month Adopt a Cat Month

August & September are peak months.

Fresh Fruit & Vegetables Month

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ATLANTIC HURRICANE SEASON BEGINS

Rose Month Candy Month

3-4 The 1st Annual Conference of the West Texas Energy Consortium

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An event for individuals, businesses, communities and others interested in the oil & gas growth taking place around West Texas. At the Abilene Civic Center in Abilene, TX. Topics include: legislative updates from the capitol, insight from industry leaders in the area, Phase II of the Economic Impact Study, and sessions on workforce development, fracking and fresh water, emergency management planning, as well as our keynote luncheon speaker, Dr. Ray Perryman from the Perryman Group. www.WestTexasEnergyConsortium.com

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WORLD ENVIRONMENT DAY

6-7

Bad Boy Blast Presented by ConocoPhillips

NETWORKING PROVIDERS OF SERVICES IN THE PERMIAN BASIN

A networking group connecting people to improve the quality of life in the Permian Basin. State agencies and individual owned businesses providing services to the Permian Basin area. First Visit Free. Annual dues $12.00 (prorated).

Bring your business cards, brochures and name tag. Purchase lunch, if you desire. Speakers during lunch. 11:30am.

Mia Piaci Italian Restaurant.

Windwalker Farms. 2551 County Road 2801, Martin County, Texas 7:00 AM -6:00 PM. 11th Annual Sporting Clay Shoot Benefiting Andrews, Ector, Howard and Midland County Volunteer Fire Departments & Odessa Crime Stoppers. Susan Rogers will hold a Silent Auction at the event to benefit Odessa Crime Stoppers.

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First Day of Summer

FLAG DAY Father’s Day

CANADA DAY

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JULY 2014 1

Birthstone: Ruby Flower: Larkspur, Water Lily

UNITED STATES INDEPENDENCE DAY

The Independence Day referred to here is the U.S. Independence Day also known as the “4th of July” that commemorates the adoption of the Declaration of Independence.

It is a Legal U.S. Holiday that is celebrated with picnics and fireworks.

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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New study shows

Source: www.vox.com

Texans among the most content residents in the nation New data is out on the states people want to leave, and it’s tailor-made to troll all your Facebook friends from Illinois and the northeastern Amtrak corridor.

Gallup asked people around the country whether they would move away from their states, given the chance. As it turns out, half of Illinois residents and 49 percent of all those living in Connecticut want to change states. In addition, it looks like a good chunk of the northeastern seaboard is just itching to pack up a U-Haul.

Among those least likely to want to leave are Montanans, Hawaiians, Mainers, and yes, Texans.

Meanwhile, in nine states, 40 percent or more of the people want to get out, including around half of all Illinoisans, Marylanders, and Connecticut residents.

It’s fascinating data, and if you’re from the relatively content states, you can feel comfortably superior. If you’re from one of those less content states, you can shake your fist at the sky in anguish.

Or you can just, you know, get out.

All these people say they would leave if they could, but far fewer actually will, which might in a certain sense be good — imagine the epic moving-box and bubble-wrap shortage if one-third of all Americans moved to a new state.

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But only six percent of all people said they were either very or extremely likely to change states in the next year, and even that is higher than the number of people who will likely move. That share of people who as of July 2013 were in a different state from a year ago was around 1.5 percent.

That’s a much lower share than it used to be. Interstate migration has fallen in a big way over the last twenty years.

Although the data isn’t perfect, it clearly shows that the gross interstate migration rate fell by roughly half, from almost 3 percent to around 1.5 percent, between 1990 and 2011.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

Americans have stopped changing states, and that may be a very bad thing. During and just after the recession, the ever-dropping moving rate made everyone wring their hands: a collapsed housing market and a profound lack of jobs both contributed to and resulted from a lack of migration.

When there are no jobs anywhere, after all, people have less of a reason to move. And when the housing market is stagnant, people can’t go get the jobs that do happen to pop up. In other words, the would-be factory worker who can’t sell her house in Memphis to move to Cincinnati, where there are jobs, can’t get that job and spend that paycheck and create more jobs. Or maybe that person just wants to wait for housing prices to pick back up again before selling.

Because of this, it could be both a promising sign and an economic booster if Americans start to move more; notably, a lot of the states where people say they’d least like to leave also have low jobless rates, and people who would most like to leave are often in states where the jobless rate is high.

Plus, among Americans who say they plan to leave their states, the most common reason given was work- or business-related — a reason given by 31 percent of respondents. Different states, however, had different mixes of reasons; New York, Illinois, and Maryland residents all cited taxes as a key reason. New York and Connecticut residents were also significantly more likely to cite a high cost of living.

All that said, there’s another story about why people are staying put, and it’s not about recessions. After all, the decline in mobility started way before the recession.

Rather, it may be all about a more homogeneous US economy, not to mention the internet and cheap travel.

Economists Greg Kaplan and Sam Schulhofer-Wohl, argue that the decline in moving in part happened because US jobs got less geographically specific, as they put it. Translated, that means it’s easier than it used to be to find a lot of the same sorts of jobs across a lot of different cities, as the Economist noted in 2012.

A shift away from the goods-producing sector to services has helped this happen. Common services jobs, like healthcare and waitressing, can be done anywhere. But a lot of goods-producing jobs (manufacturing, mining, logging) have to be done in particular places (i.e.

wherever the factories, mines, or trees are).

Likewise, there’s now more fluid information. People can easily look up places they might want to live. This could also be a factor that keeps people in place — they can research and hem and haw over a move, rather than crossing their fingers and driving across the country.

All of which may mean that even if Illinoisans and Connectici and really anyone else is just sick of their state, they’re less likely to do anything about it than they were 20 years ago. The question of whether that’s a good or bad thing remains a mystery.

States With Largest Proportion of Residents Planning to Move Within 12 Months % Extremely/Very/ Somewhat likely to move Nevada Illinois Arizona Maryland Lousiana Idaho South Carolina Mississippi New York Connecticut North Carolina

20 19 19 17 17 17 17 16 16 16 16

Gallup 50-state poll, June-December 2013

States With Smallest Proportion of Residents Planning to Move Within 12 Months % Extremely/Very/ Somewhat likely to move Main Iowa Vermont Minnesota West Virginia Texas Pennsylvania Indiana Kentucky Noth Dakota

8 8 8 9 9 9 9 9 10 10

Gallup 50-state poll, June-December 2013

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PR O FILES Jim Henry

by Morris Burns Photo courtesy of © 2014 Marfa Public Radio

Imagine the surprise of some freshman in the mid ‘50’s at the University of Oklahoma that he was being hazed with a Dutch Rub, aka noogie, or a trip into the pond in front of the dorm by the future founder of Henry Petroleum and well respected Midland philanthropist Jim Henry.

Jim’s father was a hard rock mining engineer and owned his own small business. While attending Classen High School in Oklahoma City Jim was good at math so engineering came as a natural career choice. When he planned to attend OU he found that they had a very good petroleum engineering program and after playing around the oil fields around Oklahoma City as a youngster the choice was easy.

Jim saved $1,600 from a paper route and worked summers for Humble Oil Company to finance his college education. He enjoyed working one summer as a roustabout at Bronte, Texas learning the production side of the business. The next summer he worked as an engineering assistant in Wichita Falls, a much less interesting job. He also worked for Humble a few months while completing his thesis and prior to going into the Air Force.

Jim lived in student housing while attending OU. When he was an upperclassman he participated in initiating incoming freshmen into dorm life by throwing them into a pond in front of the dorm. A couple of times there ware some pretty big, strong fellows to initiate and that posed a couple of problems. One time there was a 20

pair very large of twins to be initiated so they got them into Jim’s room one at a time for some minor hazing thinking they were safe from the other brother. Seems the key to the twin’s door also fit Jim’s room and during the administering of a noogie, complete with much loud protesting, the door opened and the other brother filled the entire door opening. In another incident the student to be hazed was talking to his girlfriend on the phone when they went to administer his initiation. Jim and the others let him go into his room supposedly to finish the phone call. When Jim and the others went into the room the student was standing in the second floor window and proceeded to jump out breaking his wrist in the process.

After earning a masters degree from OU he did research in the Air Force for two years, rising from the rank of second lt. to captain. Following his time in the Air Force, he worked for Humble, now Exxon, for four years in Houston and Midland.

