EneSof_OGFJdecel_1704 1 3/14/17 9:16 AM

THE BUSINESS PUBLICATION FOR THE OIL AND GAS EXECUTIVE

October 2017

FAIRMOUNT SANTROL
DISCUSSES TRENDS IN
PROPPANT BUSINESS

SPECIAL FOCUS:

PRIVATE CAPITAL
E&P VALUATIONS
WOLFCAMP SHALE
PRIVATE EQUITY JVS

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 CONTENTS V14/NO. 10 | OCTOBER 2017
THE BUSINESS PUBLICATION
FOR THE OIL AND GAS EXECUTIVE

FEATURES

22 16 30
WOLFCAMP DELAWARE THE NEXT FOCUS FOR
An assessment of recent activity AFRICAN OIL PRODUCERS

33
with a GIS approach

18 LEARNINGS FROM THE OIL

FAIRMOUNT SANTROL AND GAS DOWNTURN
Fairmount Santrol is organized into two What it means for technology adoption

36
business segments, one that provides
proppants used by oil and gas companies,
and another that delivers sands and products ASSET MANAGEMENT
to end users in the industrial and recreational Is now the time for machine learning?

40
markets. OGFJ heard from Fairmount
Santrols management team about the
business and key trends in the industry. TURNAROUND PROJECTS

30
5 tips to keep things in scope and on target
22
UPSTREAM VALUATIONS IN THE 42
CURRENT COMMODITY PRICE WHATS NEW FOR GOODWILL
ENVIRONMENT MEASUREMENT?

27
GOING PUBLIC
Using MLPs, corporations, and UP-Cs
as exit vehicles

36
DEPARTMENTS
5 EDITORS COMMENT
6 CAPITAL PERSPECTIVES
ON THE COVER 10 SECOND THOUGHTS
Jenniffer Deckard, 12 UPSTREAM NEWS
Fairmount Santrol
CEO 14 MIDSTREAM NEWS 6
46 DEAL MONITOR
Photo courtesy of 48 OGFJ100P
Fairmount Santrol
55 INDUSTRY BRIEFS
59 ENERGY PLAYERS
64 FINAL WORD

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OGFJ .com pwestervelt@pennwell.com

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Finding common ground
FIRST OFF, lets acknowledge there is a prob-
lem. The oil and gas industry and the Ameri-
can public dont always see eye to eye on issues
facing the country for example, on hydraulic
fracturing, which is necessary for developing
shale resources, and on climate change, and
whether or not hydrocarbons are a significant
DON STOWERS
CHIEF EDITOR factor in exacerbating global warming.
OGFJ There are arguments to be made on both
sides of these issues, and even scientists dis-
agree on major points, but clearly the petroleum business is
not winning the PR battle with the public in the United States
and globally. Many consumers, probably most, see oil and gas
companies and their executives in a bad light.
Most people are sophisticated enough to view these issues
in shades of gray rather than absolute terms. But for the petro-
leum industry the question remains: how do we change public
perception, and is that even possible?
The industry cant afford to ignore this growing divide because
public perception shapes political reality. The wider the gap
becomes, the more draconian the regulatory environment for
all industry sectors upstream, midstream, and downstream
from the wellhead to the pump, or burner tip.
Consulting firm EY conducted a nationwide survey of US
consumers earlier this year and a separate survey of energy
executives and found that their views about the oil and gas
industry vary widely, which is not exactly shocking news. I wrote
about the results of those surveys in the June issue of OGFJ in
which we compared and contrasted the views of consumers
with that of industry executives. The survey results compel you
to consider why there is such a marked difference between the
two groups.
The energy industry is providing products the public de-
mands, says Deborah Byers, EYs US Energy Leader. But clearly,
there is a rift between what consumers want, how they want
it, and the publics understanding of the industry. This gap poses
a challenge for the future of oil and gas companies, and may
influence their interactions with prospective employees, com-
munities near current or future operations, shareholders, and
even with consumers of energy products.
Partly as a result of the survey, EY has just released a report
titled How do we create a more refined view of oil and gas?
Surprisingly, to me at least, EY concludes that oil and gas com-
panies have an opportunity to engage consumers and find
common ground on a number of topics, including regulation.
Interestingly, the surveys show that 85% of consumers and
79% of oil and gas executives agree that regulations are neces-
sary to prevent or minimize the impact of oil and gas accidents
and spills. And 85% of consumers and 84% of executives agree
regulations are necessary to ensure environmentally safe drilling
practices.
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_5 5
EDITORS COMMENT
The survey also showed that a large majority of consumers
also say they are willing to pay more for a gallon of gasoline to
ensure regulatory priorities are met, which undermines the
argument that consumers would not pay more in a more regu-
lated environment.
Here are a few more data points from the surveys:
40% of consumers and 90% of executives think tax reform
will be good for the overall economy.
42% of consumers and 74% of executives think tax reform
will be good for energy prices.
91% of consumers and 93% of executives believe climate
change is real.
62% of consumers say creating alternative fuels is a major
step toward addressing climate change.
More than 75% of respondents say they are willing to pay
more for gasoline if air and water quality regulations increase
prices.
While 41% of consumers believe the industry is underregu-
lated, 53% of executives believe the industry is
overregulated.
EY points out that, thanks to the shale boom, oil and gas
companies are exploring, developing, and transporting products
in and across markets less familiar with the industry. Increased
public interface means a social license to operate is more
important than ever before. The industry may also face chal-
lenges related to market share as technology makes new energy
options accessible and affordable.
In a market with energy choices, EY says consumer prefer-
ences and attitudes are critical. Having a good reputation and
being seen as an industry that shares consumers long-term
concerns and values will be necessary for oil and gas companies
in an age of energy abundance.
Consumer opinions are more important than ever, says Byers.
Public perceptions can impact the industrys ability to recruit
and retain talent, access capital necessary for growth, and pursue
new projects. They can also influence the regulatory and tax
environment and, perhaps, even demand for oil and gas products.
Americans views on oil and gas serve as a reminder that com-
panies need to proactively demonstrate value and earn trust.
The report highlights a disconnect between American con-
sumers and the oil and gas industry. However, it also identifies
areas in which there are overlapping interests common ground
that the industry can use to connect with consumers and im-
prove understanding, communication, and its reputation.
The public views environmental protection and safety as
critical issues. The survey shows that the petroleum industry
places similar value on good environmental stewardship and
safety performance. Tax fairness is another area where there is
significant common ground between the two groups. Those
are great starting points for opening up a dialogue on the role
of oil and gas today and in the future.
5
10/6/17 2:47 PM
 CAPITAL PERSPECTIVES

Denisismagilov| Dreamstime
Pitfalls in the oil patch
KEY CONSIDERATIONS FOR PRIVATE EQUITY INVESTMENTS IN UPSTREAM JOINT VENTURES
MARC ROSE AND JEREMY PETTIT, SIDLEY AUSTIN LLP, DALLAS

IN THE MARRIAGE OF HEAVEN AND HELL, poet William
Blake wrote that [t]he road of excess leads to the palace of
wisdom. Following a period of strong oil prices and abundant
sources of capital during the last commodity cycle, the downturn
has left oil and gas producers searching for viable sources of
capital. Some producers have sought out joint ventures with
private equity investors as a means to acquire, finance, and
develop oil and gas assets in the upstream space. While joint
ventures can be a solution for both parties, investing in upstream
joint ventures involves a unique set of risks and issues for private
equity investors that may catch even seasoned investors off-
guard. This article addresses three focus areas for private equity
investors contemplating an upstream joint venture in the current
market environment: (1) the counterparty, (2) market access,
and (3) the exit. Taking the time to understand these areas will
help lead the investor towards the upstream joint venture palace
of wisdom.
FOCUS ON THE COUNTERPARTY
In successful joint ventures, the counterparties rely on each
other for success. In upstream joint ventures, private equity
investors may find themselves relying significantly more on
their counterparties than they do in other industries. For this
reason, investors should focus on finding the right producer
counterparty when mulling over an upstream opportunity, in
particular, by addressing control and operation of the proper-
ties, producer bankruptcy risk, and potential transferability
issues. For ease of reference, in this article we sometimes refer
to an experienced operator/producer as the producer and a
private equity investor as the investor.
Control and operation
Private equity investors are used to having significant control
over their investments. In joint ventures, these controls show
up in the form of affirmative control rights (such as the ability

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to force a sale or replace a manager) or negative control or veto
rights (such as the ability to prevent certain corporate
actions).
This traditional control model is harder to implement in
the upstream space. From the outset, there is an information
asymmetry between the producer and the investor. The up-
stream space requires a unique mix of geophysical, engineering,
environmental, finance and land management expertise that
can give the producer more leverage in the initial negotiations,
and frequently results in investors relying heavily on the pro-
ducer throughout the life of the joint venture. Such reliance
means that the investor, even if it may negotiate for certain
contractual controls, may not have as much actual control as
it is used to.
This is compounded by the structure of upstream joint
ventures. Joint ventures in the upstream space are predomi-
nately structured as asset transactions (mainly because oil and
gas assets are easily divisible), with the investor and the pro-
ducer counterparty each directly owning a portion of the hy-
drocarbon assets. With each party holding its own direct in-
terest in the assets, normally the parties select the producer
to act as the operator of the jointly-held assets, and negotiate
a joint operating agreement to define the rights and obligations
of the parties with respect to those assets.
The industry-standard AAPL Form 610 Model Form Oper-
ating Agreement (the Model Form) is customarily the starting
point for these negotiations. While the Model Form has many
benefits, it also contains several operator-friendly provisions
that can result in less control for a non-operator party (here,
the investor). For example, removing underperforming oper-
ators is a challenging process to execute under the best of
scenarios, but becomes even more challenging under the terms
of the Model Form. Non-operators are limited to removing the
operator entity for cause. In practice, this has been a very
high bar for removal. Even in a scenario in which a non-oper-
ating party owns a majority interest in a contract area, and
therefore might expect that it could replace the operator at
any time for any reason, the terms of the Model Form will not
allow for the replacement of the operator by interest ownership
alone.
As another example, the Model Form provides an operator
more control than a non-operator party in the pace of devel-
opment of the assets and in the acquisition of new properties
within the relevant geographic area. While an investor may
initially be content to allow the producer to control these
operational-type activities, changes to the producers financial
capabilities, changes to commodity prices and changes to
competitive forces within the relevant geographic area may
result in the producer and the investor having different views
on, and different abilities to execute on, these activities. Inves-
tors face both contractual and practical restrictions related to
the pace of development and the acquisition of new properties,
and will want to address these concerns in the joint venture
documentation.
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_7 7
CAPITAL PERSPECTIVES
In successful joint ventures, the counterparties
rely on each other for success. In upstream
joint ventures, private equity investors may find
themselves relying significantly more on their
counterparties than they do in other industries. For
this reason, investors should focus on finding the
right producer counterparty when mulling over an
upstream opportunity, in particular, by addressing
control and operation of the properties, producer
bankruptcy risk, and potential transferability
issues.
Bankruptcy risk
In addition to operatorship issues, investors should scrutinize
the creditworthiness of their producer counterparty, and wheth-
er and how the venture should be unwound in the event the
producer becomes bankrupt. Investors should understand the
potential risk that the hydrocarbon assets that they hold directly
or have a right to receive may be re-classified as property of the
bankrupt producer counterpartys estate, as well as the risk
that the contractual rights that the investor has bargained for
may be suspended during the bankruptcy process and/or re-
jected completely by the bankrupt producer counterparty as
it emerges from bankruptcy. Like most of the risks discussed
in this article, these risks can be addressed and mitigated, but
are crucial to address up front.
Transferability
Investors should reflect on whether and when to permit their
producer counterparties to sell and transfer their interests in
the jointly-owned assets (and operatorship) to a third party.
Because investors often rely heavily on their producer counter-
parties, investors ordinarily will want to make sure the producers
are prevented from (or at least limited in) transferring their
interests (and operatorship) to third parties without the inves-
tors agreement. This is particularly true during the development
period, when the producers expertise is especially key to the
success of the venture.
FOCUS ON MARKET ACCESS
Once a prospect is successful and hydrocarbons are flowing,
the venture may find that its market access is constrained by
limited existing pipeline resources or burdensome gathering
agreements. The investor should examine whether there is a
viable midstream option for transporting hydrocarbon produc-
tion to market. A venture that results in a substantial increase
in production in an area may require a separate midstream
buildout, either by the joint venture parties or a third-party
midstream gatherer. Such buildouts are usually expensive and
potentially distracting to upstream ventures.
If there is an existing viable midstream option, investors
should diligence potential costs. Sometimes, undeveloped assets
are already dedicated to a midstream provider. Especially in
7
10/6/17 2:47 PM
 CAPITAL PERSPECTIVES
well-developed plays like the Permian, STACK/SCOOP and
Appalachia, existing gathering agreements may constrain or
limit take-away options or make the access available only on
expensive non-market terms, placing more strains on owner
cash flows.
The relationship between upstream producers and midstream
gatherers has been put to the test during the downturn. Gath-
ering fees from fixed pricing in midstream contracts were once
viewed as regular, expected and almost annuity-like revenue
source by midstream gatherers. These fees have become less
certain as they have resulted in significant financial burdens
on upstream producers in a low-price environment. In many
cases, upstream producers have approached their midstream
gatherer counterparties seeking relief. Some midstream gath-
erers have agreed to adjust pricing. Some have not. In extremis,
some upstream producers have attempted to use the bankruptcy
process to rid themselves of burdensome midstream dedications,
with mixed results. In one much publicized example, the bank-
ruptcy court in the Sabine case (Sabine Oil and Gas Corp. v. HPIP
Gonzales Holdings LLC (In re Sabine Oil & Gas Corp.), 547 B.R.
66 (Bankr. S.D.N.Y. 2016)) determined that a midstream dedi-
cation did not run with the land, and as such, could be rejected
by the upstream producer debtor, a result that brought into
question the treatment of midstream contracts that many
thought would survive bankruptcy.
Interestingly, the low-price environment and other dynamics
have in some cases resulted in more-favorable deal terms for
some upstream producers in negotiations with midstream
gatherers, especially in hot plays like the Permian. Midstream
gatherers are paying premiums to upstream producers to be
able to transport their production, sometimes in the form of
cash and/or equity. In June 2017, several news outlets reported
a transaction between a midstream gatherer and an upstream
provider in which the midstream party agreed to pay the up-
stream producer a significant cash amount up front and to
carry the producer on a significant portion of its capital expen-
ditures in connection with the construction of a gathering
system and processing plant that will be used in the transpor-
tation of the producers future production. It will be interesting
to see if this trend continues.
It is important for investors to understand the landscape
surrounding access to market for the venture, which can vary
greatly depending on the location of the assets.
FOCUS ON THE EXIT
Finally, investors should focus on the eventual exit of their joint
venture investment. Private equity investors generally have
relatively short-term investment strategies, and expect to have
flexibility in their ability to exit the investment when it makes
financial sense for them to do so. Aside from the usual joint
venture exit challenges that arise from the fact that each joint
venture involves parties that may have different intentions for
the investment, exiting a joint venture in the upstream space
can be challenging.
8 WWW.OGFJ.COM
1710OGFJ_8 8
Investors will want to retain flexibility over the timing of
their exit, whether during the initial development phase or the
later operational phase. Practically, it may be more difficult to
exit during the development phase. Because producers typically
want more control over the development of their assets than
a financial investor, the investor looking to exit during the de-
velopment stage may find their potential buyers limited to a
subset of other private equity or financial buyers, rather than
the full suite of financial and strategic acquirers who may be
interested in the deal at other stages of its lifecycle. In addition,
producers can be much more sensitive to transfers by an investor
during the development phase, as a new party may not have
the same views as the producer regarding the build out and
development of the venture.
One unique aspect of joint ventures in the upstream space
is that, as mentioned previously, producer counterparties are
generally chosen to operate the jointly-owned assets. But on
exit, savvy investors understand that potential buyers will put
a premium on being able to take over the operatorship of the
properties, and will want to focus on how to capture that pre-
mium when the non-operator investor looks to exit its invest-
ment. Such a right may be more palatable to a producer during
the operational phase when the development has been sub-
stantially completed than it may be during the development
phase.
CONCLUSION
As private equity investors consider moving into or expanding
their exposure to upstream oil and gas joint ventures, they
should ensure they understand the full suite of risks and issues
involved, including those addressed in this article. Assessing
counterparty risks, market access and the desired exit outcomes
can increase the investors odds for finding an upstream joint
venture palace of wisdom.
ABOUT THE AUTHORS
Marc Rose is a partner and Jeremy
Pettit is an associate in Sidley Austin
LLPs private equity and energy trans-
actional practice located in the firms
Dallas, Texas office. Rose and Pettit
represent private equity funds and
energy companies in mergers and acquisitions, joint ventures
and investments.
This article has been prepared for informational purposes only and
does not constitute legal advice. This information is not intended to
create, and the receipt of it does not constitute, a lawyer-client re-
lationship. Readers should not act upon this without seeking advice
from professional advisers. The content therein does not reflect the
views of the firm.
| OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:47 PM
 TM
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 SECOND THOUGHTS
A summer of sand. Regional sand.
USING SAND to prop open fractures when
completing wells isnt new to the oil and gas
industry, but the exponential growth in the
amount of sand used in completions is. In an
April research note, Douglas Westwood detailed
concerns about a shortage of frac sand for the
US shale plays, specifically 40/70 frac sand in
MIKAILA ADAMS
EDITOR OGFJ the Permian Basin.
More recently, as part of the interview con-
ducted with Fairmount Santrol for this issue, CEO Jenniffer Deckard
detailed demand specific to the Permian Basin,.
You can expect to see new mines come online from the industry
this year and next, primarily in the Permian Basin, she said, noting
that the company expects proppant demand to expand both
within the Permian Basin and in regions outside of the Permian
Basin, so additional supply will be needed. She said she doesnt
expect all operators to do a complete conversion to regional sand
grades and quality, thus leaving some of the Permian Basin demand
to be addressed from current supply, but went on to note that
Fairmount has started construction on its Kermit mine in the
Permian to meet the growing demand for in-basin, regionally
produced sand, as well as the demand for smaller mesh sizes. You
can read more from the interview on page 18 of this issue.
Going back to the Douglas Westwood report, advancements in
horizontal drilling and completion techniques, as well as high-in-
tensity completions, and the significance of multi-well pad drilling
in the Permian are driving frac sand demand. The firm, citing Q1
2017 data from Energent Group, said that the majority of new
Delaware Basin completions use, on average, 1,990 pounds of frac
sand per lateral foot.
Another driver is the longer laterals per well in the shale plays,
Douglas Westwood continued, noting that as E&Ps acquire more
continuous acreage, we can expect the two-mile lateral to be much
more common. For the last two years, on average, horizontal well
lengths in the Midland Basin neared 7,500 lateral feet, the firm
reported.
In a late September, in a note containing highlights from its Oil
& Gas Leaders Conference, Wolfe Research commented on regional
sand, specifically. Over the last several years many frac sand
companies have been purchasing or expanding regional sand
capacity. Most large sand companies have or are pursuing regional
sand mines. With rail costs comprising such a significant compo-
nent of delivered costs and E&Ps preferring finer mesh sand, WR
sees frac sand companies increasingly expanding, developing or
purchasing regional sand mines.
This is certainly happening in the Permian.
In late July, Badger Mining Corp. purchased property containing
sand reserves located north of Kermit, Texas. The property contains
over 35 years of estimated sand reserves, predominately featuring
finer grades of sand such as 40/70 and 100 mesh. The reserve will
add in-basin Texas sand to the companys portfolio.
10
1710OGFJ_10 10
Development of the site for a sand mining facility will begin
immediately with an anticipated completion date of April 2018.
Once complete, the mine will have a capacity of 3 million tons per
year.
In early August, Black Mountain Sand LLC, an NGP-backed
sand supplier primarily serving the Permian Basin, announced a
multi-year supply contract with Diamondback Energy Inc. set to
begin in early 2018. This agreement ensures Diamondbacks con-
tinuity of frac sand supply through committed capacity of Black
Mountains two 4 million tons per year facilities and 1.5 billion tons
of in-basin frac sand reserves. Black Mountain will dedicate a
substantial portion of its Permian mine capacity to Diamondback,
providing in-basin 100 mesh and 40/70 frac sand.
In June, US Silica Holdings Inc. (SLCA) announced plans to build
a new frac sand mine and 4 million ton per year plant in the Permian
for $225 million. The 3,200-acre site has over 30 years of 40/70 (30%)
and 100-mesh (70%) reserves. Initial production is scheduled for
late 4Q17. In its analysis of the news, Cowen and Company said
the $225 million purchase price includes land and construction
costs and is attractive implying $56/ton versus the most recent
Permian sand deal at $108/ton. Assuming $140 million of EBITDA
(assuming a delivered marginal cost per ton to West Texas of $75,
production cost of $15/ton, last mile cost of $25/ton, and a $75/
ton well head price) implies a 1.6x multiple compared to SLCA
trading at 5.8x our 2018 estimate. Of note the analyst continued,
the property is not part of the dunes everyone has been reviewing
on Google maps, but a subsurface resource on a ranch near Mo-
nahans State Park.
An important side note: certain areas in the region are inhabited
by the dunes sagebrush lizard. A conservation plan for the lizard
was implemented in 2012 by the State of Texas. More recently, the
Texas Comptroller of Public Accounts informally mentioned the
habitat to the US Fish & Wildlife Services agency, noting the Permian
frac sand permitting rush.
Back to frac sand: In late September, SLCA announced a $150
million plan to build a second frac sand mine and plant in West
Texas. The new facility, located about 60 miles north of Midland,
is expected to produce approximately 2.6 million tons annually.
The company has secured customer commitments for the purchase
of 1.2 million tons per-year of sand including cash pre-payments,
and for up to four Sandbox crews to deliver the sand from the mine
to customer well sites. Initial production is expected in March of
2018. The 3,500-acre site has over 30 years of reserves of fine grade
40/70 and 100 mesh.
Ive been told that frac sand use in 2017 is on pace to greatly
exceed its peak set in 2014. Regional sand stands out as one way
for companies to mitigate delivery costs. Still, as experts from a
frac sand panel at the aforementioned Wolfe Research Oil & Gas
Leaders Conference agree, potential truck congestion, financial
backing, operational history, and customer contract appetite remain
as constraints. And, perhaps, the dunes sagebrush lizard.
WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:47 PM
 10th Annual
April 3-5, 2018
Cox Business Center, Tulsa, OK #PipelineExpo
www.PipelineEnergyExpo.com

2018 PIPELINE + ENERGY EXPO AWARDS

E
WANT YOUR PROJECT, PRODUCT OR SERVICE TO BE
RECOGNIZED AS THE BEST IN THE INDUSTRY?
SUBMIT YOUR APPLICATION TODAY!