After being honorably discharged from the Air Force it was back to work for Humble for four and a half years then to Skelly Oil Company. Then Jim was hired by Daroyl Curry, one of the owners of Solar Oil Company.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

Shortly after going to work for Solar, the company lost their major investor and Jim was laid off. Jim talked with Bob Landenberger, also a layoff victim of the demise of Solar, and the two formed H&L Consultants. H&L started out with a business plan on half page of paper. Their plan was to start as consultants, become operators, and then become an oil company. They hired Doris Brooks, who lost her job at Solar at the same time, as their secretary. Jim was a reservoir engineer and Bob was a well sitting geologist.

Going out on their own looked like a risky venture compared to going back to work with Skelly. However when Skelly became Getty then Getty became Texaco and many of the employees were laid off with each successive takeover, the move turned out to be a very fortunate one for both. Bob had six children at the time and Jim had two. Jim asked Paula, his wife, for advice on whether to go back to Skelly or go independent. As Jim put it, she told him, “Go for it.�

One early client was Hanson Oil Company from Roswell New Mexico. H&L Consultants became the Midland office for Hanson. They were paid $1,000 plus a 1 percent overriding royalty interest for each Hanson prospect they developed and $2,000 plus a 2 percent override for each prospect they generated.

his employees make many of the day-to-day decisions at Henry Petroleum leaving him more time for his favorite philanthropic interests.

In 2008 Jim sold Henry Petroleum to Concho but immediately started Henry Resources to continue his interest in the petroleum industry. Jim and Paula also continue their philanthropic interests supporting the new tennis center on Bus Barn Road and assisting MISD in providing affordable housing for teachers.

About the Author Morris Burns: From December 1997-October 2006, Morris served as the Executive Vice President for the Permian Basin Petroleum Association. Since retiring from the PBPA in 2006, Morris opened a public relations and safety consulting firm doing safety classes and public relations for many firms both in and out of the petroleum industry. Morris is also a frequent contributor to local TV news concerning the oil and gas industry in the Permian Basin, as well as a weekly radio show participant since 1998 on KWEL 1070 AM from 8:00 am to 9:00 am Tuesdays talking about oil and gas iss ues. morrisburns@sbcglobal.net

One day in their early consulting days Jim was walking down Wall Street when he noticed Bob Bailey walking behind him. Bob was with a consulting firm, Bailey, Sipes and Williamson. Jim needed work so he slowed down and Bob caught up with him. Sure enough, Bob offered Jim some consulting work at $10 per hour and Jim jumped at it.

In mid 1971 Jim and Bob got their big break. Frank West with Hanover Planning from Dallas contracted H&L to drill several wells in the Spraberry. That was when Henry and Landenberger, Inc. got their start (the predecessor of Henry Petroleum). Henry and Landenberger would make a 32nd override and a turnkey profit of about $6,000 per well. Jim and Bob were elated.

Between 1973 and 1980 things were very good. H&L was sustained by the 32nd overriding operating interest and were drilling 20 wells per year. Gradually Jim and Bob bought more and more interest in the wells that they drilled.

In 1977 Bob decided to retire and the name of the company was changed to Henry Petroleum. Jim now lets JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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Conferences in JUNE - JULY 2014 The 1st Annual Conference of the West Texas Energy Consortium 06/03/2014 - 06/04/2014 Abilene Civic Center in Abilene, Texas An event for individuals, businesses, communities and others interested in the oil & gas growth taking place around West Texas. www.WestTexasEnergyConsortium.com GTL North America Conference 06/04/2014 - 06/05/2014 Houston TX, USA www.gtlnorthamerica.com Tulsa Oilfield Expo 06/04/2014 - 06/05/2014 Tulsa OK, USA www.tulsaoilfieldexpo.com PIRA Scenario Planning Conference 06/09/2014 - 06/09/2014 Houston TX, USA www.pira.com Annual Global Procurement and Supply Chain Management for the Oil and Gas Industry Conference 06/09/2014 - 06/11/2014 Houston TX, USA www.ifmr-events.com/marcusevans-conferences-eventdetails.asp?EventID=21085 PIRA Understanding Global Oil Markets Conference 06/10/2014 - 06/11/2014 Houston TX, USA www.pira.com

Louisiana Energy Conference 06/11/2014 - 06/13/2014 New Orleans LA, USA www.LouisianaEnergyConference.com USEA Annual Energy Efficiency Forum 06/12/2014 - 06/12/2014 Washington DC, USA www.eeforum.net API Exploration and Production Standards Conference on Oilfield Equipment and Materials 06/16/2014 - 06/20/2014 Chicago IL, USA www.api.org/events-and-training/calendar-ofevents/2014/e-p-standards ShaleRail Summit 06/25/2014 - 06/26/2014 Houston TX, USA www.informationforecastnet.com/events/shalerail/ registration API Tanker Conference 06/25/2014 - 06/26/2014 Austin TX, USA www.api.org/events-and-training/calendar-ofevents/2014/tanker South Texas Oilfield Expo 07/09/2014 - 07/10/2014 San Antonio TX, USA www.southtexasoilfieldexpo.com/?gclid=COr78Mypi70CFY 3m7AodewEAvA SPE Well Construction Efficiency NPT Reliability and Process Improvement Forum 07/13/2014 - 07/18/2014 Santa Fe NM, USA www.spe.org/events/14fus4/ EIA Energy Conference 07/14/2014 - 07/15/2014 Washington DC, USA www.fbcinc.com/e/eia/

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Leading Auctions in the Oilfield Industry.

Upcoming Auctions and Auction Equipment listings from Tradequip International’s online and site-held auction companies.

Saurce: Tradequip International

Drilling Rigs

Prod.

Equip.

Drilling Equip.

Tubular Goods

Oilfield Trucks

Oilfield Trailers

Parts & Tools

www.tradequip.com

Support Equip.

SOUTHCENTRAL AUCTIONS

COMPANY

DATES

LOCATION

OILFIELD EQUIPMENT TRUCKS & TRAILERS

Kruse Energy & Equipment LLC

Jun 10, 2014 Jun 12, 2014

Oklahoma City, OK

OILFIELD EQUIPMENT TRUCKS & TRAILERS

Kruse Energy & Equipment LLC

Jun 11, 2014 Jun 12, 2014

Oklahoma City, OK

OILFIELD EQUIPMENT TRUCKS & TRAILERS

Kruse Energy & Equipment LLC

Jun 18, 2014 Jun 19, 2014

Odessa, TX

INVENTORY

No Lots are Currently Posted for this Auction

INTERNET AUCTIONS

COMPANY

DATES

LOCATION

INVENTORY

PIPE & EQUIPMENT AUCTION

Network International Inc

Jun 18, 2014 Jun 25, 2014

Internet

No Lots are Currently Posted for this Auction

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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SAFETY TIPS IF YOU SEE IT YOU OWN IT! Anyone that’s ever been involved in Accident Investigations can tell you, that about 99 times out of 100 you will encounter a witness involved that says something to the effect of “I could have told you that was going to happen” or “I saw that coming”! What does this mean? It means that a person or a group of people saw a hazard or a practice in action that was hazardous and they chose to accept it and do nothing about it. So, why was the hazard accepted?

The answer is often times complacency. Complacency is defined by Dictionary.com as a feeling of quiet pleasure or security, often while unaware of some potential danger, defect, or the like. The danger lies in the unknown moment when a repeatedly ignored hazard transforms from a potential hazard to a lethal weapon. It just takes a split second for that weapon to strike and catch someone who happens to be in the wrong place at the wrong time and all of a sudden someone is missing a finger or even worse someone has lost their life. Now the witness who said “I could have told you that was going to happen” or the person who said “I saw that coming” is not only a witness to an accident but they are responsible for what happened. IF YOU SEE IT, YOU OWN IT!

Another reason for employees accepting hazards as norms is that they are scared to speak up. Workers are afraid that if they say anything that they will be yelled at, made fun of, or even reprimanded. Fortunately, this problem has a solution called the Stop Work Authority. Stop Work Authority is a tool given to employees assuring them that if they see something

being done that is unsafe that they have not only the right but the obligation to stop the job and fix the problem before anyone gets hurt or an incident occurs. The right to Stop Work Authority is given to them by their employer and the operator for whom they are working and it means that they can shut an unsafe act down at any moment and that they don’t have to worry about any kind of reprimand for doing so. In fact, employees are encouraged to do it. The obligation to use stop work authority comes from within each individual who has to decide if they are willing to stand up and stop a job because of hazards that are present. IF YOU SEE IT, YOU OWN IT!

No one wants to be the witness that says “I could have told you that was going to happen” or “I saw that coming”. Do you want to be that someone who could have prevented an accident but chose to say or do nothing? That someone who has to live with the guilt of knowing that they could have made a difference and who knows that they could have stopped someone from getting hurt…but didn’t. Do not become complacent and accept hazards as the norm just because you have been working around it for a long time and nothing has ever happened. By allowing hazardous behaviors to continue, it is only a matter of time before a preventable accident occurs.

Use Stop Work Authority and exercise your right to work in a safe environment. IF YOU SEE IT YOU OWN IT! Tiffany Hokett Vice President, American Safety Services, Inc.

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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ADVICE for Mineral Owners from a Permian Basin Land Girl Mineral owners have a lot of rights!

Mineral owners have the following Executive Rights: ◆ The rights to explore, develop, and the obligation to pay for the costs for that development. ◆ The rights to use the surface (to the extent reasonably necessary). ◆ The rights of ingress and egress. ◆ The rights to enter and leave the premises and the right to lease. ◆ They have the rights to economic benefits.

• They can receive the bonus – which is the payment when they are leased (This is also called the consideration.)

• The rights of rentals, which is the payment for deferred drilling and the royalty, which is the share of production, free of production costs.

There are a few more rights mineral owners may not be utilizing: 1) Mineral owners have the right to research the exploration company seeking to lease the minerals.

Would you lease a rental property to a tenant if you were unaware of their habits, lifestyle or ability to pay the monthly rent?

June will focus on various West Texas, and energy writers exposing the Permian Basin Energy and KWEL.com audience to entertaining & educational writers.

• June 7 - Tanner McElroy, Texas Tech Graduate who lives in Dallas - War of Wings The Battle between Lucifer and Michael before they fall from Heaven. Ethics are important among landmanagers, geologists, and engineers!

• June 14 - Mark Stansberry - Nationally known author & energy investor, America Needs America’s Energy: Creating Together the People’s Energy Plan 28

Have you considered asking the landmanager about the economic stability of the company, their drilling history, and the potential drilling schedule. Also remember, an executed lease is not a guarantee that the lessee will drill. Many mineral owners are leased several times throughout their lifetime and the acreage has not been developed. Further geological studies, seismic, economics, and other factors may impact the proposed drilling.

2) You have the right to utilize landmanagers, attorney’s and other professionals to help you obtain your title and consult you during the leasing process. Our company can review your minerals and create inventories and gather title. We have many experts who we refer for additional services as needed.

For further professional tips, tune into KWEL.com on radiolocator and listen from your smart phone, or tune into AM 1070, FM 107.1 every Saturday from 1:00 p.m. to 1:30 p.m. Call in with your questions to l 432-682-8700 to ask questions to Kimberly Smith, RPL. Listen on Tuesdays at 8:00 a.m. to speak with Morris Burns. Morris has a long history advocacy for the Petroleum Industry.

Truly yours, Kimberly Smith, CEO Development Resources, Inc. Development Resources, Inc. can also help retrieve and inventory your mineral estate. @permianlandgirl on twitter or landmaam.com • June 21 - Lloyd McDonald- Baylor University, Graduate, Midland author & Attorney, Tejanos in the Texas Revolution - Learn about the development of an abstract office. Visit the KWEL station on Wall Street to meet Midland resident, Lloyd McDonald in person after the show!

• June 28 - Rebecca Ponton, landm’aam in San Antonio - Women in Energy - highlighting key leaders in energy and why she is compelled to write about rising leaders. *Taken from Oil and Gas Land) from the AAPL.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

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JUNE & JULY

TOP

FESTIVALS AND EVENTS IN TEXAS All across Texas, a variety of festivals, events and attractions are a great way to have fun and to spend time with your family.

ROUND TOP MUSIC AT FESTIVAL HILL 2014 June 1-July 12 100 young musicians from around the world study & perform in a series of orchestra & chamber music concerts with renowned international faculty, conductors & soloists. The Festival & Chamber Orchestras perform several times during June. Individual & season tickets available. Round Top Festival Institute, Hwy 237 at Jaster Road.

(979) 249-3129 www.festivalhill.org Hot Summer Nights IN ODESSA June 6, 13, 20, 27 and July 11, 18, 25 and August 1 10th Anniversary season featuring favorite musical groups playing jazz to polka, Texas swing to big band classics, Tejano to country—a different musical journey every Friday night.

Downtown Odessa’s Noel Heritage Park (5th & Sam Houston St.) Free admission. Sponsor: Odessa Council for Arts & Humanities and Main Street Odessa.

(432) 337-1492 www.odessaarts.org

Bad Boy Blast Presented by ConocoPhillips June 6-7th Windwalker Farms. 2551 County Road 2801. Martin County, TX. 7:00 AM -6:00 PM. 11th Annual Sporting Clay Shoot Benefiting Andrews, Ector, Howard and Midland County Volunteer Fire Departments & Odessa Crime Stoppers. Susan Rogers will hold a Silent Auction at the event to benefit Odessa Crime Stoppers.

Mex-Tex- Family- Fiesta-2014 June 7 Centennial Plaza. 105 N. Main Street. Midland, TX. 9:00 AM-midnight. Fun family event with live music, activities and food in downtown Midland! Entertainers include Bobby Pulido, DJ Kane & Ricky Rick y Sterio Kumbia, Ram Herrera, Marcos Drozco, La Calma, Las Fenix, and more.

WILD HORSE PRAIRIE DAYS June 6-7 Haskell. Western musical entertainers, ranch rodeo, parade, ranch horse competition, dance, kids’ rodeo, trade show, cutting horse contest and cow-boy church service at Haskell Rodeo Grounds at Civic Center.

(940) 864-2477 www.haskelltxchamber.com

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Opree June 7-20 7 PM Globe Theater • 2308 Shakespeare Road • Odessa, TX 79761 Odessa Brand New Opree was founded on the bases of bringing new talent, artists and music to Odessa. All music that is performed is live with no music pre-recorded on cd or tapes. All band members play their own instruments and sing live as well.

TEXAS FOLKLIFE FESTIVAL June 7-9 San Antonio. A Texas tradition for 43 years, the Institute of Texan Cultures presents 250 cultural organizations, a menu of 150 authentic foods, 65 artisans and craftsmen, and 7 stages of music and entertainment representing the diversity of our state.

For more info: (210) 458-2300 www.TexasFolklifeFestival.org WEST TEXAS WESTERN SWING FESTIVAL June 10-14 Snyder. Hear the “best of the best” western swing musicians at this annual gathering, including Jody Nix, Kelly Spinks, Tommy Hooker, Bobby Flores, Leon Rausch, Eddie McAlvain, Justin Trevino & many more. The Coliseum.

(325) 573-3558 www.snyderchamber.org Wagner Noel Presents Chris Tucker June 13 1310 N. FM 1788. Midland, TX. 8:00 PM-10:00 PM. Adult content, parental discretion is advised. www.wagnernoel.com Disney’s Alice in Wonderland Jr. Summer Camp June 16-July 26 Permian Playhouse. 310 W. 42nd. Odessa, TX 432-550-5456 www.permianplayhouse.com

$600 fee-includes lunch, drinks, targets & door prize drawings including guns. Shells NOT provided, please bring your own.

41st ANNUAL OUTLAW PRO RODEO & SUTTON COUNTY DAYS June 27-28 Sonora. Parade, arts & crafts fair, dance, PRCA Rodeo, food vendors, children’s rides, live entertainment and much more.

Located at Sutton County Park & Arena Complex.

1-888-387-2880 chamber@sonoratexas.org www.sonoratexas.org.