NEW FOR 2018! NOMINATIONS OPEN APRIL 7, 2017

DEADLINE FOR SUBMISSIONS: FRIDAY, NOVEMBER 17, 2017
Launching at the Pipeline Energy Expo, April 4-6, 2017, The Pipeline + Energy Expo Awards are a new initiative for 2018, and d
henceforth will be given annually in various categories within the pipeline industry that exemplify excellence in all its forms.
All companies, bodies and individuals involved in crude oil and natural gas pipeline operations, construction, integrity, safety, products,
solutions and regulatory compliance of pipelines should consider entering.
Anyone may submit a nomination, however, the award will be given to the individual, body or project/product owner who is nominated.

ONE WINNER WILL BE SELECTED IN EACH OF THE FIVE CATEGORIES:

PRODUCTS/PROJECTS/SOLUTIONS AWARDS
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ELIGIBILITY REQUIREMENTS
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One winner from each category will be selected and recognized during the Pipeline + Energy Expo keynote session in April 2018 in
Tulsa, OK. A representative from the winning company, individual or body must be available to accept the award. Winners will be notified by
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Winners will be featured on www.pennenergy.com . A representative from the winning entries will work with PennEnergy editors to develop
the article and an award video between December 31, 2017, and the keynote session in April 2018. High-resolution photos/graphics
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1710OGFJ_11 11 10/6/17 2:47 PM

 UPSTREAM NEWS
GEOPARK MAKES OIL FIELD DISCOVERY IN COLOMBIA
GeoPark Ltd., an independent Latin American oil and gas
explorer, operator, and consolidator with operations and growth
platforms in Colombia, Chile, Brazil, Argentina, and Peru, has
discovered a new Curucucu oil field in the Llanos 34 block
(GeoPark operated with a 45% WI) in Colombia.
GeoPark drilled and completed the Curucucu 1 exploration
well to a total depth of 14,600 feet. A production test conducted
with an electric submersible pump in the Guadalupe formation
resulted in a production rate of approximately 1,700 barrels of
oil per day, of 15.8 degrees API, with 0.4% water cut, through
a choke of 100/64 inches and wellhead pressure of 70 pounds
per square inch. Additional production history is required to
determine stabilized flow rates of the well. Surface facilities are
in place and the well is already in production. Petrophysical
log analysis during drilling also indicated the presence of po-
tentially productive hydrocarbons in the shallower Mirador
formation.
To minimize surface construction costs and share production
facilities, the Curucucu 1 exploration well was drilled from an
existing well pad in the recently discovered Jacamar oil field.
The well was drilled with a horizontal extension of more than
9,000 feet; representing a record for the Llanos 34 block. Curu-
cucu oil field is located on a new fault trend to the east of Tigana/
Jacana fault trend, adjacent to the Jacamar oil field. It is the
eleventh oil field discovered by GeoPark since acquiring the
prolific Llanos 34 block in 2012, and one of three new oil fields
added in 2017.
GeoPark plans to drill approximately seven wells in the Llanos
34 block during 3Q2017 with a focus on further delineating the
southern Jacana and northern Tigana oil fields.
HANSA HYDROCARBONS CONFIRM GAS DISCOVERY
OFFSHORE NETHERLANDS
Hansa Hydrocarbons Limited (Hansa) and its partners reported
a gas discovery from the N05-1 exploration well drilled offshore
Netherlands on the GEms licences. The well encountered gas
in the target basal Rotliegend sandstones. Hansa and its part-
ners Oranje-Nassau Energie BV (ONE) and Energie Beheer
Nederland BV (EBN, the Dutch State entity), further appraised
the reservoir distribution and delineated the structure with a
downdip geological side-track which also encountered gas.
The reservoir interval was cored throughout and 24m of net
sand was encountered with high permeability. This was con-
firmed by the DST in the vertical well which was flow tested at
a maximum sustained flow rate of 53 million standard cubic
feet per day, which was the limit of surface equipment. The
results of the well exceeded pre-drill expectations.
The Ruby discovery extends across the N04, N05, N08, and
Geldsackplate licences in the Dutch and German North Sea
sectors respectively in a water depth of 28m. The N05-1 well
was drilled as a joint well between the N05 and Geldsackplate
licence groups, with Hansa participating at a 40% working in-
terest. The well was operated by ONE and drilled with the
12
1710OGFJ_12 12
Paragon Offshore Prospector-1 rig, which moved off location
on August 30, 2017.
Hansa is operator of both the Dutch and German GEms li-
cences, Blocks N04, N05, N8 and N07c in the Netherlands, with
interests post-EBN participation of 25% to 30%, and the Geld-
sackplate licence in Germany with an interest of 50%.
NEW ASSESSMENT TARGETS MARKETABLE OIL
AND GAS RESOURCES IN ALBERTAS DUVERNAY SHALE
The National Energy Board (NEB), together with the Alberta
Geological Survey (AGS), released a new resource assessment
for the Duvernay Shale in central Alberta that adds significant
quantities of marketable light oil resources in the province as
well as natural gas and natural gas liquids (NGLs).
Using geological and in-place hydrocarbon data provided
by the AGS, the NEB estimates the Duvernay Shale contains
3.4 billion barrels of marketable light oil and field condensate,
or 17 years of Albertas annual production. It also shows mar-
ketable gas resources equivalent to nearly 25 years of Canadas
annual consumption.
The Duvernay Shale covers nearly 20% of the province,
stretching from just below Grande Prairie to just north of Calgary
and east of Edmonton. Companies have been drilling the
Duvernay for shale gas and oil since 2011, and the region has
extensive existing pipeline infrastructure.
Deposited about 370 million years ago, the Duvernay Shale
is rich in organic matter and ranges from about one kilometre
to more than five kilometres deep. The Duvernay generally
starts getting prospective for oil and gas production below 2.5
km, with the formation generally oily in areas shallower than 3
km and gassier in areas deeper than 3 km.
Although most of current development has focused on the
Duvernays West Shale Basin, such as the Kaybob Field north-
west of Edmonton, recent provincial land sales show increasing
industry interest in the Duvernays East Shale Basin.
A resource assessment of a formations marketable petroleum
estimates the total amount of sales-quality oil, natural gas and
even NGLs that can potentially be recovered from a formation
with existing technology. Resource assessments are based on
a number of factors such as the geology of the reservoir and
production from existing wells.
The NEB will be releasing a second report later this fall
examining the economics of the Duvernay Shale resource.
The National Energy Board is an independent federal reg-
ulator of several parts of Canadas energy industry. The Alberta
Geological Survey (AGS) is a branch of the Alberta Energy
Regulator (AER) and provides geological information and advice
to the Government of Alberta, the AER, industry and the
public.
MURPHY ENTERS DEEPWATER BRAZIL BLOCKS
Murphy Brazil Explorao E Produo De Petrleo E Gs Ltda.,
a wholly owned Brazilian subsidiary of Murphy Oil Corp. (NYSE:
MUR), has entered into a farm-in agreement with Queiroz
WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:47 PM

Galvo Explorao e Produo SA (QGEP) to acquire a 20% (ACG) field, the largest field in the Azerbaijani sector of the
working interest (WI) in Blocks SEAL-M-351 and SEAL-M-428,
located in the deep water Sergipe-Alagoas Basin, offshore
Brazil.
QGEP will retain a 30% WI in the blocks, and in a related but
separate transaction, ExxonMobil Explorao Brasil Ltda. (an
affiliate of ExxonMobil Corp.) has farmed into the remaining
50% WI as the operator. The blocks are located 80 to 100 kilo-
meters (50 to 60 miles) off the coast of Brazil and cover a total
area of approximately 1,500 square kilometers (580 square
miles).
In addition, Murphy and its partners are the high bidder in
Brazils Round 14 lease sale for Blocks SEAL-M-501 and
SEAL-M-503, which are adjacent to SEAL-M-351 and SEAL-M-428.
ExxonMobil will operate and the partners will maintain the
same WI in each of these blocks. These new acreage positions
are near several major Petrobras discoveries.
Murphy Oil Corp. is a global independent oil and natural
gas exploration and production company. The companys re-
source base includes offshore production in Southeast Asia,
Canada and Gulf of Mexico, as well as North America onshore
plays in the Eagle Ford Shale, Kaybob Duvernay and
Montney.
GAZPROM PLANNING SECOND SUBSEA PROJECT
OFFSHORE SAKHALIN
Gazprom expects to finish development drilling this year at the
Kirinskoye field offshore Sakhalin Island.
Head of Department Vsevolod Cherepanov, speaking at the
Sakhalin Oil & Gas 2017 conference, said production at the
field, part of the Sakhalin III project, is dedicated to consumers
in Russias Primorye Territory and the north of the Sakhalin
region.
It was the first Russian field to be developed using subsea
production technologies. With new producing wells in opera-
tion, the field should gradually reach the planned plateau of
5.5 bcm/yr.
Gazprom continues to conduct geological exploration in
the Kirinsky, Vostochno-Odoptinsky and Ayashsky blocks in the
same Sakhalin III project.
The Yuzhno-Kirinskoye gas field remains at the pre-devel-
opment stage, with design studies under way for a wholly
subsea project.
Gazprom is also continuing its LNG projects in Sakhalin, said
Alexander Medvedev, deputy chairman of the companys Man-
agement Committee, with design documentation nearly com-
pleted for the islands LNG plants third train.
This will have an annual capacity of up to 5.4 MM tons.
Offshore staff
EXTRA TIME FOR BP AND PARTNERS
AT AZERI-CHIRAG-GUNESHLI
BP and Azerbaijan today signed a deal extending a production
sharing contract for the super-giant Azeri-Chirag-Guneshli
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_13 13
UPSTREAM NEWS
Caspian Sea, until 2050.
Commenting on the extension, Laura Bennie, research analyst
with Wood Mackenzies upstream Caspian team, said: Finalizing
the contract extension is fitting recognition of the value that
ACG represents not only for BP and its partners, but also the
Azerbaijani economy. The combination of the extension, bonus
payment and increased SOCAR stake looks like a balanced
outcome.
For the international partners, its all about moving down
the cost curve and securing long-life assets. Finalizing the ACG
contract extension is right on trend for BP and partners the
fruits of many years of talks.
Bennie added: For Azerbaijan, this reaffirms the wider
commitment to its oil and gas industry and the future revenues
it will bring.
ACG production may now be below 600,000 barrels per
day, but there are still billions of barrels to recover and billions
of dollars to invest. Attention will now turn to a brand-new
production platform [Azeri Central East], which will be com-
missioned in the 2020s.
The production sharing contract extension is pivotal for the
post-2024 outlook for Azerbaijans oil sector. ACG currently
produces 75% of Azerbaijans liquids production, and is the
lifeblood of its economy.
The existing PSC is due to expire in 2024. The new deal sees
SOCAR increase its stake in the ACG consortium to 25% from
11.65%, while BP, which remains operator, sees its interest drop
from 35.8% to 30.37%.
The other consortium partners have also seen their stakes
reduce. Chevron now holds 9.57%, Inpex 9.31%, Statoil 7.27%,
ExxonMobil 6.79%, TPAO 5.73%, Itochu 3.65% and ONGC
Videsh 2.31%.
LATEST WISTING APPRAISAL WELL PROVES
OIL IN BARENTS SEA
The semisubmersible Island Innovator has finished drilling
appraisal well 7324/8-3 on the Wisting oil discovery in the
Barents Sea.
According to the Norwegian Petroleum Directorate, the well
was drilled in 396 m (1,300 ft) of water in license PL 537, 2 km
(1.2 mi) south of the discovery well 7324/8-1 and 315 km (196
mi) north of Hammerfest.
Prior to drilling this latest well, OMV had estimated the
Wisting areas resources in in the range of 22-80 MMcmoe.
The well encountered a 55-m (180-ft) oil column in sandstones
from the Mid-Jurassic to Late Triassic (St and Fruholmen
formations). The former had better reservoir characteristics.
In addition, the rig conducted a successful water injection
test in the St formation, confirming good injection
properties.
The well, which will be permanently P&Ad, was the sixth on
the license.
Offshore staff
13
10/6/17 2:47 PM
 MIDSTREAM NEWS
B RIEFS
GOODNIGHT
MIDSTREAM, CALLON
ENTER CONTRACT
Goodnight Midstream
has entered into a
multi-year partnership to
provide pipeline disposal
service for Callon Petro-
leum Co. in the southern
Delaware Basin. Good-
night will build, own,
and operate a produced
water pipeline connect-
ing Callons Spur acreage ership interest in this new pipe will provide the
in Ward County, Texas
to saltwater disposal
wells in the Central Basin
Platform.
TRAVERSE MIDSTREAM
PARTNERS CLOSES ON
$1.285B LOAN
Traverse Midstream
Partners LLC has closed
on a $1.285 billion senior
secured term loan. The
loan was upsized by
$150 million from an
initial loan size of $1.135
billion. Proceeds will be
used to fund ongoing
capital requirements as-
sociated with Traverses Hearne, and additional connections to third-party
35% interest in Rover
Pipeline LLC and 25%
interest in Ohio River
System (ORS), to retire
existing Traverse indebt-
edness, and for general
corporate purposes.
Deutsche Bank Securi-
ties Inc. and JPMorgan
Chase Bank NA acted as
joint lead arrangers and
joint bookrunners for the
term loan.
14
1710OGFJ_14 14
MAGELLAN MIDSTREAM TO EXPAND
TEXAS REFINED PETROLEUM PRODUCTS
PIPELINE SYSTEM
Magellan Midstream Partners LP plans to expand
its refined petroleum products pipeline system
to handle incremental demand for transportation
of gasoline, diesel fuel, and jet fuel to central and
north Texas markets.
Supported by long-term customer commit-
ments, Magellan plans to build an approximately
135-mile, 16-inch pipeline from its terminal in East
Houston to Hearne, Texas. Magellan will own the
newly-constructed pipeline from East Houston
to Hearne via an undivided joint interest agree-
ment with Valero Energy Corp. Magellans own-
ability to deliver additional product north to
Temple, Waco, and Dallas as well as Magellans
Midcontinent markets, including Little Rock, Ar-
kansas. Magellan plans to reverse an existing
pipeline which will connect to the new pipeline
segment, providing Magellan an incremental
85,000 barrels per day of refined products capacity
originating from the Houston area, for an increase
of nearly 50% to service Magellans Texas, Mid-
continent, and Little Rock markets.
In addition, Magellan will make a number of
enhancements to its existing pipeline and terminal
infrastructure, including construction of 1 million
barrels of refined products storage on a combined
basis at its facilities in Dallas, East Houston and
refineries, pipelines, and terminals within the
Houston Gulf Coast region, including Magellans
new Pasadena, Texas marine terminal that is cur-
rently under construction and expected to be
operational in early 2019.
Magellan currently expects to spend approx-
imately $375 million for its share of the project,
with the expanded capacity available in mid-2019,
subject to receipt of necessary permits and reg-
ulatory approvals.
If warranted by additional customer demand,
Magellans pipeline capacity originating in the
Houston area could be further increased.
EUREKA SECURES $400M CREDIT FACILITY
Eureka Midstream LLC has closed on a $400 mil-
lion senior secured revolving credit facility. The
credit facility amends and restates Eurekas ex-
isting credit facility and increases the aggregate
credit facility commitments from $225 million to
$400 million with an extended maturity date of
4-years from the credit facility closing date. The
WWW.OGFJ.COM
credit facility provides a $100 million accordion
whereby, under certain terms and conditions,
Eureka Midstream can increase the aggregate
credit facility commitments to $500 million. Use
of proceeds from the credit facility will be used
for funding capital expenditures, financing per-
mitted acquisitions, funding working capital, and
general corporate purposes.
ABN AMRO Capital USA LLC serves as the
administrative agent and sole lead arranger under
the credit facility with BBVA Compass, CIT Bank,
and US Bank serving as co-documentation agents,
and Citibank, Iberiabank, and Regions Bank serv-
ing as senior managing agents. Additional par-
ticipating banks include BNP Paribas, Cadence
Bank, Citizens Bank, East West Bank, Branch
Banking and Trust Company, The Huntington
National Bank, and ZB NA DBA Amegy Bank.
Simpson Thatcher & Bartlett LLP served as
legal advisors to Eureka Midstream. Thompson
& Knight LLP served as legal advisors to ABN
AMRO Capital USA LLC.
SANTA FE MIDSTREAM BEGINS
CONSTRUCTION IN SAN ANDRES
Santa Fe Midstream LLC has commenced con-
struction of a natural gas gathering, treating, and
processing system in the San Andres play in the
Permian Basin. Construction began in August
2017 and the initial natural gas facilities will be
operational by the second quarter of 2018. Santa
Fe is also developing a crude oil gathering system
in the area. Santa Fes natural gas and crude oil
midstream facilities will be located in Yoakum,
Gaines, and Cochran counties in Texas as well as
Lea County, New Mexico.
Residue from the natural gas processing plant
and treating facilities located near Denver City,
Texas, will be delivered to El Paso Natural Gas
interstate pipeline with access to the WAHA hub
and Western US natural gas markets. Natural gas
liquids will be delivered to Enterprise Products
Chaparral Pipeline for transportation to Mt. Bel-
vieu, Texas.
STAKEHOLDER MIDSTREAM TO EXPAND
IN PERMIAN BASINS SAN ANDRES
Stakeholder Midstream LLC will build a new nat-
ural gas gathering system in the Permian Basin
to serve producers working in the Horizontal San
Andres. The gas gathering solution includes
low-pressure gathering, liquids handling, sour
gas treating, cryogenic processing, and nitrogen
rejection capabilities. In conjunction with its new
| OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:47 PM

natural gas system, Stakeholder also will expand its existing
San Andres Crude Gathering System.
Stakeholders comprehensive gas gathering, treating and
processing system will include low-pressure sour gas gathering
lines across Yoakum County, Texas, and into Lea County, New
Mexico. To support its expanded gathering footprint, Stake-
holder will construct a treating and processing facility in Yoakum
County. The new facility will include front-end liquids handling,
an amine treater and acid gas injection well, a cryogenic pro-
cessing plant with the capacity to process 60 MMcf/d, and a
nitrogen rejection unit.
Stakeholder also will expand its San Andres Crude Gathering
System in Yoakum County. The crude system was fully commis-
sioned on May 1, 2017, and currently consists of approximately
90 miles of gathering pipelines, a crude oil storage terminal,
and multiple downstream pipeline connections. The expansion
will include additional gathering lines, pump stations, and
additions to storage capacity at Stakeholders crude terminal.
The acquisition of rights of way is underway, and the new
gathering lines are expected to come into service in the first
quarter of 2018.
San Antonio, TX-based Stakeholder is backed by venture
capital commitments from EnCap Flatrock Midstream.
TALL OAK III TO BUILD GATHERING SYSTEM
IN STACK PLAY
Tall Oak Midstream III LLC will construct a natural gas gathering
system in southeast Oklahomas East STACK play. The system
will span Hughes County and portions of Seminole, Pontotoc,
Coal, Pittsburg, Atoka, and McIntosh counties.
Initially, Tall Oak IIIs East STACK system will consist of more
than 50 miles of 12-inch to 20-inch pipeline, two compression
facilities, a 5,000 bpd stabilizer, an associated slug catcher and
condensate storage facilities. The system is expected to come
into service by year-end. Tall Oak III expects to add a cryogenic
processing facility to its East STACK system.
Tall Oak III was formed earlier this year with an initial equity
commitment of up to $200 million from EnCap Flatrock Mid-
stream and the Tall Oak III management team.
ENABLE MIDSTREAM TO BUY ALIGN MIDSTREAM
Dallas, TX-based Align Midstream Partners, a portfolio company
of Tailwater Capital, has entered into a definitive agreement
to sell the company to Enable Midstream Partners LP for ap-
proximately $300 million, subject to certain customary
adjustments.
Align operates a 100-million cubic foot per day cryogenic
natural gas processing plant in Panola, Texas, and approximately
190 miles of natural gas gathering pipelines across Rusk, Panola,
and Shelby counties in Texas and DeSoto Parish in Louisiana.
Enables assets include approximately 12,900 miles of gath-
ering pipelines, 14 major processing plants with approximately
2.5 Bcf/d of processing capacity, approximately 7,800 miles of
interstate pipelines (including Southeast Supply Header LLC
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_15 15
MIDSTREAM NEWS
of which Enable owns 50%), approximately 2,200 miles of in-
trastate pipelines and eight storage facilities comprising 85.0
billion cubic feet of storage capacity.
Simmons & Company International | Energy Specialists of
Piper Jaffray acted as Aligns exclusive financial advisor. Locke
Lord served as legal counsel to Align.
The transaction is subject to regulatory approval and closing
conditions.
MAGELLAN MIDSTREAM, VALERO FORM JV
TO EXPAND PASADENA MARINE TERMINAL
Magellan Midstream Partners LP and Valero Energy Corp. noted
the expansion and joint development of the marine storage
facility currently under construction along the Houston Ship
Channel in Pasadena, Texas. The Pasadena facility, which will
handle petroleum products, including multiple grades of gas-
oline, diesel and jet fuel, and renewable fuels, will be owned
by a limited liability company that is owned 50/50 by Magellan
and Valero and will initially include 5 million barrels of storage,
truck loading facilities and 2 proprietary ship docks.
Phase 1 of the facility is under construction, which includes
approximately 1 million barrels of storage and a new marine
dock capable of handling Panamax-sized ships or barges with
up to a 40-foot draft. This first phase will now be owned by the
jointly-owned company.
Further, this facility will be expanded by an incremental 4
million barrels of storage, a 3-bay truck rack and a second
marine dock capable of handling Aframax-sized vessels with
up to a 45-foot draft (Phase 2). After completion of this expan-
sion, the Pasadena facility will be connected via pipeline to
Valeros refineries in Houston and Texas City, Texas and the
Colonial and Explorer pipelines in addition to the already
planned connection to Magellans Galena Park terminal
facility.
Combined, Phases 1 and 2 of the Pasadena marine terminal
are currently estimated to cost approximately $820 million,
which will be funded equally by capital contributions from
Magellan and Valero. With the new arrangement, Magellans
incremental capital spending will be approximately $75 million
more than its previous spending estimates of $335 million for
phase 1 alone. Both phases are fully contracted with long-term
customer commitments.
Magellan currently serves as construction manager and will
serve as operator once construction is complete. Phase 1 of
the new terminal is expected to be operational in early 2019,
with Phase 2 expected to come on-line in early 2020, subject
to receipt of necessary permits and regulatory approvals.
If warranted by additional demand, the new Pasadena facility
could be expanded to include an incremental 5 million barrels
of storage, another 3 docks and expanded truck loading ca-
pacity, for a maximum footprint of up to 10 million barrels of
total storage and up to 5 docks. All future expansions are ex-
pected to be owned by the jointly-owned company.
15
10/6/17 2:47 PM
 Wolfcamp Delaware
AN ASSESSMENT OF RECENT ACTIVITY WITH A GIS APPROACH
VERONIKA AKULINITSEVA AND ROMAN BOROS, RYSTAD ENERGY

DESPITE THE COLLAPSE in oil prices tensity led to the increase in well productivity, causing operators to continue to experiment
witnessed in the second half of 2014 and a with proppant loading in hopes of achieving even better well results while keeping well
persisting environment ever since, light economics attractive enough amid depressed frac sand prices in 2015-2016.
tight oil production in the US has remained Figure 2 illustrates that further increases in proppant intensity do not necessarily result
resilient and proved its commerciality, even
in the sub-US$60/bbl environment. The
F1: PERMIAN DELAWARE WOLFCAMP - PROPPANT INTENSITY HEAT MAP
average production of light oil exhibited a
decline for the first time last year, reaching
the bottom of 4.74 MMbbl/d in the third Eddy Lea Gaines
quarter of 2016, but production in the Perm-
ian Basin continued to show a growing NM
Andrews
trend. In 2017, the Permian Midland and
Delaware are set to add approximately 500
thousand bbl/d of oil supply to the market.
Operators in both shale plays have shifted Loving Winkler Ector
their focus to developing their best acreage
positions and optimizing completion tech- Proppant per foot
Culberson Ward
niques, which has led to continuous im- Crane (Pounds per foot)
< 1,000
provements in drilling efficiency and well TX 1,000 1,500
performance. 1,500 2,000
Reeves 2,000 2,500
Since 2013, increasing completion in- > 2,500
tensity has become a major trend, as pro- Pecos
Jeff Davis 0 Miles 20
ducers in the Permian aimed to boost well
0 Km 32
configuration through drilling longer lat-
erals, increasing proppant loading, and
experimenting with proppant composition Source: Rystad Energy NASWellCube

and frac fluid type. In the Permian Dela-

F2: PERMIAN DELAWARE WOLFCAMP - FIRST YEAR
ware, proppant loading has doubled since
2-STREAM PRODUCTION HEAT MAP
2014, surpassing the level of 2,000 pounds
per foot on average in the first quarter of
2017. Eddy Lea Gaines
Figure 1 shows a proppant intensity heat NM
map for Delaware wells targeting Wolfcamp
Andrews
zones. The selection is based on 1,200 wells
with at least one year of production data
and full completion data disclosure. While
Loving Winkler Ector First year total
proppant intensity is mostly distributed 2-stream
within the range of 1,0002,000 pounds per production
foot, there seem to be operators experi- per foot
Culberson Ward (Barrels per foot)
menting with monster completions, pump- Crane
< 20
ing more than 2,500 pounds of proppant TX 20-30
per foot. The tests are concentrated in the 30-40
Reeves 40-50
southeastern area of Reeves County; how- > 50
ever, extreme levels of proppant loading Pecos
Jeff Davis 0 Miles 20
are also observed in various sweet spots
0 Km 32
across other counties of the Delaware
Basin.
Over recent years, higher proppant in- Source: Rystad Energy NASWellCube

16 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_16 16 10/6/17 2:47 PM

 in significantly improved well productivity. The most impressive production results, with in Culberson County have a GOR of more
over 50 barrels per foot, are mostly seen in the areas where proppant loading has been in than 9,000 cubic feet per barrel. Light oil
the range of 1,000-2,000 pounds per foot. Better overall results can be seen in the northern content of the wells increases as we move
part of Reeves, as well as in Loving and Culberson counties. Eddy and Lea counties are to the northern part of Reeves and farther
also among areas with higher well productivity, despite significantly fewer wells drilled to Loving and Winkler counties. In general,
compared to the other core counties mentioned. the lowest GOR is more common for the
Looking at the wells drilled across the Permian Delaware, we observe another interesting southern and eastern parts of the forma-
trend the dependence of the variability in the light oil content on the area targeted. tion. Thus, wells in the southern part of
Figure 3 presents a split of all Wolfcamp wells in the selection by the first year Gas-to- Reeves, for example, exhibit a GOR of less
Oil ratio (GOR), which is a ratio of gas production to combined crude and condensate than 3,000 cubic feet per barrel compared
output during the first year of production of the well. We observe that most wells drilled to the northern part, where GOR is mostly
within the 3,000 6,000 range.
F3: PERMIAN DELAWARE WOLFCAMP - FIRST YEAR GOR By experimenting with completion tech-
niques to boost well productivity and tar-
geting the best areas of the acreage, oper-
Eddy Lea Gaines
ators are striving to increase commerciality
NM of the wells.
Andrews Figure 4 shows the distribution of well-
head breakeven oil prices across the Wolf-
camp formation in the Permian Delaware
for our selection of wells. We see that the
Loving Winkler Ector
wells in Culberson, parts of southern
Reeves, and Loving counties in Texas, to-
First year GOR
Culberson Ward (Cubic feet per barrel)
gether with Eddy and Lea counties in New
Crane
< 3,000
Mexico, demonstrate the highest commer-
TX 3,000 6,000 ciality in the shale play. The wells drilled in
6,000 9,000 these areas, to a large extent, exhibit well-
Reeves 9,000 12,000
> 12,000 head break even oil prices of under US$40/
Pecos bbl. As we move to the lower part of the
Jeff Davis 0 Miles 20
Wolfcamp formation, into southern Reeves,
0 Km 32
Ward, and Pecos counties, the breakeven
price range significantly increases, with
Source: Rystad Energy NASWellCube
many wells holding wellhead breakeven oil
prices of US$70/bbl and above.
F4: PERMIAN DELAWARE WOLFCAMP - BREAKEVEN PRICE HEAT MAP
ABOUT THE AUTHORS
Eddy Lea Gaines Veronika Akulinitseva is a
NM senior E&P analyst at Rystad
Energy. She holds a MSc in
Andrews
economics and business ad-
ministration from Norwegian
School of Economics, Norway,
Loving Winkler Ector and a BSc in Management
from the University of Man-
Wellhead BE oil price chester, UK. Roman Boros has
Culberson Ward (Dollars per barrel)
Crane worked as a senior analyst in
< 40
TX 40-50 GIS development and as a
50-60 project manager for Rystads
Reeves 60-70
> 70 North American shale maps product. He
Pecos
holds a MSc in Geography and Cartography
Jeff Davis 0 Miles 20 and a PhD in Cartography and Geoinfor-
0 Km 32
matics, both from Comenius University,
Bratislava, Slovakia.
Source: Rystad Energy NASWellCube

OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM 17

1710OGFJ_17 17 10/6/17 2:47 PM

 INTERVIEW | FAIRMOUNT SANTROL
Do Good. Do Well.
MOTTO IN MIND, FAIRMOUNT SANTROL TALKS TECHNOLOGY, INNOVATION
PHOTOS COURTESY OF FAIRMOUNT SANTROL
Editors Note: Fairmount Santrol is organized into two business
segments, one that provides proppants used by oil and gas
companies, and another that delivers high-grade sands and val-
ue-added products to end users in the industrial and recreational
markets. OGFJ had the opportunity to interview Jenniffer Deck-
ard, CEO; Gerald Clancey, chief commercial officer; and Michael
Biehl, CFO; to talk about the companys oil and gas proppants
business and key trends emerging in the industry.
Oil & Gas Financial Journal: Fairmount Santrol is a major
proppant supplier to the oil and gas industry. Tell us more
about the business and what proppant innovation means.
Jenniffer Deckard (JD): Absolutely. Fairmount Santrol has
been a leader among proppant providers for 40 years. We pro-
duce and deliver high-quality sand for exploration and produc-
tion companies as well as oilfield service companies throughout
North America. What differentiates us though is our focus on
technology and innovation. Proppant innovation is more than
a phrase, it represents our mission and underscores our com-
mitment to deliver solutions that improve efficiencies and
enhance well productivity. Accordingly, operators see us as a
partner in their pursuit to extract every last barrel at the lowest
possible cost, rather than just solely as a proppant supplier.
Fairmount Santrol was the first to market with resin-coated
proppants, polymeric fluid diverters and most recently, proppant
transport technology, all of which have had meaningful impacts
on the growth trajectory of our industry and its production
volumes. Also, we have long viewed our distribution network
as key component of our total proppant solution, providing
product in basin in the quantities needed, and further reducing
costs and complexities for our customers.
Using sand to prop open fractures isnt a new phe-
nomenon in the industry, but the exponential growth in the
amount of sand used in completions is. Whats driving the
demand for more sand?
JD: As our industry recovers from one of the most dramatic
downturns on record, we are seeing an increase in new well
completions. Out of the downturn first came dramatic increase
in rigs, and most recently, as rig counts are stabilizing, we con-
tinue to see an increase in the number of wells completed as
completions resources catch up to drilling and operators work
their way through drilled and uncompleted well (DUC) inven-
tories. Further, E&P companies are pushing the envelope to
alter decline curves and find new ways to make their operations
more efficient and their wells more productive. The continued
trend has been to increase the amount of proppant intensity
per lateral foot and to drill longer laterals. Most E&Ps are finding
18
1710OGFJ_18 18
that different proppant intensities can significantly improve
the economic viability of their wells. As a result, weve seen a
large uptick in demand for proppants, particularly frac sand.
This move to more proppant and greater intensity has
had an effect on proppant pricing too. Can you give use an
overview of the supply/demand dynamic here in the US and
what Fairmount Santrol or the industry may be doing to
address the shortage?
Michael Biehl (MB): You can expect to see new mines come
online from the industry this year and next, primarily in the
Permian basin time will tell how quickly this new supply will
come to market, as there are several matters mining companies
may need to address before bringing new mines into a produc-
tion mode. However, we expect proppant demand to expand
both within the Permian Basin and in regions outside of the
Permian Basin, so additional supply will be needed. We do not
expect all E&Ps to do a complete conversion to regional sand
grades and quality, leaving some of the Permian Basin demand
to be addressed from current supply. While we certainly look
at the bigger picture, our team is focused on serving our cus-
tomers and making sure we have ample inventory to do so. We
recently began construction of our Kermit mine in the Permian
Basin to meet the growing demand for in-basin, regionally
produced sand, and more specifically, meet the increased de-
mand for smaller mesh sizes. Additionally, weve taken steps to
optimize our supply chain distribution network, maximize unit
train destinations and load per rail car. Recent advancements
with our proppant transport technology have provided operators
the flexibility to select coarser mesh sizes, which should help
balance demand for various types and qualities of sand. Weve
increased raw sand prices approximately $20 per ton since the
beginning of the year. Our ability to increase prices over the last
few quarters has been the result of higher demands driven by
industry dynamics such as proppant intensity as well as tightness
in supplyespecially as the higher demands are for finer grades
of sand whereas the market supply dynamics are skewed toward
a coarser mix.
With greater industry activity comes the need to
balance our impact on the environment and our resources.
Are upstream companies doing all they can to reduce their
footprint?
Gerald Clancey (GC): Corporate social responsibility is a
foundational value driver at Fairmount Santrol. We have a
motto: Do Good. Do Well. So its important for us to work with
companies that share similar values. Our end customers and
WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:47 PM
 FAIRMOUNT SANTROL | INTERVIEW

Left to right: Jenniffer Deckard,

president, CEO, director; Gerald
Clancey, executive vice president, chief
commercial officer; Michael Biehl,
executive vice president, CFO

OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM 19

1710OGFJ_19 19 10/6/17 2:47 PM

 INTERVIEW | FAIRMOUNT SANTROL

partners are constantly looking for ways to improve their op-
erations, reduce their environmental impact and enhance their
sustainability practices. Efforts to reduce truck miles, increase
the use of recycled water while decreasing the use of fresh water,
and minimize noise pollution are all successful initiatives weve
seen recently. As exploration and development creeps closer to
urban neighborhoods and established communities, we believe
there will be an even greater emphasis placed on sustainable
practices to better position operators and the industry as wel-
comed neighbors.
What has Fairmount Santrol done to keep up with the
changing needs of the upstream industry and meet the de-
mand for better, greener and more productive
completions?
GC: Several things, in
fact. Weve introduced
our proppant transport
technologies, Propel
SSP and Propel SSP 350,
to solve the decades-old
challenge of evenly dis-
tributing proppant
throughout the full
length of a created hy-
draulic fracture. The
technology props open
the fracture from well-
bore to tip, maximizing
the fracture surface area
to increase hydrocarbon
production. Sand or ce-
ramic proppants coated
with our special polymer
that swells in water, pro-
vide unprecedented transport to the tips of fractures. By doing
so, E&Ps can overcome multiple operational constraints during
their completions while reducing freshwater use and emissions,
as well as, chemical and fuel consumption at the well site. Further,
since larger proppant grains can now be carried and placed with
ease and efficiency, operators have the flexibility to choose a
larger and more conductive grain, increasing permeability and
hydrocarbon flow through the proppant pack. In comparison
to a common slickwater design, some operators have reduced
frac water required by more than 50% when using Propel SSP.
Adding to these advantages, operators have reported seeing
increases in initial production rates and estimated ultimate
recoveries by over 20%. What were seeing is that our technologies
are helping operators do well while doing good for the environ-
ment. In addition to reducing the amount of water, Propel SSP
350 allows for water reuse which presents significant opportu-
nities for E&P companies to reduce costs and reduce their en-
vironmental impact.
Some proppant companies are making supply chain
changes to better serve the needs of upstream E&P compa-
niesdirect sourcing and direct to well site delivery, for ex-
ample. You are focused instead on making changes to the
proppant itself in order to optimize fracturesis that a fair
assessment?
MB: Yes, we want to more directly help E&P companies max-
imize the value of their assets, which means we have to help
them improve production rates and recoveries in addition to
supporting their cost-reduction and efficiency goals. We will
always assess ways to improve our supply chain and operations,
yet continue to focus on better completions.
What is the optimal fracture design, and what does
the ultimate customer
engagement look like
for you?
JD: E&Ps want to safely
yield the most effective
propped fracture area
with the least amount
of resource demand,
such as capital, time,
sand, water, fuel, equip-
ment and people.
Achieving an optimal
design through technol-
ogy application, such as
with Propel SSP, pro-
vides an opportunity to
rethink field develop-
ment plans, for in-
stance, through tighter
well spacing, as a result
of enhanced propped area, as well as more effective infrastruc-
ture and service contracts. To address this hurdle and realize
the full value potential of increased reserves and improved
capital efficiency, the ideal customer engagement is forged from
an open and collaborative relationship from the field to the
executive suite. The path to a truly optimized frac involves a
broad perspective of operational risks and benefits - changing
the status quo. Executive engagement can reduce process
barriers and increase willingness to allocate and invest resources.
The results can be extraordinary.
Fairmount Santrols proppant innovations have been
used in wells in the Permian, Utica, and Marcellus, and even
garnered traction internationally. What are operators seeing
in terms of results?
GC: Weve completed more than 150 wells using Propel SSP.
Typical productivity gains are 20-25% within 12 months, however

20 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_20 20 10/6/17 2:47 PM


some studies have shown more than 50% uplift. Although its
designed to increase production through more effective prop-
pant placement, benefits are immediately recognized on the
surface where we have the ability to complete wells at any pump
rate, any proppant concentration, any mesh size and varying
water quality, while lowering the average treating pressure.
Compared to a typical slickwater design, E&Ps will observe that
a Propel SSP optimized design reduces water, chemicals, and
time needed to complete wells.
Do you see your two main businesses at cross purposes
with each other selling sand and selling proppant systems
that could potentially use less sand?
GC: We see them as complementary. Over the years, weve
consistently developed strategic relationships to maximize
value through mine and supply-chain efficiencies, as well as
value added technology solutions. For years we have been the
leading supplier of coated proppant and fluid diverting agents
while consistently growing our mining operations and demand
for our frac sands. Specifically, Propel SSP adds portfolio dy-
namics that enhance our value to customers. E&Ps can now
shift between frac sand grades to hedge against inflation due
to the ability to pump coarse sand with Propel SSP while fine
sand in the market tightens.
Water management is a significant issue, especially
for operators in the Permian, with some looking to reduce
freshwater use and water management costs. Are these re-
alistic goals for operators?
JD: Yes, in fact, this year, we introduced a produced-water
tolerant version of Propel SSP to cope with these needs Propel
SSP 350, allowing operators to use up to 100% produced water.
Believe it or not, you can actually frac with seawater, not to
mention brine and produced water. With this extension of
technical capability, we now can reduce overall demand for frac
water by loading proppant with Propel SSP at more than two
times the concentration of sand in slickwater, and promote
water reuse. In fact, weve seen more than 50% water reduction
in wells while using Propel SSP over a traditional slickwater
design. To answer your question though, water management
costs and disposal concerns continue to challenge operators,
not just in the Permian. As an industry, we need to find more
eco-friendly and economically viable ways to reduce fresh water
use, increase water reuse, and utilize non-potable sources.
You recently reported second quarter 2017 operational
and earnings results. What should readers glean from the
quarter about the future performance and outlook for the
company?
MB: We continue to execute well to meet strong demand as
well as positioning ourselves, both operationally and financially,
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_21 21
FAIRMOUNT SANTROL | INTERVIEW
Proppant innovation
is more than a phrase, it
represents our mission
and underscores
our commitment to
deliver solutions that
improve efficiencies
and enhance well
p r o d u c t i v i t y.
Jenniffer Deckard
for the long term. Operationally, were gearing up for what we
see as another year of increased proppant demand and intensity
per well, and a growing appetite for in-basin and regional sand.
We are in the process of building our West Texas Kermit mine,
which we anticipate will start-up early next year to serve the
Permian Basin. Also, our Shakopee, Minnesota mine and sand
processing plant, which is located on the Union Pacific railroad,
has recently been reactivated. The addition of these two mines
will add approximately 3.7 million tons of annual processing
capacity to our mining footprint. Were also making investments
to better align our production with demand. For example, we
are increasing our production of fine grade sand, which we
expect to be in the shortest available supply, at our Wedron,
Illinois facility. And were continuing to invest in Propel SSP
field trials to build a strong case history of performance. Finan-
cially, weve demonstrated strong capital discipline by prepaying
debt in 2016 and again in the second quarter of 2017. Our top
priorities for the coming quarters will be to begin operations
at our Kermit facility, continue reducing our net debt through
free cash flow generation and to refinance our term debt and
revolving credit facility prior to the end of 2017.
One last question for Jenniffer. Youve been the com-
panys president and CEO since 2013. How would you grade
the level of diversity in senior leadership roles in our industry?
How is Fairmount Santrol promoting diversity in its
workforce?
JD: Diversity is vital for optimal success in all industries,
including our own. More perspectives means more opportunities
for us to get to the right answer. At Fairmount Santrol, we pride
ourselves on being a company with a people-first approach.
And were always looking for ways to improve. Just recently, we
established our internal Diversity and Inclusion Council that
is charged with developing meaningful ways to promote real
diversity in our workplace culture, so were excited to see the
benefits that this council will create.
Thank you very much for your time.
21
10/6/17 2:47 PM