Firecracker Fandango July 4 Hosted by Main Street Odessa, the city’s July 4 celebration includes a parade by the Odessa Jaycees, followed by a festival with food booths, live entertainment, exhibits and activities for all ages. A spectacular fireworks display, hosted by the Odessa Jaycees, is the highlight of the evening. Downtown Odessa 2nd Annual TallTownes Backyard BBQ July 12 KD’s BBQ. 3109 Garden City Hwy. Midland, TX. 5:00 PM -8:00 PM. THE GREENCARDS and DOUG MORELAND. More bands and our headliner to be announced over the next few weeks on our website. THE GREENCARDS From the first down-beat in 2002, through tours with Bob Dylan and Willie Nelson, The Greencards have won hearts and acclaim for their multidimensional Americana vision. They are TallTownes’ first multiple-GRAMMY nominated act, having received GRAMMY nominations in 2008, 2010 and 2014. They were the 2006 Americana Honors & Awards winner as New/Emerging Artist Of The Year, and have occupied the number one position on the Billboard Bluegrass Chart. TallTownes is extremely excited to bring The Greencards to Midland for our Backyard BBQ. www.talltownes.com

Juneteenth Celebration June 18-21 Woodson Park. 1020 E. Murphy. Odessa, TX. This fourday event at Woodson Park is known throughout Texas. It commemorates the end of slavery in 1865. The celebration includes a parade, gospel music, a bbq cook-off, beauty pageant, basketball tournament and activities honoring the historical accomplishments of African Americans.

3rd Annual Sporting Clay Shoot & Pit Challenge June 20 Presented by Permian Basin Petroleum Association. Windwalker Farms. 2551 County Road 2801. Stanton, TX. 11:00 AM 4:00 PM. PBPA Sporting Clay Shoot and Oil Patch Pit King Pit Challenge. 11am-Registration & Two-Man Flush 12pm-Lunch/ Pit Challenge BBQ Cook-off 1-Rotation Begins Awards and prizes announced immediately following shoot. Awards will be given for 1st, 2nd, & 3rd teams. Must be present to win.

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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Cares The Life Center Pregnancy Resource Center

by Judy Rouse

Teen

pregnancy

has

overwhelmed

communities and parents for decades. One out of eight sexually active teens will become pregnant each year. A positive pregnancy test may answer one question but leaves a young woman to answer the greater question, “I’m pregnant, what am I going to do?”

Since 1979, The Life Center has been the answer to that question. We provide a safe and compassionate place for mothers facing an untimely pregnancy to find intelligent, unbiased answers, resources and hope. The Life Center’s humble beginnings in Midland as a phone bank has expanded into a pregnancy resource center offering life-changing educational programs to communities and ISDs and pregnancy related resources including free pregnancy tests, limited ultrasound, material assistance, pre-natal and early parenting education classes, biblically-based support and mentor programs.

We believe in education and we believe education equips and inspires individuals to make positive decision for their lives. We educate in the classrooms providing sexual health educational programs to ISD’s across West Texas. The Life Center’s sexual health education programs reach over 28,000 students annually. By offering answers to important relationship questions and addressing tough sexual issues we help students learn how to reset boundaries and goals to build healthy relationships. One student told her program presenter how much she admired what we do and acknowledged how hard it must be to speak to teens about this subject. Kari confessed she had intended to skip later and go home to “chill and have sex all afternoon” but reconsidered stating,

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“Well now! Like that’s just not happening…anymore… and I wanted you to know that!” And a fourth grade girl recently commented after attending her fourth grade program, “I like that this amazing program helps me feel better about myself, so keep doing what you’re doing. Thank you!”

We educate mothers at our centers where they discover answers to their pregnancy questions.

Julie was one of the many young moms who came to our center seeking answers for her pregnancy.

Convinced she wanted an abortion, she discovered the facts about abortion, parenting and adoption as a possible option. She was offered referrals for doctors and resources ranging from financial help to diapers and formula. Julie missed her second appointment and couldn’t be reached after that. A little over a year later, Julie stepped in the door of the center with a baby on her hip announcing, “I just had to bring him to meet the lady who saved his life!” Our programs are life-changing.

It is our privilege to help people find restored hope and for many hope is found in prayer and the biblically-based support programs we offer. A young dad comes in for weekly parent education stating he wants to be a good dad for his new born son. After a parenting session, he decided to take advantage of the optional prayer offered. Later, the dad stopped by the center again requesting prayer. As he left he said, “I came in feeling angry and I’m leaving with peace.”

He said he didn’t want to be angry when he went to visit his son.

The Life Center’s vision is for communities where individuals and families make positive decisions for life and relationships based on the word of God. We continue to work so that every young person who comes to a crossroad is equipped with the knowledge and the confidence to choose health, to choose wholeness and to choose life.

For more information regarding financial support of The Life Center, please contact Jodie Beyer at (432) 683-6072.

To find out more, become a volunteer or to donate, visit www.midlandlifecenter.org

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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Tech

Bites

Source: www.technewsworld.com

St e e r in g Driverles s C ar s to Market Google is taking baby steps in acquainting the public with its autonomous cars, but though they still fall in the category of “future tech,” that future is less distant.

For one thing, Google is not the only company developing the technology -- many automakers have their own driverless vehicles in the works. If you’re around in 2050, driverless is likely the only kind of car you’ll ride in.

The hype around driverless cars, or autonomous vehicles as they’re also known, is increasing, with Google taking reporters for spins around the city of Mountain View, California in late May. Figuring prominently in resulting news reports were the big red kill button between these cars’ front seats; the emphasis on safety in their design; and yes, a few abrupt lane changes and one case of shuddering at a turn when a bus was close by.

Still, there’s no denying that the auto industry is gaga about autonomous vehicles.

Mercedes-Benz, Audi, BMW, Ford, GM and Hyundai are among the companies working on this technology, while Volvo will put 100 autonomous vehicles on the streets of the Swedish

town of Gothenburg beginning in 2017. Nissan plans to begin selling driverless cars by 2020.

Google led the formation of the Open Automotive Alliance, a coalition including major auto manufacturers, to stimulate the use of Android in cars.

The potential of the autonomous vehicle market is huge: Vehicles with provisions for driver control will hit the market in 2025, while autonomous-only vehicles will arrive in 2030, according to IHS Automotive.

Total worldwide sales of self-driving vehicles will grow from about 230,000 in 2025 to 11.8 million in 2035, the firm predicted. Nearly 5 million of the vehicles sold in 2035 will be autonomous-only.

By 2035, nearly 54 million autonomous vehicles will be in use worldwide, IHS predicted. After 2050 nearly all of the vehicles in use, both personal and commercial, will be autonomous.

“The laws don’t exist to govern fully automated cars today,” Praveen Chandrasekar, telematics and infotainment research manager at Frost & Sullivan, told TechNewsWorld. Further, the legal definition of an autonomous vehicle that will be accepted by departments of motor vehicles has not yet been worked out.

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Then there is the question of liability, Chandrasekar pointed out. “What if a driverless car gets into an accident? Who will be blamed? You’ll get a tangle of lawsuits.”

However, products liability law has been “remarkably adaptive” to new technologies, and, on the whole, the courts “have generally proven quite capable” of addressing this issue when it comes to new technologies and products, noted Brookings Institute researcher John Villasenor.

“Given this strong record of adaptation to new technologies, there is no reason to expect that the legal system will be unable to address the products liability issues that arise with respect to autonomous vehicles,” he wrote.

Interestingly enough, technology will be a trouble spot when it comes to marketing automotive vehicles.

“The sheer amount of failsafe redundancies you’ll have to create, the AI you’ll have to build into the car to determine, for example, when the driver is ready to take control of the car, are issues,” Chandrasekar noted. “What if the driver’s taking a nap when the vehicle wants to revert control to him?”

It’s likely these problems will largely be solved by 2025-2030, Chandrasekar said.

Currently, Google’s autonomous vehicles have about $150,000 worth of equipment, making them a very expensive proposition.

By 2025, self-driving car technology will cost about $7,000 to $10,000, IHS predicted.

This will fall to about $3,000 by 2035, when only fully autonomous vehicles will be offered.

However, one issue -- safety -- may continue to plague auto manufacturers.

There is no such thing as perfect software -- all code has flaws, some of which appear earlier than others -- and the public outcry that might result if one person were injured or killed because of a software glitch in a driverless car could be devastating.

Some people compare autonomous vehicles to jetliners, which essentially are flown by autonomous systems, “but they forget the pilot is still there, a highly trained professional, who takes over if something goes wrong,” remarked Mark Fitzgerald, associate director of automotive practice at Strategy Analytics.

Also, “jets have incredible maintenance procedures,” he pointed out, “whereas car owners may do their oil changes and not take the vehicle to the dealer.”