Exploration & Production
UPSTREAM VALUATIONS IN THE CURRENT COMMODITY PRICE ENVIRONMENT
SEENU AKUNURI, TIM STUHLREYER, BRIAN LI, GIONA VODO, PWC, HOUSTON
THE OIL AND GAS SECTOR continues to remain a volatile
environment. There was some optimism in the market at
the end of 2016 and early 2017 following deals in the Permian
and other US shale regions, as well as an increase in the
number of oil and gas companies restructuring and emerging
from bankruptcy. However, despite OPEC and others curbing
production, there seems to be no near-term balance of
supply and demand. Yet the extreme reaction by oil and gas
companies to lower commodity prices could result in a
severe shortage of supply in future years. During 2015 and
2016, upstream companies reduced their capital budgets
from an estimated $760 billion in 2014 down to $600 billion
in 2015 and $438 billion in 2016 (Wood Mackenzie). These
reductions did not have an immediate impact on prices, but
there was a small increase after OPEC decided to cut pro-
22
1710OGFJ_22 22
Yurolaitsalbert | Dreamstime
duction from record highs in November 2016. Further, in
May 2017, OPEC agreed to extend production cuts until the
end of the first quarter of 2018. However, these temporary
cuts do not reflect the long-term impact of the capital budget
reductions, which is illustrated better in long-term supply
demand comparisons. In 2018 global demand is expected
to exceed supply, a likely result of the response to lower
commodity prices beginning in late 2014. This article is an
update to PwCs Upstream Valuations in the Current En-
vironment article published in OGFJs February 2016 issue
and examines changes and continuations in trends and
analyzes key inputs and assumptions utilized in company
and asset valuations in the current oil and gas
environment.
WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:47 PM
 OIL AND GAS PRICE
PERFORMANCE AND MARKET
CAPITALIZATION
Figure 1 shows the relative perfor-
mance of publicly traded E&P
oil-weighted company indices and the
correlation to WTI spot crude oil. Mid-
cap companies (between $2B and $10B
in market cap) have performed best
overall, particularly during late 2016
and early 2017. Several energy compa-
nies have recently emerged from bank-
ruptcy. With that being said, there is
still no clear consensus on the expect-
ed recovery, though both oil and gas
prices have been relatively stable for
some time now.
Figure 2 shows the relative perfor-
mance since the beginning of 2014 of
the Henry Hub spot natural gas price
together with gas-weighted small-,
mid- and large-cap publicly traded E&P
Figure 4 shows the total shale production since 2000 along with the rig count.
The rapid rise of horizontal drilling has given the US the ability to add to global
supply, thus contributing to the worldwide surplus of oil in 2014, 2015, and 2016
as shown in Figure 5. With the cut in oil production by OPEC in November 2016
and its extension in May 2017, demand has outpaced supply so far in 2017 for
the first time in four years. However, Figure 4 shows an uptick in the rig count
in 2017 given the higher oil prices which could lead to production growth in the
US. Expansion of both on-and-offshore commodity storage has enabled producers
to continue operations, further increasing supply.
On the cost side, technical innovation as well as reduction in production costs
have led to increased industry efficiencies. Significant margin improvement has
occurred under the current low-price environment and is a result of:
Technological advances (efficiencies related to cost, time, and productivity);
F1: OIL-WEIGHTED COMPANY PERFORMANCE
40% $120
30%
20% $100
10%
$80
0%
Total return

stock indices. Unlike the oil-weighted 10%

WTI
$60
indices, large-cap companies have 20%
done the best overall, even providing 30% $40
positive returns to investors since the 40%
beginning of 2014, though still relative-
50% $20
ly flat from Henry Hubs peak in
60%
mid-2014.
70% $0
01/2014
03/2014
05/2014
07/2014
09/2014
11/2014
01/2015
03/2015
05/2015
07/2015
09/2015
11/2015
01/2016
03/2016
05/2016
07/2016
09/2016
11/2016
01/2017
03/2017
05/2017
VALUATION MULTIPLES
As shown in Figure 3, E&P valuation
multiples increased from 2010 through Small cap Mid cap Large cap WTI
2013 as strong commodity pricing bol-
stered oil and gas valuations. These
multiples declined in 2014 through F2: GAS-WEIGHTED COMPANY PERFORMANCE
2016 as prices weakened. A contribut-
ing factor to these declines is that 40% $6.00
companies have become less willing
to pay for unproved reserves given the 20% $5.00
uncertainty regarding future prices.
Daily production multiples have de- 0% $4.00
Total return

Henry Hub

clined more than proved reserve mul-

tiples, as producers remain reluctant 20% $3.00
to curb production even amidst falling
prices and valuations. 40% $2.00

SUPPLY & DEMAND 60% $1.00

It seems that supply is more elastic
now due to unconventional shale pro- 80% $0.00
01/2014
03/2014
05/2014
07/2014
09/2014
11/2014
01/2015
03/2015
05/2015
07/2015
09/2015
11/2015
01/2016
03/2016
05/2016
07/2016
09/2016
11/2016
01/2017
03/2017
05/2017

duction; supply can react to price

movement more quickly inhibiting the
ability to maintain extended oil price Small cap Mid cap Large cap Henry Hub
rallies.

OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM 23

1710OGFJ_23 23 10/6/17 2:47 PM

 Decline in service costs; ysis because of significant differences
Greater focus on sweet spots and deploying marginal cost assets; and from one company to another in such
G&A and workforce reduction. aspects as asset profiles, proved vs
unproved reserves, current production,
EXPLORATION & PRODUCTION COMPANY AND ASSET VALUATION and pricing differentials.
BASICS The results of our study indicated
Next, we briefly review the fundamentals of valuing individual E&P assets and that within the income approach anal-
privately held E&P companies and examine recent trends seen in valuation inputs yses performed on E&P companies and
and assumptions. upstream assets for 2016, some of the
assumptions applied are continuations
METHODOLOGY from last year while others differed
The data presented was sourced from PwC clients operating in the E&P industry from the previous year.
during 2016. The population included a variety of publicly traded and private
businesses, ranging in size, location, type of play (conventional vs. unconventional) Use of strip pricing as the basis of their
and financial strategy (corporate vs. private equity). Figure 6 shows the breakdown commodity pricing forecasts
of companies surveyed by size. Our 2015 data showed that approxi-
mately 80% of valuations surveyed
F3: MEDIAN VALUATION MULTIPLES BY YEAR RECENT INCOME utilized NYMEX strip. Our 2016 data
APPROACH showed an even greater trend in this
140,000x 25 TRENDS selection of pricing, with almost 90%
The income approach of valuations surveyed now using NY-
120,000x
20 is generally the most MEX as a basis for commodity pricing.
Daily production multiple

100,000x c o m m o n ly u s e d Use of one or a few analysts has his-

Proved reserves

15 method of valuing torically led to inaccurate pricing pred-

80,000x
E&P companies and ications. On the other hand, strip price
60,000x 10 assets. Market ap- is directly based on companies hedg-
proach indications of ing and trading activities and it is also
40,000x 5 value provide some used as the basis for many company
20,000x insights and corrob- production forecasts.
0 oration for other
0x
methods. However, in Long-term pricing beyond strip is based
2010

2011

2012

2013

2014

2015

2016

an E&P context it is on expectations of long-term inflation

Daily production multiples
typically not as sup- Our 2016 data showed that companies
Proved reserve multiples
portable as an in- used a mix of three year and five-year
come approach anal- strip pricing. After that, long-term in-
flation ranged from zero to ten percent
F4: US UNCONVENTIONAL PRODUCTION and was reflective of that companys
internal, long-term forecasted oil price.
55 500
450 Decrease in median discount rate given
45 increase in stability in the commodity
400
350 price environment and lower cost of debt
35
Number of rigs

A vast majority of companies utilized

300
MMboe/d

a weighted average cost of capital

25 250
(WACC) as the basis for their discount
200 rate. The range of discount rates varied
15
150 widely, from a low of 6.6% to a high of
100 24.0%. The average WACC decreased
5
50 from approximately 11.1% in 2015 to
10.5% in 2016. This is likely a result of
5 0
lower cost of debt as well as a more
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

industry appropriate debt to equity

Dry shale gas production Tight oil production Rig count ratio, which is a big component in cal-
culating equity betas. Figure 7 shows

24 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_24 24 10/6/17 2:47 PM

 the yield to maturity on corporate
bonds for various indices of energy com-
panies from 2014 to 2016. Yield to ma-
turities have decreased substantially
from 2015 to 2016, particularly for the
B-rated bonds which included a sig-
nificant number of the E&P companies
in the study.
Under the current market environment, E&P companies can expect
greater scrutiny to be applied to valuation analyses and their inputs
and assumptions. It is imperative that E&P companies continue to
use key assumptions which are both auditable and based on market
support.
F5: SUPPLY VS. DEMAND

99
Lower risking for all non-producing Total demand
reserves compared to 2015 Total supply
97
The median risking for proved devel-
oped non-producing (PDNP) reserves
95
was 80% in 2016 compared to a median MMb/d
risking for PDNPs of 95% in 2015. The 93
median risking for proved undeveloped
(PUD) reserves was 75% in 2016 com- 91
pared to a median risking for PUDs of
90% in 2015. Figure 8 shows the change 89
in risking from 2015 to 2016 for all re-
serve categories.These changes likely 87
reflect a heightened sense of caution 2010 2011 2012 2013 2014 2015 2016 2017
among clients due to the low-price
environment. Figure 9 shows the aver -
age projected strip price for the month of December for 2014 F6: POPULATION BY SIZE OF POPULATION
through 2016. Companies, particularly smaller ones, may not
have capital resources to explore and produce all reserves.
However, the definition of proved reserves, as set forth by <$500M
5
the SEC in Rule 4-10 of Regulation S-X, implies that the average
16 $500M-$1,000M
risking of the overall proved reserve category should not be
less than 90%. Therefore, this risking trend is important to $1,000M-$5,000M
monitor going forward.
17 >$5,000M
Approximately 20% of E&P valuations included corporate G&A 69
In 2015, 57% of companies included corporate G&A expenses
in their income approach, but in 2016, only 17% included it.
This reflects several ongoing trends in the industry. First, for
many acquirers, the expectation is that the additional assets
would be handled with current G&A and would not contribute
to additional G&A expenses. Second, due to the low-price F7: COST OF DEBT (IN %)
environment that many small- and mid-cap E&P companies
operate in, companies have focused on cutting costs and 14
prioritized cash conservation. 12
However, no company can operate indefinitely without any 10
corporate G&A. Therefore, this G&A trend is important to
Cost, %

8
monitor going forward, and we would expect to see more
6
companies include G&A going forward.
4
2
KEY CONSIDERATIONS SURROUNDING THE INDUSTRY
Key ongoing considerations which will have an impact on E&P 0
12/31/2014 12/31/2015 12/31/2016
valuations include the impact of OPECs actions, the impact
20Y Average Bloomberg A+, A, A-, YTM
of additional volumes contributed by Iran, and whether de- 20Y Average Bloomberg BBB+, BBB, BBB-, YTM
mand will increase enough to absorb current levels of pro- 15Y Average Bloomberg B, YTM
duction and have a meaningful impact on current storage

OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM 25

1710OGFJ_25 25 10/6/17 2:47 PM

 F8: CHANGE IN RISKING FROM 2015 TO 2016 ABOUT THE AUTHORS
FOR ALL RESERVE CATEGORIES Seenu Akunuri is a Princi-
pal in PwCs Deals practice
100%
2016 Median in Houston, Texas. He is
2015 Median the leader of PwCs US En-
Change in risking

75% 2014 Median ergy and Mining Valuation

practice and has 20 years
50%
of experience in the valuation of busi-
25%
nesses. Akunati holds an MBA with a
concentration in Finance and Account-
0% ing from Tulane University.
PDP PDNP PUD PROB POSS

Tim Stuhlreyer is a director

in PwCs Transaction Ser-
vices Valuation practice
F9: MONTHLY AVERAGE PROJECTED STRIP PRICE and has more than 10 years
of experience in the valu-
75
ation of businesses and
70 intangible assets. He holds an MBA
Monthly average strip price

from the University of Texas and a BS

65 in Industrial Engineering from Texas
A&M University.
60

55 Brian Li is a senior associ-

ate in PwCs Transaction
50 Services Valuation prac-
Dec. 2014 tice, specializing in the
45 Dec. 2015 appraisal of businesses
Dec. 2016
40 and providing corporate
Feb-17 Jul-17 Dec-17 May-18 Oct-18 Mar-19 Aug-19 finance consulting services. He holds
a degree in Accounting from The Uni-
versity of Texas at Austin.

volumes. Giona Vodo is an associate

Additionally, the recent presidential election and associated political uncer- in PwCs Transaction Ser-
tainty may dramatically affect the operating environment for E&P companies as vices Valuation practice,
well as the capital markets. specializing in the apprais-
al of businesses and pro-
CONCLUSION viding corporate finance
Since the downturn in commodity prices in 2014, E&P asset and company valu- consulting services. She holds a degree
ations have likewise seen significant declines. While there are some positives, in Finance with a focus on the Oil and
including greater demand than supply in 2017 as well as an increase in rig count, Gas industry from the University of
valuations continue to be depressed. This study on E&P company valuations Houston.
reflects changes to many assumptions as part of the continued depression. Ad-
ditionally, under the current market environment, E&P companies can expect
greater scrutiny to be applied to valuation analyses and their inputs and assump-
tions. It is imperative that E&P companies continue to use key assumptions
which are both auditable and based on market support.

26 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_26 26 10/6/17 2:47 PM


Going public
USING MLPS, CORPORATIONS, AND UP-CS AS EXIT VEHICLES
ELIZABTH MCGINLEY, BRACEWELL LLP, NEW YORK CITY
THERE ARE several structures that can be utilized to effect a
public offering of a private business engaged in the energy in-
dustry. Those most commonly considered are the master limited
partnership (MLP), the traditional corporate structure, and the
umbrella partnership, or UP-C, structure.
Generally, for federal income tax purposes, operating as a
partnership is preferred to operating as a corporation because
partnership income is subject to federal income tax only once, at
the partner level, whereas, income of a public corporation is subject
to federal income tax twice, first when earned by the corporation,
and again at the stockholder level when a dividend is paid or gain
is recognized on the sale of stock. However, there also are disad-
vantages to operating in partnership form. Partnerships generally
cannot be publicly traded and retain a single level of federal income
taxation, unless the partnership qualifies as an MLP.
THE MASTER LIMITED PARTNERSHIP
MLPs generally are formed by a sponsor as publicly traded limited
partnerships. An existing private business can be contributed
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_27 27
Roman Romaniuk| Dreamstime
to the MLP in exchange for equity of the MLP on a tax deferred
basis, resulting in a carry-over tax basis in the assets of the
business. The MLP structure is best suited for the contribution
of a private business operated in partnership form, or as a limited
liability company (LLC) treated as a partnership for federal in-
come tax purposes, so all of the operations can continue in
partnership form. If the existing business were held in corporate
form, the liquidation of the corporation, or conversion to a
partnership, would result in the recognition of any unrealized
appreciation and taxable gain at the corporate and stockholder
levels.
In exchange for the contribution, the sponsor typically receives
general partnership interests, incentive distribution rights which
are similar to a carried interest, and subordinated or common
units. The public subscribes for listed limited partnership inter-
ests, or common units, in exchange for cash.
Generally, publicly traded partnerships are treated as corpo-
rations for federal income tax purposes, so that the taxable in-
come generated is subject to two levels of federal income tax.
27
10/6/17 2:48 PM
 If, however, at least ninety percent of the publicly traded part-
nerships gross income for each taxable year is qualifying income,
then it may be publicly traded and still maintain its status as a
partnership, with the taxable income generated subject to only
one level of federal income tax, at the partner level. Generally,
qualifying income generally includes passive investment income,
certain real property rental income and income derived from
the exploration, development, production, processing, refining,
transportation or the marketing of any mineral or natural re-
source, including oil and gas. Accordingly, to preserve the MLP
structure, the sources of partnership income must be closely
monitored and the scope of the partnerships activity generally
will be limited to operations that generate qualifying income.
The trading price of MLP common units largely depends upon
the amount of cash distributed to holders of common units.
Accordingly, the MLP structure only is suited to businesses that
can sustain significant cash distributions to investors. MLPs are
particularly attractive to US individual investors if they generate
significant depreciation through sustained growth and pass
through low amounts of taxable income, or tax losses, to common
unit holders, while also providing steady cash flow.
MLPs, however, are not an ideal vehicle to attract foreign or
tax exempt investors. Because they are flow through entities for
federal income tax purposes, common unit holders generally
are treated as if they were directly engaged in the activities of
the MLP, resulting in US source income and tax reporting re-
quirements for foreign investors and unrelated business taxable
income for tax exempt investors. Further, the annual federal tax
reporting of each common unit holders share of partnership
income is complex relative to corporate dividend reporting, and
common unit holders also can be exposed to state income
taxation and filing requirements in the states where the MLP
has assets or operations.
THE TRADITIONAL CORPORATE IPO STRUCTURE
The most common form of public offering is a sale of stock by
a corporation. Typically, the historic owners can contribute their
existing business, whether in partnership or corporate form, to
a new corporation for stock of the new corporation without
current recognition of taxable gain, however, the new corporation
inherits the tax basis in the assets contributed, and generally
there is no step up in the tax basis of the assets to their fair
market value. Thus, the corporation generally has lower depre-
ciation deductions and greater taxable income than if it acquired
the assets in a taxable transaction.
If, however, the historic business owners have unutilized
losses, they may want to trigger a gain in the assets of the business
that will result in an increase in the tax basis of the assets and
generate greater depreciation to the public corporation. For
example, the historic owners may purposely structure the con-
tribution of the business to the public corporation as a taxable
or partially taxable exchange to trigger such gain and basis
adjustment. The public corporation may be willing to enter into
a tax receivable agreement with the historic owners that recog-
28
1710OGFJ_28 28
nized such gain to compensate them for a portion of the corpo-
rate cash tax savings associated with the increased basis and
greater depreciation deductions.
The taxable income of the corporation is subject to federal
income tax at the corporate level, and the stockholders of the
corporation also are subject to federal income tax on distributions
of earnings and gain upon a sale of the stock. That is, there is
double taxation of corporate income. Further, any losses gen-
erated by the corporation may only be utilized by the corporation
or its consolidated group and cannot be passed through to
stockholders to offset other income.
Corporate entities, however, can engage in non-taxable cor-
porate reorganizations and acquire other corporations in ex-
change for stock consideration on a tax deferred basis, which is
a valuable tool for growth. Further, corporate stockholders
dividends are reported on IRS Form 1099 which generally is a
simple statement of income. As a result, foreign and tax exempt
investors generally are willing to invest in corporate stock and
are not treated as engaged in a US trade or business as a result
of holding such investment. In addition, unlike partners in
partnerships, stockholders are not exposed to state taxation in
additional jurisdictions as a result of owning stock in a corpo-
ration that owns assets and operates in multiple states.
THE UP-C STRUCTURE
The UP-C structure, in contrast, has advantages of both the MLP
and traditional corporate IPO structure, without some of the
disadvantages associated with those structures. Generally, if the
historic business were operated as a partnership, or LLC treated
as a partnership for federal income tax purposes, it can affect a
public offering by forming a corporate partner to issue shares
to the public, and invest the cash proceeds in the historic part-
nership. The corporate partner may utilize the cash raised in
the public offering to purchase units in the partnership from
historic partners or subscribe for new units in the
partnership.
The historic partners receive shares in the public corporation
with voting, but not economic, rights as well as a right to ex-
change their units in the operating partnership for stock of the
public corporation, which generally will be exercised when the
historic owners effect an exit of their investment in the
business.
The benefits of the UP-C structure include the historic owners
continue to own the business through a pass-through entity
with the income of the business subject to a single level of federal
income tax, and losses from the business flow through to the
historic owners which may be utilized to offset other taxable
income. In addition, their voting rights with respect to the public
corporation allow the historic members to continue to participate
in, or even control, the governance of the public corporation
and the exchange right provides a liquidity option through the
ability to exit the partnership investment in exchange for public
corporation stock which can be readily sold for cash.
In addition, historic owners also may receive rights under a
WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:48 PM
 tax receivable agreement (TRA), which, generally, provides that
the historic partners share in the cash tax savings of the public
corporation attributable to additional tax deductions generated
through transactions with the historic partners. The tax benefits
to the public corporation generally are in the form of increased
tax basis in its share of the operating partnership assets and
additional depreciation, which may be generated by the historic
partners upon a sale of operating partnership units to the public
corporation upon formation of the UP-C structure, the agreement
to adopt certain tax depreciation allocation methodology to
generate additional tax depreciation allocations to the public
corporation, or the taxable exchange of a historic partners units
in the operating partnership for stock of the public
corporation.
Not all UP-C structures, however, include a TRA. The TRA is
a complex agreement that can be time consuming to value and
negotiate. If the tax benefits to the public corporation are not
expected to be large, or they are not expected to be realized by
the corporation for many years, particularly if the corporation
is not expected to have net taxable income for many years after
carrying forward any available net operating loss, the long deferral
of payments under the TRA may make the present value of those
payments less significant. If, however, the value of the business
at the time of the IPO far exceeds the tax basis in its asset, and
significant additional depreciation can be generated for the
corporation, a TRA can increase the return to historic partners
by thirty or forty percent. So, at the least, owners considering
an IPO should calculate the estimated value of a TRA when
choosing an IPO structure.
The decision to effect a public offering is not a single decision,
but the beginning of a decision process, including choosing the
form of the public offering which will be driven, at least in part,
by the federal income tax considerations. Careful evaluation of
the long-term tax benefits prior to the selection of an IPO struc-
ture can yield significant value to the historic owners of the
business.
ABOUT THE AUTHOR
Elizabeth McGinley is the head of Bracewells tax
practice. She represents a variety of clients in the
oil and gas and electric power industries, including
private equity firms investing in oil and gas explo-
ration, production and infrastructure. Her experi-
ence includes complex debt and equity financing,
joint ventures and project finance, as well as experience with
volumetric production payment (VPP) transactions.

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 Kodym | Dreamstime
The next focus for African oil producers
WIN THE INVESTMENT BATTLE AS OPEC IS SHIFTING STRATEGIES
AND THE PETROLEUM INDUSTRY IS IN DISRUPTION
SERGE TOULEKIMA, MABELLS PETROLEUM ADVISORS, PERTH, AUSTRALIA

THE ORGANIZATION of Petroleum Exporting Countries
(OPEC), a 14-member oil cartel with six members from the
African continent, has shifted its strategy from a battle for
market share against US shale oil producers to a production
cut strategy in an attempt to rebalance the oversupplied
oil market. Simultaneously, disruptive forces in several
spheres are forever changing the energy sector with lowered
oil prices and depleting investments pushing companies
to focus on repairing their balance sheets.
The ubiquitous influence of these disruptions has been
felt with pain by oil-dependent African economies, which
today require new investments. Ultimately, investments
will resume for companies to maintain their reserves re-
placement ratio above 100%. However, the break-even price
of future projects will be closely monitored by investors.
Oil-dependent African countries should position them-
selves as the preferred area for future investments. We
recommend that these countries focus on three key areas
to win the upcoming battle for new investments: (1) talented
and committed human capital; (2) innovative and flexible
petroleum contracts; (3) vibrant local service companies
offering services at international standards.
RAPID DECREASE IN OIL PRICE WAS UNFORESEEN
The collapse of the oil price from historical highs in mid-
2014 left several oil-dependent economies on the African
continent with a heavy hangover that is still hard to shake
off. From June 2014 to January 2015, the oil price retracted
by nearly 60%. With less cash on hand, several oil-exporting
countries were forced to either curtail or put a stop to
injecting vital investments into social programs. Borrowing
on the international market has also been actively pursued

30 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_30 30 10/6/17 2:48 PM

 to minimize budget deficits.
When oil prices started to decline during the third quar-
ter of 2014, OPEC mostly saw the US shale oil producers as
a nuisance that needed to be driven out of the market. In
an attempt to drive US shale oil producers out of business,
OPEC pumped even more oil, despite evidence of a glut in
the market.
OPECS BATTLE WITH US SHALE PRODUCERS
According to data published by the International Energy
Agency (IEA) the OPEC average crude oil supply for Q2
2014 was 30.27 million bbl/day. About two years later, the
OPEC average crude oil supply for Q3 2016 was 32.77 million
bbl/day, about an 8% increase. It was clear that OPEC was
seeking to maintain the oil price down to force higher-cost
oil producers like US shale oil out of business. Unfortunately,
this brutal battle for market share between OPEC and US
shale oil producers did little to rebalance the oversupplied
oil market, and instead exacerbated the glut problem, which
was further complicated by the slowing Chinese
economy.
Some shale oil producers in the US did go out of business,
but the continued low oil prices were also painful to oil
dependent economies due to significant revenues shortfall.
In contrast, shale oil producers were becoming more effi-
cient and resilient by pushing their break-even price lower.
It was clear that the strategy to retain significant market
share by driving shale oil producers out of business was
not working as planned. By mid-2016 OPEC knew it had to
abandon this strategy.
NEW STRATEGY NEEDED
Then came the new strategy to rebalance the oil market
by reducing production. In late 2016, OPEC countries led
by Saudi Arabia and non-OPEC countries led by Russia
were able to hammer an agreement to reduce oil supply.
OPEC countries agreed to remove 1.2 million bbl/day of oil
from the market whereas non-OPEC countries agreed to
remove 0.6 million bbl/day. In such agreements, compliance
is always the devil in the details. In January 2017 the
agreement came into effect for a six-month period, and at
mid-year 2017 compliance has surprisingly been
successful.
IS OPECS NEW STRATEGY WORKING?
On May 25 2017, OPEC and non-OPEC countries met in
Vienna to agree on an extension to their production cut
for another nine months until March 2018. During the
closing press conference, US shale oil producers were no
longer viewed as the bad competitor that needed to be
driven out of the market as it was now considered big
enough to accommodate US shale oil production. The war
for market share was over for now. Furthermore, in its
March 2017 Oil Market Report, the IEA appeared optimistic
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_31 31
Oil-dependent African countries should position
themselves as the preferred area for future
investments. We recommend that these countries
focus on three key areas to win the upcoming battle
for new investments: (1) talented and committed
human capital; (2) innovative and flexible petroleum
contracts; (3) vibrant local service companies
offering services at international standards.
about the glut in the oil market draining away. At least for
now, the IEA has maintained its 2017 forecast for global oil
demand growth at 1.3 million bbl/day. During the first
quarter of 2017, International Oil Companies (IOC) reported
record profits that was comparatively higher than the first
quarter of 2016 given higher oil prices. With oil companies
returning to a more profitable state, a hope for resumed
investments has started to shine on oil dependent econo-
mies on the African continent that have been dancing under
the rain since mid-2014.
SOME WORDS OF CAUTION
Going forward there remain unanswered questions about
the next actions for OPEC. One obvious question is: what
if the market glut is still around after the nine-month ex-
tension? The appetite for extending the production cut
beyond March 2018 might be waning. On this point, we
should have an early indication when OPEC meets again
this year for its 173rd meeting on November 30 in
Vienna.
Assuming that we have a scenario where the oil market
glut is persistent after nine months of production cut ex-
tension and OPEC abandons its current rebalancing strat-
egy, the oil price could tumble to below $40 per barrel very
rapidly even if Saudi Arabia seems determined to prevent
this scenario given its upcoming Aramco IPO. This doom-
and-gloom scenario for 2018 hinges on two key actors of
the supply-demand equation: the US shale oil producers
as well as the Chinese and Indian demand.
US shale oil production remains very dynamic and is
still moving toward record levels in 2017. This could mean
trouble for the rebalancing strategy that OPEC is currently
following. Additionally, a slowdown in demand from Asia
two biggest crude oil importers (China and India) would
contribute to nullifying the production cut being pursued
by OPEC and non-OPEC countries. In this mix of uncer-
tainties, we can also add the return of oil production from
big deep water projects where companies are increasing
their production efficiencies, hence, lowering the break-
even price of deep water projects. Despite small signs that
the oil market might be rebalancing the road ahead for
companies in the industry and oil dependent economies
is still full of pitfalls.
31
10/6/17 2:48 PM
 SHAPING THE FUTURE
The use of renewables has made a steady progress and will
continue to do so. However, we believe that oil will continue
to play a significant role in the world economy for years to
come, and it will continue to be a key contributor to the
GDP of oil-dependent African economies. The prolonged
low oil prices have had a negative impact on investments
which is a driving factor for companies to maintain their
reserves replacement ratio above 100%. Therefore, invest-
ments into new production will ultimately resume. Never-
theless, investors will likely stay away from high-cost proj-
ects with a long payback period.
For oil-dependent African economies, it will no longer
be enough to react to unanticipated events as it did in the
past. The upcoming battle will be a battle for attracting
investments, and it will be between two groups of producers:
high cost versus low cost. To win this battle, countries will
need to move from wait and react to shape their future.
We believe the energy sector is facing the type of disrup-
tion never seen before. We are undergoing disruptions in
several spheres at the same time. To name a few, we are
seeing a technological disruption with the breakthrough
in shale oil production, data analytics, artificial intelligence
and the Internet of Things; an environmental disruption
with a renewed awareness for climate change and an effi-
cient use of energy; a demographic disruption with changes
in consumer behavior; a geopolitical disruption with tec-
tonic changes in the political landscape and the birth of
new alliances from North America to Europe, from the
Middle East to Asia and from Africa to South America.
Faced with these unprecedented disruptive forces the oil
dependent African economies have no choice but to actively
participate in the fundamental reinvention of the energy
sector.
For African oil producers to win the investment battle,
there are three areas requiring continuous attention,
including:
HUMAN CAPITAL Most companies understand that
finding, developing, and retaining talented employees is
very difficult. Talented and committed people in a coun-
try are one of the key enablers for attracting investments.
No credible investors would be willing to put money into
an environment where recurring industrial actions are
the norm. Take an example of five companies with the
same type of assets to operate, it will always be the case
that there will be a difference in performance across the
board that is likely to be driven by the people they employ.
People are the key contributors to the success of a busi-
ness. We therefore believe that by continuously producing
world class engineers, geologists (and many other dis-
ciplines) with the proper work ethics, the cost of doing
business will also be positively impacted.
PETROLEUM CONTRACTS Petroleum contracts cannot
be a zero-sum game. What is positive for the State should
32
1710OGFJ_32 32
also be in the best interest of the investor. New innovative
petroleum contracts are needed to stimulate investments.
Great flexibility should be built into the contracts such
that the signing parties are able to adapt them based on
the prevailing economic context. These contracts should
be underpinned by a good legal system which is inde-
pendent and protect wealth and investment.
The petroleum laws or hydrocarbon codes passed by
parliament should be designed to attract investments
and protect the public interests. Therefore, the competing
needs must be adequately balanced. With flexibility
being key in a dynamic and changing investment envi-
ronment, petroleum laws should not be written as if they
were a Production Sharing Contract. Likewise, countries
should refrain from incorporating detailed fiscal terms
into petroleum laws as any amendment will require the
approval of parliament.
LOCAL CONTENT A diverse and competitive presence
of local companies in the entire chain to support the
production of oil will contribute to bringing the cost of
doing business down. This is where the State can greatly
shape its future by creating the necessary conditions to
enable the development of capabilities for local compa-
nies according to international standards. Sourcing
companies outside the country to carry out basic field
operations jobs can add up to the cost of doing business.
In the battle for attracting investments, the ideal situation
would be for the local service companies to provide the
same quality of services as international contractors at
a lower cost.
CLOSING WORDS
US shale oil producers have captured the highlights since
2014 and are one of the disruptive forces in the industry
today by forcing conventional oil producers to re-examine
their business model. What their breakthrough indicates
is that investors will return if they are presented with proj-
ects that have a short payback period and a break-even
price that can be driven down.
The lesson for oil-dependent African economies is to fun-
damentally reshape their business environment by creating an
environment that lowers the payback period and break-even
price of projects.
ABOUT THE AUTHOR
Serge Toulekima is an energy consultant with
25 years of experience. He is based in Perth,
Australia, and is a member of the Australian
Institute of Company Directors. He has working
experience in Africa, Europe, Asia, and Austra-
lia, and is a graduate of Texas A&M
University.
WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:48 PM

Learnings from the oil and gas downturn
WHAT IT MEANS FOR TECHNOLOGY ADOPTION
PRANAV PATEL AND SUNIL JOSE, NORTH HIGHLAND, HOUSTON
WHAT DOESNT KILL YOU makes you stronger. Organizations
surviving the recent downturn in crude oil prices have found creative
ways to streamline operations and improve efficiencies within all
areas. At the center of this uptick in efficiency is technology and
the capacity to effectively adopt it throughout the business. The
ability to identify, assess, implement, integrate, and operate new
technologies into an organization is not only critical to maintaining
profitability through rough economic stretches, but also positions
a company in better standing versus competitors as the climate
turns more favorable.
Sometimes it takes looking at an issue from a different vantage
point to understand the full context. While many segments of the
oil and gas value chain do not intersect with the retail or healthcare
industries, there is still something that can be learned from these
other sectors by noting the strides made in developing and incor-
porating technology into standard practices.
Retailers are increasingly investing in security, mobility, and big
data analytics to better understand their customers and provide
the services they need at a more rapid pace than the competition.
This requires integration with multiple platforms including spe-
cialized business tools and enterprise resource platforms. With
the adoption of any new technology, multiple business processes
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_33 33
Artitcom | Dreamstime
may be affected and need to be re-engineered to optimize overall
performance. While arduous at times, the resulting value has been
an improved understanding of consumer needs and the ability to
engage customers from multiple fronts.
Historically, healthcare has been portrayed as a service not
willing to heavily invest in marketing or improve patient interactions
beyond performing tests and medical procedures. More recently,
the healthcare industry has put a substantial focus on using tech-
nology to enhance patient experiences. Demographic changes and
new entrants into the market have caused some healthcare facilities
to rethink the way they engage customers from the point of search-
ing for a provider through follow-up visits. Technology involving
mobility, more efficient scheduling, and virtual and telehealth
follow-up consultation capabilities, along with improved patient
communication, has been successfully implemented to increase
the number of patients seen and reduce redundant administrative
work and procedures that eat at margins.
Heavy investments in data analytics have helped many financial
institutions better predict and manage their risk, understand threats,
and better define their own risk appetites. Financial services has
touchpoints across all industries and thus minor mistakes can
have a greater impact. Executives in the sector are leading the
33
10/6/17 2:48 PM
 T1: PRODUCTIVITY LOSS EXAMPLE companies take a more conservative view
Facility size Technician time Annual loss on new technologies by understanding case
(by # of work orders (hours spent searching Average in technician
processed daily) for documentation) hourly rate productivity
studies from early adopters and watching
the outcome as the adopters get out of the
Small 10 X 20 min X $50 = $70K
Trough of Disillusionment and into the
Medium 30 X 30 min X $70 = $460K
Slope of Enlightenment. As they witness
Large 50 X 40 min X $90 = $1,423K this journey, O&G companies begin to as-
semble use cases and develop plans for
buildout of highly structured and agile project management processes that encourage pilots to test out the various hypotheses
reaching fast and effective decisions. In many cases, the key to harnessing digital power that may exist for the prospective
is not the technology itself, but how well the management of selecting, sourcing, imple- technology.
menting, and developing a support structure for the solution is executed. This seemingly conservative journey
Noting trends in other industries helps to illustrate the fact that even sectors with strong through the hype cycle is primarily related
performance and stable customer bases are seeing the advantages of staying ahead of to the complex nature of O&G operations
their competitors by actively incorporating new technology solutions. Businesses that not as well as the crucial safety requirements
only keep up with the technology curve, but surpass it through internal innovation and that surround the industry. Technologies
by testing and learning new approaches, are setting themselves up for success. such as real-time process management and
Despite these comparisons to other industries, Oil & Gas (O&G) has come a long way operations monitoring have been prevalent
in terms of acceptance and adoption of new technologies. Traditionally O&G and the in the shipping, nuclear, and aviation sec-
adoption of new digital solutions mixed as well as oil and water, but as the world has be- tors for years, but satellite and fiber tele-
come more technologically connected, the O&G industry has been forced to pay attention. communication limitations, rig-side per-
For decades, significant volumes of data and learning have been gleaned from the reservoir sonal and equipment safety requirements,
to the drilling rig to the refinery, but it is commonly believed that a significant amount of and the constant evolution of operational
that data is never used in a meaningful way. As leaders become aware of the data gold parameters and working conditions have
mine at their fingertips and feel rising pressure from the effects of lower oil prices on their necessitated a longer adoption curve. To-
bottom line, the industry is beginning to see its own future through a digital lens. day, as some of these barriers are addressed,
The recently completed Baker Hughes and GE Oil & Gas (BHGE) merger clearly illus- real-time operations have become the stan-
trates this change in industry perceptions. Perusing through the BHGE website you will dard for driving safe and efficient opera-
find phrases such as data driven productivity, merging the digital and the physical worlds, tions. Sensors automatically track data from
and from kilobit to kilowatt, peppered throughout the communications. One of the various inputs and this real-time informa-
overarching value drivers for the merger is predicated on the companys bullish view on tion helps inform current decisions as well
the future of digital technology across the O&G value chain. as supports the building of models that
One useful way to understand the current state of the industrys views of technology help predict issues before they occur. With
is to plot the rise of O&G technology interest against the Gartner Hype Cycle (Figure 1). many of the existing use cases for digital
Technology driven companies such as Amazon or Google tend to stay on the left side of technology focused on one aspect of the
the curve and attempt to bring their customers along for the ride along the curve. O&G value chain, companies are beginning to
explore the opportunities of digitally con-
F1: GARTNER HYPE CYCLE necting all aspects of the value chain to
drive exponential benefit and efficiencies.
Peak of inflated The dip in the price of oil over the last
expectations two years has forced the O&G industry to
take a long look at technology as the po-
tential answer to improved margins. No-
Plateau of where is this more evident than in the
productivity upstream, onshore unconventional shale
Slope of plays in the United States. Unconventional
enlightenment plays have increased in popularity over the
Technology last 10 years primarily due to the emergence
Trough of
trigger O&G
disillusionment of fracking technology, the repeatable na-
technology
interest
ture of well construction steps in a forma-
tion, and the ease of ramping up or ramping
down well construction based on economic
Time and market drivers. In contrast, conven-
tional plays are characterized by multi-year

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1710OGFJ_34 34 10/6/17 2:48 PM

 development timeframes, a small footprint of development, and
heavy capital outlay. To unlock the potential of unconventional
plays operators must create a repeatable, high velocity well con-
struction process that allows them to evaluate, fund, develop, and
produce from hundreds of wells concurrently across hundreds of
thousands of acres in a relatively short timeframe.
Digital technology is the backbone for the future of unconven-
tional well construction processes and will continue to impact
other aspects of the O&G lifecycle for years to come. The benefits
of digital technology adoption in O&G extend beyond upstream
and are already impacting midstream and downstream players as
well. Lets look at how a prominent liquefaction operation leveraged
digital technology to improve employee efficiency. In collecting
engineering specifications and operational procedures for the
companys critical emergency response projects, maintenance, and
facility upgrades, technicians were spending an inordinate amount
of time searching for relevant project documentation in multiple
sources that existed across the enterprise. The lack of a single,
accurate source of truth for these critical documents prompted
the company to commission a project to digitize and consolidate
decades of paperwork that would be searchable using sophisticated
document analysis technology. While the technology was the
critical centerpiece in cleaning up the documentation issues, it
certainly was not the only factor for a successful project. Just as in
most technology adoption efforts, while the software utility was
able to scan, categorize, and identify conflicts in documentation
based on pre-configured algorithms, the people and processes
surrounding the technology needed an overhaul if they were to
truly succeed. Specifically, the company had to focus on training
users and software administrators, integration to existing document
management systems and ensuring that the requisite software
infrastructure was architected and supported correctly.
The result was a new project document management system
for maintenance and facility upgrades that allowed for document
traceability and facilitated efficient search. Applying this new system
to the most critical projects resulted in a projected savings of $1
million annually. Table 1 shows an example breakdown of resource
hours used per work order to determine the loss in technician
productivity. Note that the size of an operation has an exponential
effect on the cost of searching for documents. The one-time project
costs are typically recovered by the end of year one.
Beyond the savings related to technician productivity, this system
created other benefits that combated productivity loss events such
as equipment downtime, contractor contingency charges for high
risk environments, costs related to recreating necessary documents,
safety incidents, and fines due to compliance or audit failures.
While the case for being open to technological innovation is
not a new concept, the current environment proves that simply
engaging in the discussion is not enough. Organizations need to
be able to adopt and efficiently integrate new technologies if they
want to survive into the next generation. Building competency and
strategy around this area can help transform a company at all levels.
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_35 35
ABOUT THE AUTHORS
Pranav Patel is a management consultant with the
North Highland Company. He has experience leading
technology-driven projects across the upstream and
downstream segments of the Oil & Gas value chain
including the areas of data management, business
intelligence, and IT infrastructure. Patel holds an MBA
from The University of Houston and an undergraduate degree in
Electrical Engineering from The University of Texas.
Sunil Jose is a management consultant with the North
Highland Company. Jose has multiple years of digital
technology and operational experience in all aspects
of the Oil & Gas value chain with specific focus on
real-time drilling and production technologies. Prior
to working at North Highland, he led the product
management efforts of the digital oilfield division for a major oilfield
service company. Sunil holds an MBA from The University of
Houston and an undergraduate degree in Biomedical Engineering
from Texas A&M University.
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35
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 Asset management
IS NOW THE TIME FOR MACHINE LEARNING?
EITAN VESELY, PRESENSO, HAIFA, ISRAEL

AS CAPITAL EXPENDITURES and O&M

budgets are cut in response to the pre-
cipitous fall in worldwide petroleum
prices, there is growing interest in the
unrealized economic potential of Indus-
trial Analytics. Shrewd marketing on the
part of certain vendors has created a
perception that machine learning is the
holy grail solution for increased uptime
and higher recovery rates.
Lets start with the bullish forecasts.
McKinsey Consulting estimates that the
potential economic benefit of using ad-
vanced analytics is a 13% reduction in
maintenance costs. According to GE,
companies using predictive, data-based
approach experience 36% less unplanned

Theerapong Jaikaew| Dreamstime

downtime and can save an average of $17
million per year. Not to be outdone, Cisco
goes even further by audaciously claiming
that industry-wide adoption of IoT can
grow GDP by 0.8%.
Not surprisingly, these organizations
do not share their underlying assump-
tions and calculations.
This article provides a realistic assess-
ment of the alternatives for Machine
Learning for Predictive Maintenance in
the oil and gas industry based the near-
term outlook for O&M, infrastructure
investment, and workforce dynamics.
CURRENT STATE OF OVERALL
EQUIPMENT EFFECTIVENSS (OEE)
From an operational perspective, the
most important metric to consider is
Overall Equipment Effectiveness or OEE.
The OEE measurement includes avail-
ability (uptime), performance (speed),
and quality of output (defect rate). It is
calculated as follows: OEE = Availability
* Performance * Quality (see Figure 1).
How does the oil and gas industry
rate? According to the Aberdeen Group,
the average oil and gas company has an
OEE of 73%. This compares to the best
in class of 89%. One of the largest con-
tributing factors is unscheduled down-
time. Between 2009 and 2012, there F1: OVERALL EQUIPMENT EFFECTIVENESS
were more than 1,700 refinery shut- Operating Time
Availability = X 100%
downs in the US. This is an average Scheduled Time
of 1.16 shutdowns a day. Significant- Actual Output
ly, more than 90% of the mainte- Performance = X 100%
Target Update
nance-related shutdowns were
Good Output
unplanned. Quality = X 100%
Actual Output
The economic impact is well
documented. The average daily cost
of unscheduled downtime is $7 million for an onshore well and substantially more
for offshore facilities.
Furthermore, the outlook for OEE is getting worse. Since the fall in oil prices, there
has been a significant reduction in both new capital expenditures and O&M invest-
ment. In periods of instability, deep budget cuts can be random and asset maintenance
has become less of a priority. The expected result is further deterioration in medium-
to long-term asset performance.
THE SHIFT TO INDUSTRIAL IOT IN THE ERA
OF LOWER PETROLEUM PRICES
The emergence of Industry 4.0 has coincided with the industry downturn.
Executives have taken note and at a strategic level there has been a shift from
maximizing revenue to optimizing production. Last year, Microsoft and Accenture
commissioned a study called the Upstream Oil and Gas Digital Trend Survey. The