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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PBE NEWS BRIEFS Watching the basin

Permian Basin drives first-quarter growth in oil-directed horizontal drilling rigs The Permian Basin and South-Eastern New Mexico has seen a significant increase in horizontal oil-directed drilling activity over the past five months. This trend began at the start of 2013, and accelerated from the week ending on December 27, 2013, to the week ending on May 9, 2014. During this time, the number of horizontal, oil-directed rigs in the Permian Basin rose by 63 rigs, 50% of the total increase in the United States. This growth was heavily concentrated in counties in the Permian Basin containing formations with high production potential.

Horizontal oil-directed drilling rigs are primarily used to drill wells that produce oil from tight, low-permeability formations.

The change in the number of oil-directed horizontal rigs in the Permian Basin does not necessarily mean that it will have a commensurate change in overall oil production. However, it does demonstrate that producers have been drawn to the potential for new production from its tight oil formations, which are stacked in multiple layers.

During the first quarter of 2014, almost 80% of all new horizontal, oil-directed drilling in the Permian Basin took place in just five counties that contained such formations.

These counties were Reeves County, (14 rig increase); Ward County, (9 rig increase); Martin and Midland County, (8 rigs each); and Eddy County, New Mexico (6 rig increase). The highgrowth formations in these counties include the Spraberry, Wolfcamp, and Bone Spring formations.

By the end of 2013, the Permian Basin’s 215 rigs surpassed both the Eagle Ford and Williston Basin, which had 173 and 164 rigs, respectively. During the first quarter of 2014, the increase in oil-directed horizontal rigs in the Permian Basin was more than four times the combined increase in the Eagle Ford and Williston Basin.

Source: U.S. Energy Information Administration, based on Baker-Hughes data

Watching THE SHALE

EIA cuts recoverable Monterey shale oil estimate by 96 pct The U.S. Energy Information Administration (EIA) on Wednesday cut its estimate of recoverable oil in California’s Monterey shale by 96 percent, casting doubt on what was once thought to be America’s next major energy play.

Technically recoverable reserves are often a moving target, changing as new drilling techniques develop and the price of oil fluctuates. Further drilling will likely provide clearer evidence of the Monterey’s true reserves, the EIA said.

In what could be welcome news for environmentalists and a potentially bad omen for oil drillers, such as Venoco Inc, with large leases in the region, the EIA slashed its forecast of technically recoverable reserves, citing production difficulties from initial wells.

Oil driller Occidental, one of the major leaseholders in the state, earlier this year put its California business up for sale in part due to lagging oil production.

The reserves were downgraded by 96 percent, from 13.7 billion barrels estimated by a government-funded report in 2011, to just 600 million barrels, the EIA said. A detailed report is expected to be released in June.

“The EIA concluded that the technical recoverability of Monterey shale did not look as strong in 2014 because of the industry’s difficulty in producing from the region,” EIA head Adam Sieminski told reporters in New York.

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“Not all resources are created equal,” Sieminski said. “It turned out that it is harder to crack the reservoirs and get the oil flowing from the Monterey” than from Bakken or the south Texas formation of Eagle Ford.

The downgrade will not impact near term production in the Monterey, estimates of which have increased to 57,000 barrels per day on average between 2010 and 2040, the EIA said on Wednesday. Last year’s estimate for 2010 to 2040 was 14,000 barrels per day.

Source: Reuters

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

Watching the STATE

Texas physicians generating billions of dollars in economic impact Texas physician practices have a profound impact on the state’s economy. A new study released by the American Medical Association finds that there are more than 47,000 practicing physicians in Texas who support in excess of 522,000 additional jobs and generate $78.6 billion in economic activity annually.

“The bottom line is that Texas’ physician practices, without a doubt, are good for the economic health of our communities and our state,” says Texas Medical Association (TMA) President Dr. Stephen L. Brotherton.

The new study, titled “The National Economic Impact of Physicians,” was prepared by IMS Health. It shows that 720,000 practicing physicians across the U.S. supported 10 million jobs and generated $1.6 trillion in economic activity in 2012. “Physicians carry tremendous responsibility as skilled healers charged with safeguarding healthy communities, but their positive

impact isn’t confined to the exam room,” says AMA President Dr. Ardis Dee Hoven. “The new study illustrates that physicians are strong economic drivers that are woven into their local communities by the economic growth, opportunity and prosperity they generate.”

According to the study, each physician in Texas supported an average of 10.8 jobs and generated an average of $1.6 million in economic output.

According to TMA officials, the study found that Texas physicians generate significantly more economic output (medical and non-medical sales revenues) than the legal industry; produce more jobs than colleges, universities and nursing homes combined; and pay more in wages and benefits than all Texas hospitals.

Source: www.bizjournals.com

Watching the GOVERNMENT

U.S. new home sales rebound, inventories at 3-1/2 year high Sales of new U.S. single-family homes rose more than expected in April and the stock of houses on the market hit a 3-1/2 year-high, further signs the sputtering housing recovery was poised to regain steam. The Commerce Department said in May that sales increased 6.4 percent to a seasonally adjusted annual rate of 433,000 units, ending two straight months of declines.

March’s sales pace was revised up to 407,000 units from a previously reported 384,000 units. The government made revisions to the model it uses to adjust the data for seasonal fluctuations, which affected only the monthly data. Economists polled by Reuters had forecast new home sales at a 425,000-unit pace last month.

Compared to April last year, sales were down 4.2 percent.

A run-up in mortgage rates last year and rising home prices, which have outpaced wage growth, are weighing on housing. Home sales are also being hampered by a shortage of properties. But there are signs a turnaround is imminent. Sales of previously owned homes increased in April and the inventory of houses was the highest in

nearly two years, a report showed in May. According to Freddie Mac, the fixed 30-year mortgage rate fell to an average of 4.14 percent in late May, a near seven-month low, from an average of 4.20 percent the prior week. That should help to improve affordability.

In April, new home sales jumped in the Midwest to their highest level since November 2007. Sales also rose in the South, but were flat in the West. In the Northeast, sales recorded their largest decline since October 2012.

The inventory of new houses on the market increased 0.5 percent to 192,000 units, the highest level since November 2010. While the stock of new houses on the market has come off a record low hit in July 2012, it remains less than half of its pre-recession level.

At April’s sales pace it would take 5.3 months to clear the supply of houses on the market, down from 5.6 months in March. With inventories improving, the median price of a new home last month fell 1.3 percent to $275,800 from April last year.

Source: Reuters

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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Watching the Nation

U.S. consumers’ energy spending rose this winter U.S. consumer energy expenditures this past winter (fourth quarter of 2013 and first quarter of 2014) were $14.0 billion (4.4%) higher than the previous winter, as cold weather east of the Rocky Mountains led consumers to pay more to heat their homes but less to fuel their cars. Energy expenditures as a share of disposable income increased 0.1% from the winter of 2012-13 to last winter, with most of the growth occurring in the first quarter of 2014.

Transportation fuels account for the largest contribution to consumer energy expenditures, followed by electricity, natural gas, and heating oil and propane. Energy expenditures vary by season and with market conditions, and are a function of the prices and consumption of each type of energy.

Transportation fuel expenses declined $5.8 billion (-3%) last winter compared with the previous winter, as prolonged bad weather reduced driving and gasoline consumption. The transportation fuel share, which can represent more than two-thirds of energy expenditures during the summer when motorists drive the most, declined from 58% in the winter of 2012-13 to 54% last winter.

Electricity expenditures increased $7.9 billion (10%) last

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winter compared with the previous winter. Electricity expenditures include expenses for utilities and are highest during the summer months when air conditioning boosts electricity demand. Nearly two-thirds of the homes that use electricity as their main heating fuel are concentrated in the South, which has lower heating demand than other parts of the nation.

Natural gas expenditures increased by $5.8 billion (16%) last winter compared with the previous winter. Natural gas expenditures, which typically peak in the first quarter of each year because of heating demand, also include the cost of using other natural gas appliances such as water heaters and clothes dryers.

Heating oil and propane expenditures together were $6.0 billion (27%) higher than the previous winter.

Heating oil and propane make the smallest contribution to aggregate energy expenditures because they are used predominantly for space heating and are used to heat a relatively small number of homes across the country. However, their use is concentrated in areas of the country that were hit the hardest with cold weather this past winter.

Source: U.S. Energy Information Administration, based on U.S. Bureau of Economic Analysis

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

Watching Offshore

Maersk Drilling chief says rigs dip could last further 18-24 months The global offshore drilling market’s dip could be longer than previously expected and charter rates could take until 2017 or 2018 to recover to last year’s levels, the head of Maersk Drilling said in May.

Hemmingsen added that charter rates, which peaked at about $650,000 a day for top of the line ultradeep water units last year, would fall to $500,000 a day or even lower in some cases.

Oil groups continue to delay projects to save cash and rig rates will fall further just as a slew of new vessels ordered during the boom years start to hit the water, said Claus Hemmingsen, the CEO of Maersk Drilling, part of Danish shipping conglomerate A.P. Moller-Maersk.

“With every quarter that goes by with next to no new projects sanctioned and next to no new deepwater rigs contracted, the recovery is pushed out a little bit,” Hemmingsen told Reuters.

“But if you look at the long term requirements for deepwater drilling, the rigs available and the order backlog, then by 2017 or 2018 I would expect rates close to being on par with what you saw in 2013,” Hemmingsen said. “The projects are there and the economy is gradually picking up.”

Analysts at Barclays say that 13 newly built floating rigs due to enter the market this year are still without contracts.

Hemmingsen now expects the market dip to last a further 18-24 months, having predicted in the previous quarter that it would last 12-18 months, and sees charter rates hitting the bottom over the next several months.

His comments match forecasts by rig firm Fred Olsen , which has said it expects tough times for the sector for at least another two years.

Maersk Drilling, like many of its global peers, has struggled to pick up new contracts this year and its order backlog shrank to $7.4 billion at the end of the first quarter from $7.9 billion at the end of last year.

However, Maersk needs more vessels to meet its long term growth targets and despite the industry’s dip, Hemmingsen would not rule out further orders.

“We will still have an interest to grow Maersk Drilling to a bigger size than where we are today ... and I would still have the appetite to order a couple of rigs within the next 12 months,” he said. Maersk operates more than 30 drilling rigs and barges.

Source: Reuters

Watching the WORLD

Norway supplies more than 20% of Europe’s natural gas needs Norway is the world’s third-largest natural gas exporter, after Russia and Qatar. In 2013, Norway supplied 21% of total European natural gas needs. Norway’s natural gas reaches the Continent mainly via its extensive export pipeline infrastructure while a small fraction is exported as liquefied natural gas (LNG) by tanker. The largest recipients of Norway’s natural gas exports in 2013 were the United Kingdom, Germany, France, the Netherlands, and Belgium.

EIA estimates that Norway produced 3.97 trillion cubic feet (Tcf) of dry natural gas in 2013, a decline of 0.18 Tcf from 2012. EIA also estimates that Norway’s net exports

for 2013 were 3.8 Tcf of natural gas, which, because of its modest domestic demand, was 96% of its production.

Norway’s single largest natural gas field is Troll, which, according to estimates from the Norwegian Petroleum Directorate, produced 1.0 Tcf in 2013, representing 27% of Norway’s total natural gas production that year.

Three other major producing fields in 2013 were Ormen Lange (0.76 Tcf), Asgard (0.34 Tcf), and Kvitebjorn (0.24 Tcf). These four fields accounted for just over 60% of Norway’s total dry natural gas production in 2013.

Source: U.S. Energy Information Administration, International Energy Statistics

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

41

RESTAURANT

by Marcy Madrid

BITES

SUMMER TIME B-B-Q

is just around the corner...

As the weather warms up and people begin spending more time outside, we wanted our readers to be well prepared when dusting off those grills. So I asked Roy Gillean, owner of the Legendary Barn Door Steakhouse what favorite, summertime grill recipes he could share with PBE readers, and this is what he had to say: Two of my favorite things to cook on my day off would be grilled asparagus and blue cheese hamburgers. Here's how to make it great: Start with your charcoal and/or wood.

I usually mix the two. Put it in your pit and douse it really well with charcoal fluid. Make sure you let it sit for five minutes before you light it. Be careful and let it burn down. Approximately 20 minutes later, you should be ready to start grilling.

Grab some fresh asparagus Wash it well and cut about an inch off the base. My wife, Tami says lightly sprinkle it with olive oil but I say soak it in butter; guess it depends on your preference and calorie concerns. Then sprinkle it with sea salt. When you're grilling asparagus, you want your temperature to be about 350; not too hot. Grill it until it's nice and tender. If you really want to dress it up, wrap it in bacon before you throw it on the fire.

Grilling facts from National Fire Prevention Agency Be sure to use safe grilling practices as the peak months for grilling fires approach – June and July. Gas grills constitute a higher risk, having been involved in an annual average of 7,200 home fires in 2007-2011, while charcoal or other solid-fuelled grills were involved in an annual average of 1,400 home fires.

42

Blue cheese burgers I usually use a 1/2 cup of blue cheese crumbles for every pound of hamburger meat. Knead the two together until they are thoroughly mixed, then patty them up. I love my burgers nice and thick so they're usually about 6 or 7 ounces each and at least an inch thick. Next, season them up with your favorite seasoning.

I prefer some type of Montreal steak seasoning. Then cook them until there's just a little pink left. Finally, throw them on a sourdough bun with your favorite fixings and you are good to go!

GRILLING SAFETY TIPS

• Propane and charcoal BBQ grills should only be used outdoors.

• The grill should be placed well away from the home, deck railings and out from under eaves and overhanging branches.

• Keep children and pets away from the grill area.

• Keep your grill clean by removing grease or fat build-up from the grills and in trays below the grill.

• Never leave your grill unattended.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

Other Facts & Figures • In 2007-2011, U.S. fire departments responded to an average of 8,800 home and outside fires. These 8,800 fires caused an annual average of 10 civilian deaths, 140 civilian injuries and $96 million in direct property damage.

• More than one-quarter (27%) of the home structure fires involving grills started on a courtyard, terrace or patio, 29% started on an exterior balcony or open porch, and 6% started in the kitchen.

• In almost half (43%) of the home outdoor fires in which grills were involved, half (51%) of the outside gas grills, and 29% of gas grill structure fires, the fire started when a flammable or combustible gas or liquid caught fire.

Source: National Fire Protection Agency

Keep an eye on your investment in your SWD facility.

Get the surveillance and support of Dividia.

You spent a good amount to get your SWD facility up and running. That’s why it’s important to protect it with Dividia’s remote security and surveillance systems.

You can’t be everywhere in the Permian Basin, but our cameras can be. Our systems watch out for spills, illegal dumping and other problems. We have full-time technicians in the Permian Basin who provide support when and where you need it. Keep an eye on your investment. Call 432.614.8000 or visit www.dividia.net/swd.

Surveillance. Security. Support.

That’s the Dividia difference.

432.614.8000 l www.dividia.net/swd tx Lic #B16555

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

43

One Thing Duct Tape Won’t Fix

by Daniel Stephens

Daniel Stephens is the Senior Pastor of Mid-Cities Community Church, since 2006. He is the honored husband to Kayla Stephens, a proud father of twin sons Jonah & Jude, daughter Kampbell, and a precious adopted daughter.

Duct tape can fix a lot of things, but it will not fix broken expectations. If you’re a Cowboys fan, you know what I’m talking about. Every summer there is a glimmer of hope that things will be different. That this year will be the year we get to the Superbowl. This year will be the year we stay healthy. This will be the year Jerry Jones sells the team to the state of Texas so ‘we the people’ can own the team!

And every year they take our expectations and shatter them like an impatient husband sorting out Christmas lights. And yet somehow, just like an abusive relationship, we are surprised when they fail us. We go through a few weeks of declaring ourselves over them, then we begin to search online for information on a trade or a draft prospect that may bring about “change”, a glimmer of hope if you will. Finally we pull the blue and silver shirt out of the closet and decide to give them another chance.

who prayed for their 38 year old wife and mother to be healed but instead got a funeral. If you’ve lived long enough, you’ve discovered that broken expectations are a part of life. And no amount of duct tape, one-liners, vacation time or material possessions can fix broken expectations.