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 main findings: even with the reduction in commodity pricing,
executives are committed to digitalization and recognize the
value in industrial analytics. In fact, 66% of respondents
believe that analytics can transform their business. There is a
strategic understanding of both the cost benefit and the
improvement in productivity that can be gained by digital
technologies. Finally, 56% of respondents stated that they
intend to use the cloud to enable analytical capabilities
within the next three to five years.
THREE APPROACHES TO MACHINE LEARNING
FOR ASSET MAINTENANCE
Its easy to be overwhelmed by the hype surrounding Big Data,
Machine Learning, and Industrial Analytics. The notion is
simple: using sensor data to predict machine failure. At the
same time, there is no clear path to implementation. Below we
outline three approaches to Machine Learning for Asset Main-
tenance and assess their practicality.
MANUAL STATISTICAL MODELING
The most basic approach to Machine Learning is to create an
internal group within an organization that can generate pre-
dictive models. Sample data is taken from machines and then
data scientists build statistical models. The data scientists
extrapolate from the sample data to the specific machines.
Having worked in this industry and also spoken with several
industry executives, I know the challenges they face building
internal competencies in Machine Learning. First, there is a
worldwide shortage of big data scientists and engineers. As the
industry faces margin pressure and copes with an aging work-
force, it is unrealistic to recruit a critical mass of highly skilled
big data professionals into an organization focused on produc-
tion. The industry will also struggle to compete with the com-
pensation levels that are provided in the financial services and
high-tech sectors which is attracting many of the big data
professionals. This approach may be limited only to a few in-
dustry giants.
The alternative to creating an internal Data Science Center
of Excellence is the cheap-and-dirty citizen data scientist con-
cept. A couple of years ago, Gartner coined the term citizen
data scientist to refer to an individual who generates models
that use advanced diagnostic analytics or predictive and pre-
scriptive capabilities, but whose primary job function is outside
the field of statistics and analytics.
Underlying the concept of the citizen data scientist is that
off-the-shelf analytics tools would democratize the field of
statistics. The reality is more complex. Statistical models become
obsolete quickly. No matter how robust a software package, the
decision about which statistical model or algorithm to use
cannot be made by a technician.
In other words, building internal capabilities is a resource
intense commitment that will require additional headcount
and budget.
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_37 37
There is an almost universal consensus about the
vast economic potential for Machine Learning for
Asset Maintenance in the oil and gas industry.
Our recommendation is to approach solution and
vendor selection using a data-driven methodology
to maximize the likelihood of success.
SIMULATED MODELING
The Digital Twin concept has gained much attention and has
been highlighted by Gartner as a leading IT trend for 2017.
It is a simple concept to understand, but is complex (and
expensive) to implement. At a high-level, it works as follows: a
virtual clone of a machine asset is created using the blueprints
of the physical machine. his requires an army of data scientists,
design technicians, and other subject matter experts. The Digital
Twin uses the so-called Supervised Machine Learning meth-
odology, which requires the virtual machine to learn the un-
derlying asset behavior before it can detect performance ab-
normalities. To work effectively, the Digital Twin needs to be
an exact replica and there can be no deviations between the
physical and virtual asset.
Figure 2 depicts the iterative nature of how the Digital Twin
is deployed.
PROCESS FOR SUPERVISED MACHINE LEARNING
With its Predix offering, GE has positioned itself as a top vendor
in this category. Other players include SAP and Siemens. Each
Digital Twin is created and customized for a unique asset and
not for an entire upstream oil platform or downstream
refinery.
Although the Digital Twin is a remarkable technology, oil
and gas companies struggle with its deployment for the following
two reasons:
Industry infrastructure is aging and the outlook for asset
performance is troubling. More than 50% of worldwide oil
production is from machinery that is beyond midpoint in the
asset lifecycle. Why is this important? To create the Digital
Twin, technicians use the actual asset blueprint which often
deviates from the underlying asset. That is because over time,
as machines are repaired and upgraded, there are changes that
are not always captured. Creating a Digital Twin with aging
assets is a time consuming, expensive, and laborious task.
Oil and gas companies face an impending labor shortage
because of an aging working. According to Mercer Managements
Oil and Gas Talent Outlook 2016-2025, 20% of geoscientists in
Europe and 23% of petroleum engineers will reach retirement
age by 2020 in the US and Canada. What is often not recognized
about the Digital Twin is that it requires the input of facility
engineers and technicians. The Machine Learning does not
happen automatically and the Digital Twin needs to precisely
model the underlying asset. Given cuts to O&M budgets and an
overall talent shortage in the industry, the ability to assign existing
facility staff to create the Digital Twin is a major challenge.
37
10/6/17 2:51 PM
 F2: PROCESS FOR SUPERVISED MACHINE LEARNING separately, Unsupervised Machine Learn-
ing is analyzing data and looking for
Analytics
Supervised machine learning application patterns. It is agnostic with respect to
sensor or asset type and can be used by
Deploy Consume an entire production facility.
Model management
Monitoring
CONCLUSION: CAVEAT EMPTOR
Physical machine
building
Model
execution
Human
! This article summarizes the three major
Alert approaches to Industrial Analytics and
Interactive feedback Analytics
feedback Machine Learning for Asset Mainte-
Parallel learning engine
nance. Given commodity prices and the
SDK
Drag and drop current state of assets in the oil and gas
industry, a conservative model for invest-
Resource requirements ment in this type of solution is
Data scientist necessary.
Big Data engineer We are not suggesting that you delay
Facility manager implementing a Machine Learning for
Asset Maintenance solution. Instead, we
Source: Presenso
recommend a conservative, fact-based
approach:
Finally, it should also be noted that the Digital Twin is built on a per-asset basis. When creating the business case for
In other words, a Digital Twin is not created for an entire rig or refinery. Rather, it can Industrial Analytics, test each solution
be created for specific machinery or assets. The issue of scalability and cost effective- provider by giving them with two to
ness is a major drawback given current levels of commodity pricing. It may be con- three years of historical data. Compare
ceivable that GE provides airplane producers with a Digital Twin model for each new their predictions of machine failure
and expensive jet engine GE sells them, but most of the market in oil and gas is relative to actual failures.
brownfield. Include two to five solution-providers
in the test.
UNSUPERVISED MACHINE LEARNING For final vendor selection and to fore-
An alternative approach to Simulated Modeling is Industrial Analytics based on Un- cast ROI and TCO, use data that is
supervised Machine Learning. based on the pilot instead of relying
Lets go back to the Digital Twin. The Digital Twin technology is based on the so- on industry benchmarks.
called Supervised Machine Learning methodology. It trains the algorithm on the There is an almost universal consen-
underlying asset by providing it with data labels or classifications. When Machine sus about the vast economic potential
Learning that is supervised recognizes new data, it then associates it with the data for Machine Learning for Asset Mainte-
labels that it has already learned. nance in the oil and gas industry. Our
With Unsupervised Machine Learning, data labels are not provided to the algorithm. recommendation is to approach solution
Instead, vast amounts of data are analyzed and the algorithm itself generates the and vendor selection using a data-driven
labels. methodology to maximize the likelihood
The algorithm is looking for abnormal sensor or signal behavior. Once it detects of success.
anomalies the data, correlations, and pattern detections between signals are performed.
This is done to later present the operators with the exact sequence of abnormal events ABOUT THE AUTHOR
detected. Once an evolving failure has been detected, a failure alert is generated. This Eitan Vesely is the CEO of
alert includes information on correlated sensor abnormalities. This valuable infor- Presenso. He was previously
mation significantly helps in tracking the failure origin. a hardware specialist and a
Apart from methodology, the key difference between Simulated Modeling and support engineer for Applied
Unsupervised Machine Learning is how it is applied to a production facility. With the Materials where he special-
Digital Twin, a unique clone is created for every asset. With Unsupervised Machine ized in software-hard-
Learning, the algorithm is agnostic with respect to sensor or asset type. The algorithm ware-mechanics interfaces and system
is trained to find anomalous sensor behavior (or patterns of anomalous behavior) and overview. He holds a bachelor of science
to use this information to provide early warnings of machine degradation or asset degree in mechanical engineering.
failure.
Significantly, Unsupervised Machine Learning can be applied to all the assets in
rig or refinery. In other words, whereas the Digital Twin needs to learn each asset

38 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_38 38 10/6/17 2:51 PM

 REGISTER BY OCT. 6 & SAVE!

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1710OGFJ_39 39 10/6/17 2:51 PM

 Turnaround projects
FIVE TIPS TO KEEP THINGS IN SCOPE AND ON TARGET

GEOFF ROBERTS, ORACLE, UNITED KINGDOM

IF THERES ANY CERTAINTY in the oil

and gas industry, its that every few years
executives will spend considerable time
overseeing the process of taking refinery
units out of service for scheduled main-
tenance or unforeseen events.
These turnarounds (or TARs) are costly
projects, not only because of the millions
of dollars companies lose for each day a
unit is out of commission, but also due
to the direct costs, such as labor, tools,
heavy equipment and materials that hit
the bottom line. Indeed, TARs are now
the most significant portion of a plants
yearly maintenance budget, according to

EPCM Professional Services Partners, a
US-based consultancy.
A perfectly executed project will be
costly enough by itself. Unfortunately,
nearly every TAR invariably involves some
degree of delay. When properly planned
for, the damage from such glitches can
be minimized. But if anticipation of po-
tential issues is lacking and appropriate
steps are not taken to avert them, the
financial effects can be significant, with
critical equipment offline weeks or
months longer than expected.
By and large, the traditional tools used
to manage turnarounds dont provide the
visibility and efficiency needed to effec-
tively manage the agreed scope through
its lifecycle. Organizations need the right
combination of processes and tools in
place to effectively manage this scope and
mitigate risks arising from complex TAR
events.
Here are five tips for improving TAR
project management to improve
outcomes:
PLAN AS IF THE BUSINESS DEPENDS
ON IT (BECAUSE IT DOES)
Large TARs or shutdown projects often
involve thousands sometimes tens of
thousands of activities that must be
completed within a very tight, fixed win-
dow of time. Each piece of the event in-
Calyx22| Dreamstime
volves specific direct/sub contract labor resources, parts/equipment and major plants
that needs to be available at certain times. All detail must be identified and scheduled
in advance to ensure a smooth process and avoid costly delays.
A large refinery, for example, in addition to turnaround activities will also have
thousands of day-to-day preventive maintenance activities, and several new construc-
tion or expansion projects under way all running concurrently. A refinerys profitability
largely depends on being able to quickly schedule all the above and deploy resources
across projects, locations, product lines, and divisions, to ensure projects are achievable
to meet the business needs. If a turnaround in one plant impacts production of a highly
profitable product in another, profitability on the whole can suffer.
Thats why it is critical to have a meticulous budget and timeline-driven plan that
spans the entire scope of the project, from planning to execution and post-event
analysis.
The most important planning consideration for TARs is to recognize most plans
stumble or fail because they do not adequately prevent scope creep, where a projects
original goals expand while it is in progress. Scope creep is one of the most common
causes of TAR projects going over time and budget, and its typically driven by conflicting
objectives and lack of sufficient coordination among stakeholders.
To minimize extensive scope creep, identify all project stakeholders from the start,
get them engaged in planning, and ensure everyone understands and agrees to the
business objectives well in advance of project kickoff. Every scope item should have at
least one direct connection to the TAR business objectives. And every scope item
should be tracked, compared against budget and deadlines, and mapped back into
procurement.
As part of this process, it will also be important to account for unscheduled or
emergent work in the field that is, identifying and planning against things that
might go awry during a TAR. For example, a technician might take the head off a vessel,

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 look inside a compressor and discover its in worse shape than
expected. A solid plan will always include scenarios and fixes
for emergent work. Similarly, a comprehensive plan will also
anticipate and account for delays beyond control, such as an
unexpected permitting problem or extreme weather conditions
that could delay work.
KEEP SCOPE SACRED
Its one thing to have a plan and quite another to stick to it. Too
often, teams struggle with following scope throughout a projects
lifecycle, frequently delivering varied results from what was
originally targeted and agreed upon.
The idea of scope freeze delivering on scope exactly as
agreed upon at the onset rarely works, resulting in huge costs.
More often than not, the scope changes as the project progresses,
chiefly due to poor planning and up-front coordination and
alignment. To avoid such scenarios, it is critical to hold stake-
holders accountable to commitments made during the of-
ten-lengthy planning process.
Companies must also pay close attention to the scope-chal-
lenge the points in the project where requested changes are
reviewed and either approved or denied. This is a good process,
but many times changes are approved for the wrong reasons
(often, down to who shouts the loudest). Instead, make certain
all approved changes map back to the initial and agreed upon
business objectives and cost-benefit analysis. And be aware of
how the changes will impact project deadlines.
MAKE DATA AVAILABLE TO ALL
Many oil and gas companies track project information the
old-fashioned way they plug it into a spreadsheet and stand-
alone tools. The trouble with this approach is that critical data
resides on someones PC where it isnt readily accessible to all
stakeholders who need the data to make decisions and execute
projects effectively.
With a centralized platform for project management, teams
can track their work and increase overall coordination and or-
ganizational competence across the enterprise.
For example, the ability to manage scope through its lifecycle
including all estimates, reviews, approvals and any changes
to the overall scope connected to the resources and schedule
ensures visibility throughout the organization. This helps
ensure all stakeholders and especially management can
make effective decisions.
In todays connected world, oil and gas companies that do
not take advantage of modern integrated tools and the ability
to share information in real time put themselves at a significant
competitive and financial disadvantage. Transparency is key to
success in the digital age.
CONNECT THE ENTERPRISE
There are many tools and products available to support TAR
events, but none delivers the kind of common, centralized project
management platform that an Enterprise Project Portfolio Man-
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_41 41
agement (EPPM) solution does. As such, an EPPM solution
should be a top consideration for oil and gas companies.
The EPPM approach eliminates the need for multiple and
disparate management by spreadsheets and the like and provides
accurate, up-to-date information and a birds- eye view of project
progression. For example, on a TAR there are two shifts per day,
and the shift scheduler must bring all the needed data together
from one shift, reconcile it, and then create the next shift plan.
Managers can leverage EPPM to more effectively forecast and
manage costs, schedules, materials and resources across the
enterprise.
Cost, schedule, and earned-value thresholds can be set to
automatically generate issues when projects exceed specified
limits. Negative trends can be identified early so the necessary
course corrections can be made. Managers can plan for the
unexpected by performing what-if simulations to determine
the schedule and cost exposure of project risks. This holistic
view, combined with the ability to see details when needed,
provides management with the data they need to deliver the
highest possible levels of predictability at the lowest possible
cost.
LEARN AND IMPROVE CONTINUALLY
Far too often, the siloed and disconnected approach to TAR
planning and execution leaves oil and gas companies unable
to track performance and capture learnings that can be applied
to future events.
On average, larger TARs occur every four to five years. Every-
thing that occurred during previous projects actions, incidents,
scope changes, overruns, etc. needs to be centrally stored,
analyzed, and readily accessible to advise future endeavors.
TARs do not start with planning and end when specific proj-
ects are done. Organizations should view turnarounds as ongoing,
circular maintenance processes that can have a direct effect on
a companys revenues and competitive standing.
In conclusion, managing scope, cost, scheduling, risk and
change is a core challenge for the oil and gas industry. By suc-
cessfully applying these five best practices above, oil and gas
companies can not only keep current TAR projects on track, but
also improve the overall planning process and minimize costly
delays.
ABOUT THE AUTHOR
Geoff Roberts serves as director of industry strategy
(energy) at Oracle. He is a chartered cost engineer
with more than 35 years of experience in all aspects
of project management and project controls. He
has been with Oracle Construction and Engineering
for 17 years. Roberts provides strategic direction,
domain expertise and insight around asset intensive industries
and how they operate, to both internal and external customers
and provides input into the solutions Oracle delivers to its
customers.
41
10/6/17 2:51 PM
 Designer491 | Dreamstime
Whats new for goodwill measurement?
THERE ARE POSITIVES AND DOWNSIDES OF THE NEW FASB AMENDMENTS
KEVIN CANNON, OPPORTUNE LLP, HOUSTON

IN JANUARY 2017, the Financial Accounting Standards Board (FASB) issued amendments GOODWILL IMPAIRMENT TESTING:
to its Accounting Standards Codification Topic 350, Intangibles: Goodwill and Other (ASC A TIMELINE OF CHANGES
350). ASC 350 describes the procedures to be taken to test goodwill (the excess of consid- In June 2001, the FASB issued Statement of
eration paid for a business above the fair value of its identified tangible and intangible assets Financial Accounting Standards No. 142,
and liabilities) for impairment subsequent to its initial acquisition. The objective of these Goodwill and Other Intangible Assets (SFAS
amendments to ASC 350 is to simplify the process of testing goodwill for impairment. 142), which ended the practice of amortizing
Companies with goodwill on their balance sheets will want to understand the evolution goodwill (over 40 years, previously) and
of goodwill impairment testing over time, the changes that the new amendments to ASC subsequently required companies to test
350 will bring, and the potential impacts these changes will have for companies in the goodwill for impairment at least annually,
energy industry. or as triggering events dictate, to determine
if an impairment loss exists.
F1: TIMELINE OF DEVELOPMENTS IN GOODWILL IMPAIRMENT TESTING SFAS 142 also set forth a two-step test
for measuring goodwill impairment.Step
ASC 350 ASC 350 amendment 1 compares the estimated fair value of a
Goodwill Supercedes SF Private company
amortization AS 142 option reporting unit with its carrying value, in-
cluding goodwill, typically at the equity
Prior to Jun Jul Sep Jan Jan level.If the carrying value exceeds fair value,
2001 2001 2009 2011 2014 2017 Step 2 is performed, in which the implied
fair value of goodwill is compared with the
FASB SF AS 142- ASC 350 Elimination
Sets forth 2 step amendment of ASC 350
goodwills carrying value.The implied fair
goodwill measurement Step 0 Step 2 value of goodwill under Step 2 is estimated
process
by allocating the fair value of a reporting
unit to all its assets and liabilities (measured

42 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_42 42 10/6/17 2:51 PM

 at fair value), similar to a purchase price allocation.The excess of
the fair value of a reporting unit over the amounts assigned to its
assets and liabilities under Step 2 equals the implied fair value of
goodwill.SFAS 142 was superseded in July 2009 by ASC 350, which
retained the two-step goodwill measurement process.
Many companies found that the cost and effort of this two-step
process led to undue complexities and inefficiencies.In September
2011, the FASB moved toward simplifying the goodwill testing
process when it released an amendment to ASC 350, allowing for
a qualitative assessment to effectively bypass the Step 1 analy-
sis.Commonly referred to as Step 0, this update allows an entity
the option to estimate whether it is more likely than not (a greater
than 50% likelihood) that the entitys fair value is less than its carrying
value.Qualitative factors include general macroeconomic conditions,
industry and market conditions, and the reporting units overall
financial performance.
January 2014 initiated an even more substantial effort at simpli-
fying goodwill testing.At that time, the FASB amended ASC 350 to
allow privately-owned companies the option of amortizing goodwill
over a period not to exceed 10 years.Further, when a triggering
event occurs, a private entity exercising this option of measuring
goodwill may first apply a qualitative Step 0 test to determine
whether the quantitative impairment test is necessary. If that as-
sessment indicates that it is more likely than not that goodwill is
impaired, the entity must then perform the quantitative test to
compare the reporting units fair value with its carrying amount,
including goodwill. Under this option the goodwill impairment loss,
if any, represents the excess of the carrying amount of the reporting
unit over its fair value. The goodwill impairment loss cannot exceed
the reporting units carrying amount of goodwill. (See timeline in
Fig. 1.)
Companies with goodwill on their balance sheets
will want to understand the evolution of goodwill
impairment testing over time, the changes that
the new amendments to ASC 350 will bring, and
the potential impacts these changes will have for
companies in the energy industry.
which may include allowing the amortization of goodwill.
Effective dates for these amendments, as published by the FASB,
are shown in Table 1.
Early adoption is permitted for interim or annual goodwill im-
pairment tests performed on testing dates after January 1, 2017.
POTENTIAL IMPACTS TO THE ENERGY INDUSTRY
As a result of these recent changes to ASC 350, private and public
companies will no longer perform Step 2 of the goodwill impairment
test.For the energy industry, goodwill impairment is a topic that
has received much greater focus in recent years.As shown in Fig.
2, the incidence of goodwill impairment has increased significantly
among US-based, energy-focused companies with market capital-
ization of $100 million or greater, in tandem with the downturn in
commodity prices that began in mid-2014.
Yet, despite these historically high levels of goodwill impairment,
significant goodwill balances remain on the books of energy-focused
companies.Fig. 3 shows total goodwill on the balance sheets of
US-based energy related companies with market capitalization of
$100 million or greater over the past four years.
F2: US ENERGY COMPANY GOODWILL IMPAIRMENT
20
18
16
USD in billions

2017 AMENDMENTS TO ASC 350 14

In a move to further simplify goodwill impairment testing in January 12
10
2017, the FASB eliminated Step 2 from ASC 350 for all private and 8
public business entities on a prospective basis.Under the amend- 6
ments, an entity would perform its annual or trigger event-based 4
2
goodwill impairment test comparing the fair value of a reporting 0
unit with its carrying amount in the same manner under Step 1, FY FY FY LTM Q3
2013 2014 2015 2016
whereby entities will recognize an impairment charge for the amount
by which the reporting units carrying amount exceeds its fair value, Source: CapitalIQ

limited by the amount of goodwill allocated to that reporting

unit.The Step 0 qualitative assessment option will remain available F3: US ENERGY COMPANY GOODWILL
to determine if the quantitative impairment test is necessary.The 140
FASB has stated that it will evaluate the effectiveness of these new 135
USD in billions

amendments before it considers implementing additional changes, 130

125
120
T1: EFFECTIVE AMENDMENT DATES 115
Effective for fiscal years beginning 110
Entity types AFTER December 15 105
Public SEC filers 2019 100
FY FY FY FQ3
Non-public SEC filers 2020 2013 2014 2015 2016
Private and not-for-profits 2021 Source: CapitalIQ

OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM 43

1710OGFJ_43 43 10/6/17 2:51 PM

 F4: ENERGY TRANSACTIONS > $1 MILLION

236.60
ARTICLES FOR Number 258 286
of deals 166.96
150.43
DISTRIBUTION 217
94.24
Use published editorial content to Total transaction
validate your marketing initiatives value
(USD in billions) 182

2013 2014 2015 2016

ELECTRONIC REPRINTS Source: CapitalIQ

HIGH
HIGH-QUA
GH UALI
LITY
TY G
GLO
LOSS
LO SSY
SSY HA
HAND
NDOU
NDOUTS
OU TS
As Figs. 2 and 3 indicate, US-based energy companies im-
CROSS MEDIA MARKETING
G paired approximately $35 billion of goodwill from the beginning
PERSON
RS
PERS ONAL
ONALIZ
AL IZED
ED D
DIR
IREC
ECT
IREC T MA IL P
MAIL PRO
RODU
RO DUCTS
DU of 2014 through Q3 of 2016.However, the aggregate goodwill
balance of these companies only declined by approximately
PLAQUES & FRAMED PR
RINTS $17 billion over this same timeframe. This means nearly $18
billion of goodwill has been created via transaction activity
since the onset of the energy industry downturn.Fig. 4 shows
the trend of US-based energy transaction activity and volume
Articles are available in since 2013 (deal size of greater than $1 million) which has given
rise to this goodwill.
electronic (pdf) format and Continued high levels of goodwill on the balance sheets of
professional, high-quality prints. energy companies, in particular, those in the midstream sector,
coupled with an increasing level of deal activity, meansenergy
Engage visitors on website companies will need to sharpen their focus on properly ac-
counting for and measuring goodwill.We can also expect a
Educate target audience continued focus by auditors and regulators on defensible, sup-
Enhance email campaigns portable, and properly-estimated valuations that are used for
the quantitative goodwill impairment test.
Instantly credible conference Positives of the new ASC 350 amendments include, most
materials significantly, lower cost and complexity related to Step 2, which
should simplify the process of goodwill impairment testing.How-
Trusted sales presentations content ever, a possible downside of the new amendments is the po-
Add 3rd party endorsement to tential for greater variability in earnings.Under ASC 350 Step
social media 2, the fair value of tangible and intangible assets (other than
goodwill) in some instances may have limited the amount of
Professional recruiting and goodwill impairment.
training materials Under the new standard, a Step 1 impairment will result in
a write down of goodwill equal to the excess of the carrying
Branded content marketing value of the reporting unit over its fair value.As a result, this
could cause some companies to experience greater volatility
in earnings.
For additional information, please
ABOUT THE AUTHOR
contact Foster Printing Service,
Kevin Cannon is a director in Opportune LLPs


  


 
 valuation practice, based in Houston. He has 12
Oil & Gas Financial Journal.
Call 866.879.9144 or
sales@fosterprinting.com
years of experience performing business and asset
valuations and providing corporate finance con-
sulting. His specific experience includes valuations
of businesses and intangible assets for purchase
price allocations, impairment, and tax planning purposes with
a focus on oil and gas and oilfield services.