There is an interesting story in the Bible that tells of a moment when Jesus made two sisters cry because he didn’t meet their expectations. I know a man making a woman cry because he failed to meet her expectations is

Everyone has had broken expectations. The man who expected a promotion at work and got more responsibility without the extra pay. The woman who expected reciprocated love and faithfulness and instead got an adulterous husband. The couple that thought marriage was open invitation to happiness but soon discovered it was more of an onramp to holiness. The family of four 44

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

not altogether unique, but stay with me for a moment. It was about his friend Lazarus. Lazarus had been sick and his two sisters Mary and Martha sent for Jesus. Jesus had been teaching in local synagogues and miraculously healing people. Surely, when Jesus heard that his friend Lazarus was sick, he would come to his house on the outskirts of Jerusalem and heal him. But Jesus never came… and Lazarus died. The funeral came and went, people were at their little house in Bethany mourning and drowning their sorrow in food. The sisters were grieving, confused, and disappointed.

When expectations shatter, most people become bitter, give up, or live in denial; but that’s not what Mary and Martha did. When Jesus finally showed up they ran out to meet him. Despite their disappointment, they met him on the road with their tears, and their questions, and their doubts. We could learn something from these women. The answer to broken expectations is not hiding

your disappointment or concealing your questions, but taking them to Him. The answer is not in keeping your emotions in check and acting like you have it all together but falling at his feet with tears, and snot, and frustration.

The only way to fix broken expectations is running to God, not away from him.

In response to the women’s tears, Jesus went to the tomb and commanded Lazarus to come out, and he did. Sometimes God doesn’t simply want to meet our expectations, he wants to exceed them. Sometimes we want him to heal something but he will allow it to die so he can bring it back to life. Duct tape can’t fix your broken expectations, but Jesus can. Run to him, even if you’re upset, disappointed, angry, tear-filled, or even callous. You might be surprised with what He will do.

Follow Daniel on Twitter: @DanielBstephens

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

45

U.S. RIG COUNT - TEXAS

States &

through June 6, 2014

BAKER HUGHES RIG COUNT

RIGDATA RIG COUNT

Four Week Average 2012

Four Week Average 2013

Last Week

This Week

Four Week Average 2012

Four Week Average 2013

Last Week

This Week

Waiting to Spud

Texas RRC District 1

136

121

117

116

135

123

121

125

13

Texas RRC District 2

87

88

93

91

82

96

92

91

7

Texas RRC District 3

46

55

52

53

48

65

59

62

5

Texas RRC District 4

35

36

37

33

30

30

29

29

3

Texas RRC District 5

13

9

9

9

12

10

9

12

0

Texas RRC District 6

26

34

34

34

24

33

29

36

0

Texas RRC District 7B

13

10

9

10

18

18

19

16

6

Texas RRC District 7C

83

97

98

97

77

103

106

101

9

Texas RRC District 8

276

323

324

325

260

321

323

318

8

Texas RRC District 8A

36

39

37

41

34

43

44

42

1

Texas RRC District 9

22

16

16

16

31

27

25

30

1

Texas RRC District 10

60

65

63

62

65

67

67

66

0

Texas Total

833

893

889

887

816

936

923

928

53

U.S. Totals

1,769

1,862

1,926

2,128

2,094

2,130

105

Districts

1,861 1,857

COPYRIGHT Š 2014 RIGDATA P.O. Box 820547 Fort Worth Texas 76182-0547 1-800-627-9785 | www.rigdata.com This report is protected under United States and international copyright laws and is intended for the exclusive use of the subscriber. Any unauthorized reproduction, retransmission, distribution, publication, broadcast or circulation of this report to anyone, directly or indirectly, without the express prior written consent of RIGDATA is prohibited. To order additional report copies at a reduced rate or for a corporate site license, please contact: 1-800-627-9785 46

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

Top 35 Drillers Rankings Each month we track the activity of all the drillers and compile the results into a report that identifies the top 35 out of 100 drillers based on their footage drilled. Updated monthly, these reports also detail the number of well starts and the number of directional wells drilled by each of the top 35 out of 100. through June 30, 2014 Company

Footage Drilled

% of Total

Average Footage

Well Starts

% of Total

Directional Wells

1

Helmerich & Payne, Inc.

18,700,271

17.1%

10,372

1,803

13.0%

1,597

2

Patterson-UTI Drilling Company, LLC

10,773,369

9.8%

10,309

1,045

7.6%

934

3

Nabors Industries, Ltd.

9,091,183

8.3%

7,227

1,258

9.1%

1,151

4

Precision Drilling Trust

5,087,005

4.6%

8,651

588

4.3%

531

5

Nomac Drilling, LLC

4,729,044

4.3%

9,832

481

3.5%

481

6

Ensign Energy Services, Inc.

4,488,396

4.1%

6,295

713

5.2%

415

7

Unit Drilling Company

3,437,905

3.1%

9,795

351

2.5%

331

8

Pioneer Energy Services Corp.

2,953,998

2.7%

10,151

291

2.1%

213

9

Trinidad Energy Services Income Trust

2,822,843

2.6%

10,154

278

2.0%

226

10

Cactus Drilling Company, LLC

2,546,579

2.3%

10,480

243

1.8%

236

11

Capstar Drilling, LP

2,446,023

2.2%

6,611

370

2.7%

106

12

Savanna Energy Services Corp.

1,624,272

1.5%

9,024

180

1.3%

56

13

Xtreme Drilling and Coil Services Corp.

1,612,840

1.5%

10,681

151

1.1%

147

14

Sidewinder Drilling, Inc.

1,491,478

1.4%

8,523

175

1.3%

160

15

Complete Production Services, Inc.

1,210,002

1.1%

10,254

118

0.9%

57

16

Desoto Drilling, Inc.

1,167,379

1.1%

4,507

259

1.9%

259

17

Pinnergy, Ltd.

1,026,170

0.9%

9,245

111

0.8%

111

18

Latshaw Drilling & Exploration Company

989,206

0.9%

8,455

117

0.8%

117

19

Sendero Drilling Company, LLC

967,461

0.9%

11,250

86

0.6%

0

20

Lariat Services, Inc.

952,087

0.9%

6,752

141

1.0%

49

21

Orion Drilling Company, LLC

947,568

0.9%

11,556

82

0.6%

78

22

Robinson Drilling of Texas, Ltd.

942,614

0.9%

11,222

84

0.6%

2

23

Scandrill, Inc.

880,102

0.8%

12,224

72

0.5%

67

24

Frontier Drilling, LLC

859,946

0.8%

8,113

106

0.8%

95

25

CanElson Drilling, Inc.

848,000

0.8%

8,833

96

0.7%

41

26

Cyclone Drilling, Inc.

716,860

0.7%

3,939

182

1.3%

173

27

Bison Drilling and Field Services, LLC

707,558

0.6%

11,793

60

0.4%

18

28

Cade Drilling, LLC

684,198

0.6%

11,403

60

0.4%

60

29

SST Energy Corporation

680,354

0.6%

9,860

69

0.5%

68

30

Basic Energy Services, Inc.

651,819

0.6%

7,492

87

0.6%

20

31

Lewis Petro Properties, Inc.

631,000

0.6%

10,344

61

0.4%

60

32

ProPetro Services Incorporated

596,500

0.5%

11,471

52

0.4%

0

33

Big Dog Drilling Company

583,400

0.5%

11,906

49

0.4%

5

34

Aztec Well Servicing Co.

547,164

0.5%

6,148

89

0.6%

46

35

Murfin Drilling Company, Inc.

526,135

0.5%

4,656

113

0.8%

0

Total Top 100 for year 2014

109,558,053

100.0%

---

13,824

100.0%

---

RANK

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

47

Top 35 Operators Rankings Updated every month, we track and rank the top

35 out of 100 operators based on their footage drilled.

Keep track of the most active operators with details on their number of well starts.

through June 30, 2014

RANK

Company

Footage Drilled

% of Total

Average Footage

Well Starts

% of Total

Directional Wells

1

Anadarko Petroleum Corporation

6,121,685

5.6%

10,411

588

4.3%

580

2

Chesapeake Energy Corporation

4,533,529

4.1%

10,165

446

3.2%

446

3

Pioneer Natural Resources Company

3,741,791

3.4%

12,947

289

2.1%

199

4

Occidental Petroleum Corporation

3,686,099

3.4%

5,936

621

4.5%

298

5

EOG Resources, Inc.

3,671,960

3.4%

10,402

353

2.6%

337

6

Apache Corporation

3,277,568

3.0%

8,764

374

2.7%

245

7

Devon Energy Corporation

2,454,712

2.2%

9,263

265

1.9%

238

8

Marathon Oil Corporation

2,381,522

2.2%

14,521

164

1.2%

164

9

BHP Billiton Limited

2,162,113

2.0%

13,771

157

1.1%

157

10

Chevron Corporation

2,055,348

1.9%

5,113

402

2.9%

182

11

ConocoPhillips Company

1,821,760

1.7%

7,719

236

1.7%

190

12

Noble Energy, Inc.