44 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_44 44 10/6/17 2:51 PM

 nd
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 DEAL MONITOR

Oil and gas deals slow to rebound

as Gulf Coast recovers from Harvey
ANDREW DITTMAR, PLS INC. HOUSTON

LIKE VIRTUALLY EVERYTHING else heavily centered on Hous-
ton and the Texas Gulf Coast, US oil and gas deal flow has almost
certainly been impacted by the tremendous damage caused by
Hurricane Harvey. A Harvey-inflicted slowdown is entirely
understandable given that many oil and gas professionals have
been focused on restoring their or their familys personal lives
while companies are still struggling with flooded offices or have
put efforts primarily into getting existing operations back up
and running. The next few months will tell whether this is a
momentary pause in deals caused by the storm or a more lasting
lull.
Already volatile oil prices have been made even more so by
the very active Atlantic Hurricane season (Irma, Jose, and Maria
in addition to Harvey as of press time) with conflicting views
on the storms effects on oil supply and fuel demand. This is in
addition to an upcoming OPEC meeting and the unresolved
question on whether the cartel will elect to extend current
production cuts. With no clear picture one way or the other for
oil, gas deals seem to be having an easier time finding their
footing. This is especially true just inland from the Gulf Coast,
where demand is expected to grow both locally for power
generation along with major increases in petrochemical pro-
duction and LNG exports.
The Haynesville stands out as the most popular of these
plays with its proven productivity and favorable geographic
location. A number of major private equity firms have already
bought into the play since late 2016. Publicly-traded Tellurian
Inc. ( founded by ex-Cheniere CEO Charif Souki and Martin
Houston) has now established a footprint in the North Louisiana
portion of the Haynesville via an $85 million deal with a private
equity-backed seller trimming its position. The company picked
up current output of 4 MMcf/d along with 138 operated Haynes-
ville/Bossier locations. Tellurian plans to use Haynesville gas
as a feedstock for its proposed Driftwood LNG terminal. On
the same day, another small public company, Empire Petroleum,
announced it had signed a term sheet with a private seller to
acquire Haynesville assets just to the north of where Tellurians
acreage will be.
Taking a slightly different tack on supplying Gulf Coast gas,
proven STACK/SCOOP developer Vitruvian has launched its

PLS INC. MONTHLY DEAL MONITOR 8/17/17 - 9/16/17

SELECT US UPSTREAM TRANSACTIONS
Date Value
Announced Buyer Seller ($MM) Asset Location Deal Type O/G
14-Sep-17 Elk Petroleum Resolute Energy $160 UT: Aneth Field Property Oil
14-Sep-17 IOG Capital Earthstone; Red Mountain; Undisclosed - TX: Eagle Ford & OK: Merge/Arkoma Property Oil
12-Sep-17 Sabinal Energy Chevron - TX Permian: Central Basin Platform Property Oil
11-Sep-17 New Dawn Energy Forest Capital - North LA: Haynesville Mineral Gas
6-Sep-17 Tellurian PLS Confidential $85 North LA: Haynesville Property Gas
6-Sep-17 Empire Petroleum PLS Confidential - North LA: Haynesville Property Gas
6-Sep-17 White Knight Production Newark E&P - North TX: Marble Falls Property Oil + Gas
5-Sep-17 PLS Confidential Carrizo Oil & Gas $62 OH: Utica Condensate Property Oil + Gas
24-Aug-17 Vitruvian Exploration IV PLS Confidential - South TX: Eagle Ford Acreage Gas
17-Aug-17 Vitruvian Exploration IV Sanchez Energy $105 South TX: Eagle Ford Acreage Gas
Total $412

SELECT GLOBAL MIDSTREAM TRANSACTIONS

Date Value
Announced Buyer Seller ($MM) Asset Location Deal Type Asset Type
12-Sep-17 Enable Midstream Align Midstream $300 North Texas & Louisiana Corporate Gathering & Processing
1-Sep-17 MPLX Marathon Petroleum $1,050 Diversified Dropdown Oil Pipeline & Storage
Total $1,350
Prepared by PLS Inc. For more information, email memberservices@plsx.com
Validity of data is not guaranteed and is based on information available at time of publication.

46 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_46 46 10/6/17 2:52 PM

 DEAL MONITOR

fourth iteration (and third partnership with PE-backer Quantum
Energy Partners) by acquiring dry gas Eagle Ford acreage from
Sanchez Energy. The company paid $105 million for Sanchezs
70,000-acre undeveloped Javelina asset in La Salle and Webb
counties, Texas. Sanchez, along with the vast majority of Eagle
Ford producers, is heavily focused on oil and liquids and was
willing to part with this asset for $1,500/acre. Vitruvian was
also able to pick up an additional 50,000 acres from private
sellers and internal leasing efforts in the same area of the play.
With core Haynesville trading at $8-10,000/acre, the less drilled
dry gas Eagle Ford offers a potential higher risk/higher return
profile for supplying gas to the Gulf Coast market.
Besides Gulf Coast gas, one of the biggest trends of 2017 has
been Permian producers divesting their operations elsewhere.
This has continued post-Harvey, including Carrizo Oil & Gas
getting a $62 million-plus deal inked for its Utica condensate
window leasehold in the immediate aftermath of the storm.
Carrizo is also considering selling its DJ Basin and Marcellus
positions to focus entirely on the Eagle Ford and Delaware
Basin. Down the road, it would not be entirely surprising to see
even the companys Eagle Ford position hit the market and
Carrizo look to slim down to a Delaware Basin pure-play focused
on its legacy assets there plus the substantial position acquired
from ExL Petroleum earlier this year.
Resolute Energy is already far along in its transformation
into a Delaware pure-play after agreeing to sell its Aneth oil
field assets in Utah to Elk Petroleum for $160 million cash
upfront plus a $35 million contingent payment based on oil
prices. At press time, Halcn Resources is also close to wrapping
up its transformation into an entirely Delaware Basin-focused
producer. After emerging from bankruptcy, the company has
been a prolific deal maker. Halcn established its footprint in
the core Delaware via acquisitions from Samson Exploration
and Sundown Energy while selling its El Halcn assets in the
Eastern Eagle Ford and an operated Bakken portfolio for a
combined total of over $2 billion. Now, the company is shedding
its last non-Permian assets by divesting the remaining non-op-
erated Bakken interests for a total of $110 million. Selling down
non-Permian assets gives these companies much needed li-
quidity on the balance sheet for drilling while also potentially
rewarding stock with the premium paid for Permian
pure-plays.
Outside of the US, deal markets were very active during late
summer. In one of the largest transactions anywhere this year,
Total agreed to buy Maersks E&P business for $7.5 billion. While
its operations span the globe, Maersk has a particular concen-
tration in the North Sea, including the Danish Underground
Consortium and the Johan Sverdrup development. In an even
larger deal, albeit one that smacks more of geopolitical posturing
than oil and gas fundamentals, Glencore and the Qatar Invest-
ment Authority sold almost their entire equity stakes in Rosneft
for $9.1 billion to CEFC China Energy. These interests had been
acquired a mere nine months earlier, leading to an abundance
of theories for the quick flip.

SELECT INTERNATIONAL UPSTREAM TRANSACTIONS

Date
Announced Buyer Seller Value ($MM) Asset Location Deal Type O/G
11-Sep-17 Origin Benaris International $153 Australia Property Gas
8-Sep-17 CEFC China Energy Glencore; QIA $9,100 Russia Corporate Oil
6-Sep-17 Undisclosed Pengrowth $121 Canada: AB Conven. Property Oil
5-Sep-17 CNRL Cenovus $786 Canada: AB Conven. Property Oil
1-Sep-17 Tangle Creek Energy RMP Energy $64 Canada: AB Conven. Corporate Gas
30-Aug-17 KUFPEC Total $317 Norway: North Sea Property Oil + Gas
21-Aug-17 Total Maersk $7,450 Denmark: North Sea Property Oil + Gas
Total $17,991

SELECT GLOBAL OILFIELD SERVICE TRANSACTIONS

Date Value
Announced Buyer Seller ($MM) Asset Location Deal Type Asset Type
5-Sep-17 Patterson-UTI Energy MS Energy Services $215 Texas Corporate Directional Drilling Services
31-Aug-17 Nabors Robotic Drilling Systems - Norway Corporate Robotic Drilling Products
30-Aug-17 NCS Multistage Spectrum Tracer Services $80 Oklahoma Corporate Tracer Products
28-Aug-17 Forum Energy Technologies Quantum Energy Partners $237 Texas Corporate Coiled Tubing & Line Pipe
28-Aug-17 Trinidad Drilling RigMinder $30 Texas Corporate Drilling Data Management
22-Aug-17 Waterbridge Resources EnWater Solutions - Texas Corporate Water Management
Total $562

OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM 47

1710OGFJ_47 47 10/6/17 2:52 PM

 OGFJ100P QUARTERLY

Private company update

MIKAILA ADAMS, EDITOR OGFJ

INDEPENDENT RESEARCH FIRM IHS Markit has provided
OGFJ with updated production data for the OGFJ100P periodic
ranking of US-based private E&P companies. The rankings are
based on operated production only within the US.
TOP 10
This installment of the OGFJ100P ranking begins the 2017 data
coverage. With that comes some changes in the Top 10. Since
the July 2017 installment, Indigo Minerals LLC has moved up
in the Top 10 gas producers listing to No. 4 from its previous
spot at No. 9. The second biggest mover in the gas space is Jonah
Energy Inc., moving down three spots from No. 3 to No. 6, and
down to No. 8 by overall BOE from its previous position at No.
6. The biggest movers in the Top 10 liquids producers list are
Mewbourne Oil Co. and Citation Oil & Gas Corp. Mewbourne
sits at the No. 2 seat in liquids production, up from its previous
No. 5, and moves up two seats to the No. 5 producer by overall
BOE. Citation falls to the No. 9 spot in liquids production, down
from its No. 6 spot in July. Sheridan Production dropped out of
the Top 10 liquids producers list for October, having previously
rounded out the list in the No. 10 spot.
And, while Indigo Minerals moved up four spots from Julys
No. 11 spot to No. 7 for this installment by overall BOEits
top-rated Hilcorp that appears to have the largest jump in
productionmost likely from the $2.7 billion acquisition of
ConocoPhillips assets that closed in July. We noted the deal in
the July installment, but production reports hadnt yet been
calculated. Now, No. 1 Hilcorps production of 52,421,482 BOE
at presstime has more than doubled the 24,879,181 BOE of No.
2 Chief Oil & Gas LLC. With the deal between Hilcorp San Juan
LP, a partnership between Hilcorp Energy Co. and The Carlyle
Group, the company added 1.3 million net acres in the San Juan
Basin with production of nearly 120,000 boe/d, placing it among
the top producers in the area.
M&A
In other private company transaction news, Bakersfield, CA-
based Berry Petroleum Company LLC closed on the sale of its
interests in the Hugoton natural gas field, located primarily in
Kansas, effective July 31, 2017. Berry Petroleum used the pro-
ceeds from the Hugoton sale to close the previously announced
purchase of the Kern County, California, South Belridge Hill
asset, also effective July 31, 2017. With the close, Berry owns a
100% working interest in the Hill.
Berry CEO Trem Smith said, We are pleased to have com-
pleted the disposition of this non-core asset as it provides Berry
with numerous opportunities for growing our western United
States asset base, as exemplified by the Hill acquisition. In ad-
dition, the simultaneous closings allowed Berry to complete
the transaction as a 1031 tax-deferred exchange permitting
Berry to leverage its cash flow.
At the time, Berry Petroleum entered into a new $1.5 billion
reserve based facility with an initial borrowing base of $500
million, effective July 31, 2017. The facility replaced the com-
panys previous facility. The maturity date of the new facility
will be July 29, 2022.
Also selling off assets in recent months was Samson Resources
II LLC. The Tulsa, OK-based company closed on the sale of its
assets in East Texas and North Louisiana for a cash purchase
price of $504 million (after after giving effect to contractual
purchase price adjustments to the $525 million purchase price
announced on August 1) to an affiliate of Rockcliff Energy II
LLC, a privately held company headquartered in Houston, Texas.
The deal closed September 29.

TOP 10 PRIVATE GAS PRODUCERS TOP 10 PRIVATE LIQUIDS PRODUCERS

100P 100P Total
Rank Rank Company Total Wells Gas (Mcf) Rank Rank Company Wells Liquid (bbl)
1 1 Hilcorp Energy Co. 17,506 271,628,512 1 3 LLOG Exploration Co. LLC 38 14,617,984

2 2 Chief Oil & Gas LLC 262 149,275,085 2 5 Mewbourne Oil Co. 2,072 8,356,146

3 4 Merit Energy Co. 6,794 80,616,960 3 6 Fieldwood Energy LLC 865 8,331,712

4 7 Indigo Minerals LLC 1,322 78,021,761 4 1 Hilcorp Energy Co. 17,506 7,150,063

5 9 Vine Oil & Gas LP 274 74,095,882 5 4 Merit Energy Co. 6,794 6,624,183

6 8 Jonah Energy LLC 1,772 70,620,374 6 11 Endeavor Energy Resources LP 4,473 5,063,304

7 5 Mewbourne Oil Co. 2,072 51,397,193 7 17 Slawson Exploration Co. Inc. 394 4,756,274

8 6 Fieldwood Energy LLC 865 46,918,129 8 14 Petro-Hunt LLC 397 4,367,657

9 3 LLOG Exploration Co. LLC 38 42,423,915 9 21 Citation Oil & Gas Corp. 2,433 4,319,479

10 10 Sheridan Production Co. LLC 4,600 31,432,725 10 23 Hunt Oil Co. 767 3,516,887

Source: IHS Markit Source: IHS Markit

48 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_48 48 10/6/17 2:52 PM

 OGFJ100P QUARTERLY

2017 YEAR-TO-DATE PRODUCTION RANKED BY BOE

Rank Company BOE Total wells Largest field
1 Hilcorp Energy Co. 52,421,482 17,506 Basin

2 Chief Oil & Gas LLC 24,879,181 262 Dimock

3 LLOG Exploration Co. LLC 21,688,637 38 Mississippi Canyon Block 0300

4 Merit Energy Co. 20,060,343 6,794 Painter Reservoir East

5 Mewbourne Oil Co. 16,922,345 2,072 Purple Sage

6 Fieldwood Energy LLC 16,151,400 865 Eugene Island Block 0330

7 Indigo Minerals LLC 13,284,085 1,322 Bethany Longstreet

8 Jonah Energy LLC 12,477,405 1,772 Jonah

9 Vine Oil & Gas LP 12,349,314 274 Red River-Bull Bayou

10 Sheridan Production Co. LLC 8,717,433 4,600 Carthage

11 Endeavor Energy Resources LP 7,320,835 4,473 Spraberry

12 Walter Oil & Gas Corp. 6,587,394 58 Ewing Bank Block 0878

13 Samson Investment Co. 5,842,248 1,335 Carthage Southeast

14 Petro-Hunt LLC 5,792,717 397 Charlson

15 Cox Oil LLC 5,784,559 203 Tiger Shoal

16 Templar Energy LLC 5,771,926 939 Stiles Ranch

17 Slawson Exploration Co. Inc. 5,632,082 394 Big Bend

18 Texas Petroleum Investment Co. 5,496,520 1,472 Atchafalaya Bay

19 Fasken Oil and Ranch Ltd. 5,230,694 1,220 Spraberry

20 GeoSouthern Energy Corp. 5,196,978 439 Eagleville

21 CrownQuest Operating LLC 5,139,757 762 Spraberry

22 Citation Oil & Gas Corp. 5,045,542 2,433 Sho-Vel-Tum

23 EagleRidge Energy LLC 4,919,107 1,038 Newark East

24 Hunt Oil Co. 4,571,940 767 Spraberry

25 Eclipse Resources I LP 4,394,841 79 Cameron

The agreement with Rockcliff Energy consists of approxi-
mately 210,000 net acres across East Texas and North Louisiana,
producing approximately 90 MMCFe/d of production, net to
the companys interest.
Samson will repay approximately $214 million in outstanding
borrowings under its $280 million senior credit facility. In ad-
dition, the board has declared a distribution totaling $250,250,000
($11.00/Class A Unit) to be paid on October 31, 2017 to unit-
holders of record as of the close of business on October 17, 2017.
The sale of the East Texas assets comes after the company
acquired substantially all of the assets of Samson Resources
Corp. upon its emergence from Chapter 11 bankruptcy on
March 1, 2017. In addition to this sale, the company has closed
on approximately $14 million of additional company-wide non-
core asset and equipment sales since March 1, 2017.
Going forward, Samson Resources II LLC intends to focus
its efforts on developing assets in the Powder River and the
Green River Basins of Wyoming. The company owns approxi-
mately 146,000 net acres in the Powder River Basin and ap-
proximately 59,000 net acres in the Green River Basin. On
September 11, the company board approved the start of a
program to drill five operated wells on the companys Fort Union
property in Sweetwater County, Wyoming, as well as an acceler-
ated permitting program in the Powder River Basin of
Wyoming.
The drilling program at the Fort Union property will entail
using two rigs to drill five operated wells in the Fort Union
formation with expected results of 3.7 Bcfe per well (45% liquids
expected) at a cost of $2.9 million per well.
On September 12, Sabinal Energy LLC and the Kayne Private
Energy Income Fund LP noted the closing of the purchase of
certain producing oil and natural gas assets owned by Chevron
USA Inc. in the Central Basin Platform and Northern Shelf of
West Texas. The acquired assets produce approximately 7,500
barrels of oil equivalent per day across a roughly 66,500 net acre
position in Hockley, Terry, and Gaines Counties.
Founded in 2016, Sabinal is a privately held oil and natural
gas exploration and production company based in The Wood-
lands, Texas.

OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM 49

1710OGFJ_49 49 10/6/17 2:52 PM

 OGFJ100P QUARTERLY

CAPITAL Irving, TX-based District 5 Investments LP, a private equity

In early August, Post Oak Energy Capital LP led a $100 million
equity commitment to Nadel and Gussman NV LLC (NGNV).
Affiliates of Nadel and Gussman LLC and the management
team will co-invest alongside Post Oak. NGNV is a Tulsa-based
exploration and production company with an initial focus on
the acquisition and development of oil and gas properties in
the Haynesville Shale. NGNV is also evaluating additional re-
source shale plays throughout the United States.
firm formed in 2016 and focused on investing in middle-market
oil and gas and oilfield services companies, made a growth equity
investment into newly formed Pathfinder Resources LLC. Based
in Dallas, Texas, Pathfinder was formed to acquire North Ameri-
can mineral and royalty interests, with an initial focus on the
Marcellus and Utica Shale plays in Pennsylvania, Ohio, and West
Virginia. This is D5s third Fund I platform investment. The firm
is actively seeking opportunities across the energy sector. Invest-
ment sizes range from $5 million to $35 million.