1,643,294

1.5%

9,724

169

1.2%

169

13

QEP Resources, Inc.

1,601,585

1.5%

11,606

138

1.0%

133

14

Oasis Petroleum North America, LLC

1,600,317

1.5%

10,065

159

1.2%

159

15

Exxon Mobil Corporation

1,443,553

1.3%

5,174

279

2.0%

123

16

Encana Corporation

1,427,432

1.3%

12,745

112

0.8%

106

17

Concho Resources, Inc.

1,425,921

1.3%

11,228

127

0.9%

97

18

Whiting Petroleum Corporation

1,338,302

1.2%

9,698

138

1.0%

125

19

Southwestern Energy Company

1,245,239

1.1%

4,479

278

2.0%

277

20

Linn Energy, LLC

1,235,476

1.1%

5,590

221

1.6%

99

21

EP Energy E&P Company, LP

1,125,119

1.0%

9,784

115

0.8%

101

22

SandRidge Energy, Inc.

1,094,754

1.0%

5,393

203

1.5%

141

23

Laredo Petroleum, Inc.

1,072,300

1.0%

11,287

95

0.7%

29

24

Newfield Exploration Company

981,510

0.9%

6,415

153

1.1%

144

25

CrownQuest Operating, LLC

972,800

0.9%

12,010

81

0.6%

0

26

Murphy Oil Corporation

969,388

0.9%

10,771

90

0.7%

90

27

WPX Energy, Inc.

902,192

0.8%

6,353

142

1.0%

141

28

Ultra Petroleum Corp.

858,779

0.8%

12,818

67

0.5%

67

29

Antero Resources Corporation

811,470

0.7%

11,116

73

0.5%

73

30

Cimarex Energy Co.

791,990

0.7%

10,421

76

0.5%

75

31

Penn Virginia Corporation

767,500

0.7%

14,481

53

0.4%

53

32

SM Energy Company

694,559

0.6%

9,261

75

0.5%

75

33

Windsor Energy, Inc.

687,200

0.6%

10,908

63

0.5%

49

34

Rosetta Resources, Inc.

680,450

0.6%

9,862

69

0.5%

62

35

Parsley Energy Operations, LLC

667,200

0.6%

11,914

56

0.4%

4

Total Top 100 for year 2014

109,558,053

100.0%

---

13,824

100.0%

---

48

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

Source: www.eia.gov

Lower crude feedstock costs contribute to North American refinery profitability Last year was the third year in a row that North American refineries showed considerably higher profitability than European refineries as measured by earnings per barrel processed. While many factors contribute to refinery profitability, lower North American crude oil prices compared with world prices have been a key factor driving this outcome. North American refiners’ earnings per barrel processed were more than $7 per barrel (bbl) higher than their European competitors in 2013, based on an analysis of 26 energy companies with refinery operations that submit financial and operating information by segment in annual reports to the U.S. Securities and Exchange Commission.

Financial data by segment allow comparisons of just the refining business of global integrated companies—those that explore and drill for oil as well as refine it—with those that only refine crude oil into products.

Earnings per barrel processed (Figure 1) takes a company’s earnings from its refining and marketing segment and divides it by its annual refinery runs, which is a useful measure for comparing large companies with smaller ones.

In this analysis, EIA compared 13 companies based in North America and 13 in Europe. Ten of these companies have nearly all their refinery throughput in North America, 10 others have nearly all their throughput in Europe, and 6 have refineries throughout the world. Total earnings in the refining segment for each grouping was divided by its total annual refinery runs to estimate earnings per barrel processed as shown in Figure 1.

The scale of refinery runs varied widely across the companies in the sample selected, with 59,000 barrels per day (bbl/d) being the smallest and 4.6 million bbl/d being the largest in 2013. Earnings in the refining segment ranged from a loss of almost $2 billion for one company to a profit of $4.3 billion for another. Total refinery throughput for these companies averaged 25.6 million bbl/d in 2013, approximately 56% of total OECD liquid fuels consumption.

Refining profitability across the three groupings tended to move together during the 2004-10 period. European and North American refineries benefitted from a broad increase in gasoline and distillate prices from 2004 to 2006, with profitability falling during the 2008-09 financial crisis.

However, as the global economy recovered after 2010, many North American refineries benefited from relatively lower prices for two key inputs, crude oil and natural gas.

Increasing production of both crude oil and natural gas contributed to lower feedstock costs in North America compared to international prices.

As North American crude oil production increased from new tight oil plays, U.S. imports of crude oil steadily decreased.

Production increases since 2011 led to bottlenecks in the Midcontinent, depressing U.S. average refiner acquisition costs compared with Brent (North Sea), with discounts

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

49

May Drilling Productivity Report indicates continuing oil production growth with upward revision in the Permian Basin

averaging more than $9/bbl from 2011 to 2013 (Figure 2). This crude discount tended to benefit companies with refineries in the interior of the United States and Canada.

In 2013, Gulf Coast refiners began to see increased earnings because of lower crude costs after some of the infrastructure bottlenecks to move crude oil to the Gulf Coast were removed and prices of Light Louisiana Sweet (LLS) crude began to trade at a discount to Brent.

Product prices in North America, however, continued to be driven by international crude oil prices and petroleum product markets. Crack spreads, the difference between the purchase price of crude oil and the wholesale selling price of refined products, on the Gulf Coast increased in late 2013, and have remained high in 2014.

North American refineries have been able to run at relatively high rates because their crude oil and natural gas costs were low and global product prices remained high.

Refinery runs for North American companies rose 27% from 2010 to 2013, while the European companies’ refinery runs declined 11%.

The result was an increase in product exports, particularly from the U.S. Gulf Coast. As U.S. refineries increased runs to produce distillate, they also produced more gasoline and have taken some market share from Europe in Latin American and West African markets.

In 2014, U.S. crude prices remain discounted to Brent.

Additionally, relatively cheaper natural gas prices in North America continue to provide U.S. and Canadian refineries with further energy feedstock price advantages compared with refineries in other parts of the world. Preliminary financial results from the first quarter suggest that North American refiners are maintaining higher profitability than their European rivals.

50

The May update to the Drilling Productivity Report (DPR) indicates continuing oil production growth in the key oilproducing regions. Cumulatively, in the Bakken, Niobrara, Permian, and Eagle Ford, oil production is expected to increase by 74,000 bbl/d in June 2014. The monthly growth rate is 4,000 bbl/d more than in May 2014. With new data from the Railroad Commission of Texas, the Permian region new-well oil production per rig was revised up to 132 bbl/d.

EIA expects the Permian region to reach 1.535 million bbl/d of oil production in June 2014 as the rig count in the region reaches record highs.

Gasoline prices mostly decrease, diesel fuel prices down nationwide The U.S. average retail price of regular gasoline decreased by two cents this week to $3.67 per gallon as of May 14, 2014, up seven cents from this time last year. Prices decreased in all regions except the Rocky Mountains, where the average rose one cent to $3.51 per gallon, and the Midwest, which increased by less than a penny to remain at $3.60 per gallon. The West Coast and Gulf Coast prices each decreased by three cents, to $4.02 and $3.44 per gallon respectively. The East Coast price is now $3.68 per gallon, down two cents from last week.

The national average diesel fuel price decreased two cents to $3.95 per gallon, up eight cents from the same time last year. Prices declined in all regions of the nation, led by a two-cent drop in the Gulf Coast to $3.80 per gallon. The East Coast, Midwest, West Coast, and Rocky Mountains each decreased one cent, to $4.04, $3.92, $4.04, and $3.97 per gallon respectively.

Propane inventories gain U.S. propane stocks increased by 2.5 million barrels last week to 37.7 million barrels as of May 9, 2014, 4.1 million barrels (9.7%) lower than a year ago. Gulf Coast inventories increased by 1.4 million barrels and Midwest inventories increased by 0.8 million barrels. East Coast inventories increased by 0.2 million barrels and Rocky Mountain/ West Coast inventories increased by 0.1 million barrels.

Propylene non-fuel-use inventories represented 9.5% of total propane inventories.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JUNE 2014

JUNE 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

51