2017 YEAR-TO-DATE PRODUCTION RANKED BY BOE

Rank Company BOE Total wells Largest field
26 Kaiser-Francis Oil Co. 4,091,954 1,233 Silo

27 Red Willow Production Co. 4,073,578 594 Ignacio Blanco

28 Caerus Oil and Gas LLC 3,775,439 1,010 Grand Valley

29 Zavanna LLC 3,734,728 114 East Fork

30 Warren E&P Inc. 3,343,833 345 Mehoopany

31 Valence Operating Co. 3,125,257 616 Carthage

32 Deep Gulf Energy II LLC 3,095,895 3 Mississippi Canyon Block 0773

33 Vantage Energy LLC 3,020,870 243 Newark East

34 Capitan Energy Inc. 2,907,103 30 Ford West

35 Summit Petroleum LLC 2,538,357 571 Spraberry

36 Covey Park Energy LLC 2,507,758 125 Hilltop Resort

37 Bass Companies 1,995,499 930 Wildcat

38 Ballard Exploration Co. Inc. 1,824,242 57 Yellow Rose

39 Foundation Energy Management LLC 1,808,243 2,746 Republican

40 Castex Energy Inc. 1,781,515 37 Atchafalaya Bay

41 Pantera Energy Co. 1,773,601 1,206 Panhandle West

42 Hawkwood Energy LLC 1,772,766 230 Aguila Vado

43 White Oak Energy LP 1,699,714 734 Magnet Withers

44 Stephens Production Co. 1,681,462 870 Gragg

45 Cantera Energy LLC 1,635,170 611 Bob West

46 BASA Resources Inc. 1,605,520 3,076 East Texas

47 Pruet Production Co. 1,580,231 184 Brooklyn

48 Tidelands Oil Production Co. 1,560,341 452 Wilmington

49 Petro Harvester Oil & Gas LLC 1,474,135 348 Pine Prairie

50 Venture Oil & Gas Inc. 1,436,264 105 Hiwannee

51 Zarvona Energy LLC 1,396,539 274 Brookeland

52 Ankor Energy LLC 1,389,566 104 Ship Shoal Block 0230

53 Square Mile Energy LLC 1,345,444 39 Glasscock

54 Texland Petroleum LP 1,341,417 737 Fullerton

55 Great Western Oil & Gas Co. 1,335,234 387 Wattenberg

56 Burnett Oil Co. Inc. 1,333,988 291 Loco Hills

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2017 YEAR-TO-DATE PRODUCTION RANKED BY BOE

Rank Company BOE Total wells Largest field
57 E&B Natural Resources Management Corp. 1,297,671 1,141 Poso Creek

58 DCOR LLC 1,279,085 237 Dos Cuadras

59 Murex Petroleum Corp. 1,218,916 196 Sanish

60 Fuse Energy LLC 1,217,631 161 Newark East

61 Alta Mesa Holdings LP 1,205,136 127 Weeks Island

62 LOGOS Resources II LLC 1,183,049 696 Basin

63 Snyder Brothers Inc. 1,169,110 103 Limestone Run

64 Killam Oil Co. Ltd. 1,143,250 323 Umbrella North

65 Kraken Oil & Gas LLC 1,134,946 86 Lone Tree Lake

66 CML Exploration LLC 1,131,761 284 Madisonville West

67 Berexco LLC 1,126,495 1,513 Cushing

68 Cobra Oil & Gas Corp. 1,114,949 129 West Branch

69 Vernon E. Faulconer Inc. 1,113,949 470 Warmsley South

70 Smith Production Inc. 1,112,160 420 Stirling

71 Sanguine Gas Exploration LLC 1,074,045 224 Mills Ranch

72 Tana Explorartion Co. 1,067,924 179 Breton Sound Block 0025

73 Renaissance Offshore LLC 1,063,073 92 Ship Shoal Block 0176

74 Border To Border Exploration LLC 1,056,209 79 Beech Grove

75 JMA Energy Co. LLC 1,053,455 180 Putnam

76 Talos Energy LLC 1,049,033 53 Ewing Bank Block 0305

77 US Energy Development Corp. 1,046,049 79 Briscoe Ranch Dist 1

78 Sklar Exploration Co. LLC 1,024,460 75 Brooklyn

79 Wagner Oil Co. 1,024,188 358 La Sal Vieja Dist 4

80 BlackBrush Oil & Gas LP 1,023,417 252 Hugh Fitzsimmons

81 Catamount Energy Partners LLC 986,071 130 Ignacio Blanco

82 Finley Resources Inc. 982,222 329 Three Rivers

83 Henry Resources LLC 951,172 176 Spraberry

84 Courson Oil & Gas Inc. 948,050 365 Pan Petro

85 Lario Oil & Gas Co. 938,718 294 Spraberry

86 R. Lacy Inc. 916,204 242 Carthage

87 Enduro Resource Partners LLC 882,619 484 Newburg

88 Ward Petroleum Corp. 882,320 184 Wattenberg

89 Hannathon Petroleum LLC 880,340 86 Spraberry

90 Upstream Exploration LLC 875,988 25 East Cox Bay

91 BC Operating Inc. 871,912 189 Purple Sage

92 Elevation Resources LLC 870,392 32 Emma

93 Murchison Oil & Gas Inc. 859,546 197 Triple X West

94 J. Cleo Thompson & James Cleo Thompson, Jr. 855,878 1,071 Ozona

95 Discovery Operating Inc. 848,818 309 Spraberry

96 Vess Oil Corp. 840,556 1,242 Kurten

97 Verado Energy Inc. 828,927 202 Oak Hill

98 MacPherson Oil Co. 826,308 423 Round Mountain

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2017 YEAR-TO-DATE PRODUCTION RANKED BY BOE

Rank Company BOE Total wells Largest field
99 Jetta Operating Co. Inc. 804,849 295 Scott

100 Stonegate Production Co. LLC 802,331 126 Eagleville

Source: IHS Markit; For more information on the Private Company Database visit www.ihs.com.
Production totals based on latest year-to-date figures as reported to and recorded by individual state agencies and tabulated by IHS at the time of publication. Some agencies are delayed
by as many as several months in releasing data which may impact company rankings.

2017 YEAR-TO-DATE PRODUCTION ALPHABETICAL LISTING

Rank Company BOE City State Top executive officials
Michael McCabe, VP, CFO; Michael Ellis, founder, chair, COO; Lance
61 Alta Mesa Holdings LP 1,205,136 Houston TX Weaver, dir IR; Harlan Chappelle, pres, CEO; David Murrell, VP, land,
bus dev; Dave Smith, VP exp
Bob Gerdes, pres; Steve Goff, VP, ops; Amy Brumfield, VP, finance,
52 Ankor Energy LLC 1,389,566 New Orleans LA
accounting; Henry Welch, VP, tech, planning
38 Ballard Exploration Co. Inc. 1,824,242 Houston TX A. Ballard, pres, CEO, owner
Robert Marshall, VP ops; Sandra Wallace, CFO; Lary Knowlton, co-
46 BASA Resources Inc. 1,605,520 Dallas TX
founder, EVP; Michael Foster, pres, co-founder
37 Bass Companies 1,995,499 Fort Worth TX Mitchell Roper, pres; John Smitherman, VP prod

91 BC Operating Inc. 871,912 Midland TX Michael Black, pres

67 Berexco LLC 1,126,495 Wichita KS Adam Beren, pres, chair

80 BlackBrush Oil & Gas LP 1,023,417 San Antonio TX Eric Friedrichs, CFO; P. Scott Martin, CEO, pres; Mark Norville, COO

74 Border To Border Exploration LLC 1,056,209 Austin TX John Gaines, CFO; Matthew Telfer, CEO
Michael McDowell, VP, finance, controller; George Roth, VP, exp;
56 Burnett Oil Co. Inc. 1,333,988 Fort Worth TX
Anne Marion, chair; Charles Nagel, pres; Denny Whinery, VP, bus dev
Matthew Wurtzbacher, pres, COO; David Keyte, chair, CEO; Jeter
28 Caerus Oil and Gas LLC 3,775,439 North Denver CO
Thomas, CFO
The John Kelly, pres, CEO, chair; Robert Roberts, SVP finance, CFO;
45 Cantera Energy LLC 1,635,170 TX
Woodlands David Balusek, VP prod, ops; Nico Garza, COO
34 Capitan Energy Inc. 2,907,103 Carlsbad NM Craig Blair, partner; Steve Blair, partner

40 Castex Energy Inc. 1,781,515 Houston TX Kevin Ikel, bus dev; John Stoika, pres

81 Catamount Energy Partners LLC 986,071 Denver CO Craig Reid, pres

John Hinton, SVP, CFO; Marcia Simpson, SVP, eng, ops; Trevor Rees-
2 Chief Oil & Gas LLC 24,879,181 Dallas TX
Jones, founder, CEO
Curtis Harrell, pres, CEO; Robert Kennedy, SVP, bus dev, land;
22 Citation Oil & Gas Corp. 5,045,542 Houston TX Christopher Phelps, SVP, CFO, CAO; Forrest Harrell, non-exec chair;
Steve Anna, SVP, COO
66 CML Exploration LLC 1,131,761 Austin TX Kenneth Nelson, pres, founder; Donna Hartman, sec, CFO

68 Cobra Oil & Gas Corp. 1,114,949 Wichita Falls TX Jeff Dillard, pres; Robert Osborne, VP, co-owner; Richard Haskin, CFO

84 Courson Oil & Gas Inc. 948,050 Perryton TX Kirk Courson, pres; Harold Courson, chair, founder, owner
Ricky Burnett, EVP, CFO; Alan Levande, co-CEO; Sherry Hodges, VP
36 Covey Park Energy LLC 2,507,758 Dallas TX
bus dev, land; John Jacobi, co-CEO
Brad Cox, chair; Rodney Dykes, COO; Craig Sanders, CEO; Ken
15 Cox Oil LLC 5,784,559 Dallas TX
Jackson, VP, finance
Robert Floyd, pres; Timothy Dunn, CEO; Lee Dunn, VP, bus dev; Ken
21 CrownQuest Operating LLC 5,139,757 Midland TX
Beattie, COO, SVP; Charles Wetzel, CFO; Luke Dunn, VP, eng, ops
Robert Garcia, VP, ops; Alan Templeton, CFO; William Templeton,
58 DCOR LLC 1,279,085 Ventura CA
pres, managing member, principal
Tom Young, VP bus dev, land; Jere Overdyke, SVP, finance; Ray
32 Deep Gulf Energy II LLC 3,095,895 Houston TX
Nelson, VP, exp; Richard Clark, pres
95 Discovery Operating Inc. 848,818 Midland TX Don Sparks, owner; Jeffrey Sparks, COO
E&B Natural Resources Management
57 1,297,671 Bakersfield CA Frank Ronkese, treas, CFO; Stephen Layton, pres
Corp.
Eric Bruce, CFO; Vince Means, SVP bus dev; Mark Grawe, EVP, COO;
23 EagleRidge Energy LLC 4,919,107 Dallas TX
Michael Ronca, pres, CEO
Matthew DeNezza, EVP, CFO; Benjamin Hulburt, co-founder, chair,
25 Eclipse Resources I LP 4,394,841 State College PA
pres, CEO; Oleg Tolmachev, EVP, COO

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2017 YEAR-TO-DATE PRODUCTION ALPHABETICAL LISTING

Rank Company BOE City State Top executive officials
Ty Zieman, dir, finance, bus dev; Gary Dupriest, EVP, COO; Steven
92 Elevation Resources LLC 870,392 Midland TX
Pruett, pres, CEO; Gary Causey, VP exp; Randy Spaur, CFO
11 Endeavor Energy Resources LP 7,320,835 Midland TX Autry Stephens, founder; Charles Meloy, pres, CEO
Jonny Brumley, pres, CEO, mgr; John Arms, co-founder, mgr;
87 Enduro Resource Partners LLC 882,619 Fort Worth TX
Kimberly Weimer, CFO
19 Fasken Oil and Ranch Ltd. 5,230,694 Midland TX Norbert Dickman, VP, GM; Jimmy Davis, dir, O&G ops
John Smith, SVP bus dev; Mike Dane, SVP, CFO; Matt McCarroll,
6 Fieldwood Energy LLC 16,151,400 Houston TX
founder, pres, CEO; Paul Gluth, SVP, prod, ops
James Finley, owner; Stephen Clark, CFO, partner; Brent Talbot, pres,
82 Finley Resources Inc. 982,222 Fort Worth TX
partner; Clinton Koerth, VP, acq
Jay Pollard, VP, bus dev; Eddie Rhea, CEO; Richard Payne, VP, ops,
39 Foundation Energy Management LLC 1,808,243 Dallas TX
eng, geo
Greenwood Daryll Howard, COO; Ann Verzeletti, VP corp dev, eng; Shawn
60 Fuse Energy LLC 1,217,631 CO
Village Canaday, CFO; David Wolf, CEO
The
20 GeoSouthern Energy Corp. 5,196,978 TX George Bishop, founder, chair; Margaret Molleston, pres, CEO
Woodlands
Rich Frommer, pres, CEO; Jeremy Conger, SVP ops; Thomas
55 Great Western Oil & Gas Co. 1,335,234 Windsor CO
Mandula, CFO; Jay Smith, COO; Robert Heinemann, board chair
89 Hannathon Petroleum LLC 880,340 Midland TX Weston Reeves, managing partner; Justin Kuethe, managing partner
Matthew O'Neill, SVP, CFO; Leonard Gurule, pres, COO; Patrick
42 Hawkwood Energy LLC 1,772,766 Denver CO
Oenbring, chair, CEO; Donald Webb, SVP, ops
Shelbie DeZell, SVP, CFO; Jeffery Hildebrand, founder, chair, CEO;
1 Hilcorp Energy Co. 52,421,482 Houston TX
Greg Lalicker, pres, COO; Brian Wilbanks, SVP A&D
Steve Suellentrop, pres; Mark Gunnin, COO; Travis Armayor, VP corp
24 Hunt Oil Co. 4,571,940 Dallas TX
finance, bus dev; Adam Bishop, SVP exp
George Francisco, CFO, EVP; Frank Tsuru, pres, CEO; Zachary Hart,
7 Indigo Minerals LLC 13,284,085 Houston TX
SVP, bud dev; William Pritchard, exec chair; Brad Sylvester, IR
J. Cleo Thompson & James Cleo
94 855,878 Dallas TX Christy Thompson, owner
Thompson, Jr.
Gregory Bird, pres, CEO, owner; Zach Nix, VP, drilling, ops; John
99 Jetta Operating Co. Inc. 804,849 Fort Worth TX
Jarrett, VP, CFO; Gordon Roberts, SVP, bus dev
Oklahoma
75 JMA Energy Co. LLC 1,053,455 OK Jeffrey McDougall, pres, owner; Richard Bross, VP bus dev
City
Glen Mizenko, asset VP, bus dev; L. Manaugh, pres, COO; Thomas
8 Jonah Energy LLC 12,477,405 Denver CO
Hart, CEO; Michael Park, VP ops; Patrick Welch, VP, CFO
Henry Kleemeier, pres; Don Millican, CFO, VP; George Kaiser, pres,
26 Kaiser-Francis Oil Co. 4,091,954 Tulsa OK
CEO
David Killam, managing partner; Radcliffe Killam, partner, corp
64 Killam Oil Co. Ltd. 1,143,250 Laredo TX
planning
Matt Bauerschlag, VP, COO; Bruce Larsen, pres, CEO; Brad Suddarth,
65 Kraken Oil & Gas LLC 1,134,946 Houston TX
EVP, CFO
85 Lario Oil & Gas Co. 938,718 Witchita KS David Loger, CFO, EVP; Michael O'Shaughnessy, pres, CEO
Scott Gutterman, pres, CEO; John Doughtie, VP, exp; Tim Lindsey,
3 LLOG Exploration Co. LLC 21,688,637 Covington LA
SVP, prod/ops; Philip LeJeune, CFO, treas; Randy Pick, VP A&D
62 LOGOS Resources II LLC 1,183,049 Farmington NM Jay McWilliams, pres; Wayne Ritter, GM, ops
Donald MacPherson, chair, CEO; Phil Sorbet, COO, pres; Ed Ogren,
98 MacPherson Oil Co. 826,308 Santa Monica CA
ops dir
Meghan Cuddihy, VP, IR; Jason Lindmark, VP, bus dev; William
4 Merit Energy Co. 20,060,343 Dallas TX
Gayden, pres, CEO, chair, founder
Kenneth Waits, CEO; J. Roe Buckley, CFO, EVP; Curtis Mewbourne,
5 Mewbourne Oil Co. 16,922,345 Tyler TX
founder
Michael Thomann, VP finance, acct; John Murchison, pres, chair;
93 Murchison Oil & Gas Inc. 859,546 Plano TX
Rusty Cooper, VP ops
59 Murex Petroleum Corp. 1,218,916 Houston TX Waldo Ackerman, founder, pres, CEO; Reagan Smith, CFO
Max Whiteley, VP, ops; Scott Herrick, founder, VP; Jason Herrick, pres;
41 Pantera Energy Co. 1,773,601 Amarillo TX
Brooks Gentry, VP, dev
Joe Schimelpfening, SVP, COO; Dennis Justus, SVP, CFO; Gareth
49 Petro Harvester Oil & Gas LLC 1,474,135 Plano TX
Roberts, chair; Scott King, VP exp, dev Lewis Gillies, pres, CEO
Thomas Nelson, VP finance; Douglas Hunt, dir acq; Tommy Moffett,
14 Petro-Hunt LLC 5,792,717 Dallas TX
VP ops; Bruce Hunt, pres
47 Pruet Production Co. 1,580,231 Jackson MS J. Hilton, VP prod; William James, pres
Jamey Walker, VP exp; Walt Tehan, VP ops; Darren Groce, interim
86 R. Lacy Inc. 916,204 Longview TX
pres, counsel

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2017 YEAR-TO-DATE PRODUCTION ALPHABETICAL LISTING

Rank Company BOE City State Top executive officials

27 Red Willow Production Co. 4,073,578 Houston TX Robert Voorhees, pres, COO; Bill McFie, VP ops; Stephen Goff, CFO
Jeff Durrant, VP, exp, dev Skip Ward, VP ops; Mike Koenig, VP land,
73 Renaissance Offshore LLC 1,063,073 Houston TX
bus dev; Jeffrey Soine, CEO; Brian Romere, CFO
13 Samson Investment Co. 5,842,248 Tulsa OK Philip Cook, EVP, CFO; Randy Limbacher, CEO; Richard Fraley, COO

71 Sanguine Gas Exploration LLC 1,074,045 Tulsa OK Randolph Nelson, pres; Thomas Fuller, VP, finance, treas
Shannon Young, VP, CFO; Lisa Stewart, exec chair, pres, CEO, CIO;
10 Sheridan Production Co. LLC 8,717,433 Houston TX Mark Miertschin, VP, bus dev, mktg; Thomas Voytovich, VP, COO;
Mark McCool, VP, ops
Howard Sklar, CEO; David Barlow, pres, COO; Chris Farrell, VP, CFO;
78 Sklar Exploration Co. LLC 1,024,460 Shreveport LA
Cory Ezelle, VP exp mgr; Monty Shed, VP, ops mgr
17 Slawson Exploration Co. Inc. 5,632,082 Wichita KS Robert Slawson, pres; Kathy Atkins, VP, CFO; Steve Slawson, VP, ops

70 Smith Production Inc. 1,112,160 Spring TX Glenn Smith, pres, CEO

Richard Snyder, VP; Thomas Snyder, treas; Elmer Snyder, chair; Chuck
63 Snyder Brothers Inc. 1,169,110 Kittanning PA
Snyder, pres
53 Square Mile Energy LLC 1,345,444 Houston TX Gary Loveless, chair, CEO

44 Stephens Production Co. 1,681,462 Fort Smith AR WR Stephens, pres, CEO

100 Stonegate Production Co. LLC 802,331 Houston TX Michael Harvey, chair, CEO; Robert Mcdaniel, VP, ops
Ryan Hamilton, VP ops, eng; Matthew Johnson, pres, COO; Mark
35 Summit Petroleum LLC 2,538,357 Midland TX
Bruehl, VP finance; Dennis Johnson, chair, CEO; Tom Fago, VP, exp
Timothy Duncan, pres, CEO; Stephen Heitzman, EVP, COO; John
76 Talos Energy LLC 1,049,033 Houston TX Parker, EVP exp; John Spath, VP, prod ops; Michael Harding, SVP,
CFO
Eric Doss, VP, exp, geo; Scott Gladden, pres; Garrett Kimbell, VP,
72 Tana Explorartion Co. 1,067,924 Dallas TX
land, bus dev; John Petty, VP, ops
Oklahoma
16 Templar Energy LLC 5,771,926 OK David Le Norman, pres, owner
City
18 Texas Petroleum Investment Co. 5,496,520 Houston TX William Crawford, co-owner, principal
Frank Kyle, CFO, dir, co-owner; Gregory Mendenhall, VP ops; James
54 Texland Petroleum LP 1,341,417 Fort Worth TX
Wilkes, pres, dir, co-owner; Bryan Lee, VP exp
Don Foster, controller; Michael Domanski, pres, CEO, GM; Mark
48 Tidelands Oil Production Co. 1,560,341 Long Beach CA
Kapelke, VP ops, eng
Harvey Kelley, VP ops; Mark Wojna, VP exp; Al Petrie, IR; Michael
90 Upstream Exploration LLC 875,988 Metairie LA
Willis, pres
77 US Energy Development Corp. 1,046,049 Getzville NY Jordon Jayson, CEO; Douglas Walch, pres

31 Valence Operating Co. 3,125,257 Kingwood TX Stephen Manning, COO; Douglas Scherr, CFO; Walter Scherr, CEO
Roger Biemans, chair, CEO; Thomas Tyree, pres, CFO; John Moran,
33 Vantage Energy LLC 3,020,870 Englewood CO
VP ops
50 Venture Oil & Gas Inc. 1,436,264 Laurel MS Jay Fenton, pres; Jarvis Hensley, VP ops
Brian Furlong, VP, CFO, treas; Christopher Graham, pres, CEO; Jack
97 Verado Energy Inc. 828,927 Dallas TX
Cordaro, VP, ops; Edward Henry, chair
69 Vernon E. Faulconer Inc. 1,113,949 Tyler TX Tom Markel, VP, acct, CFO; David Enright, pres
Barry Hill, CEO; J. Michael Vess, chair, managing owner; Brian
96 Vess Oil Corp. 840,556 Wichita KS
Gaudreau, VP, land, acq
9 Vine Oil & Gas LP 12,349,314 Plano TX Eric Marsh, CEO; John Regan, CFO
Bryan Wagner, pres, owner; Mark Belcher, VP, exp, prod; Greg Oliver,
79 Wagner Oil Co. 1,024,188 Fort Worth TX
CFO
Joseph Walter, chair, geo; Ron Wilson, pres, CEO; Cecil Looke, VP,
12 Walter Oil & Gas Corp. 6,587,394 Houston TX
ops
David Stone, VP exp; Lew Ward, chair; William Ward, pres, CEO;
88 Ward Petroleum Corp. 882,320 Enid OK
Drew Deaton, VP finance, bus dev
30 Warren E&P Inc. 3,343,833 Casper WY Stephen Heiter, CEO
Mike Rayburn, COO; Thomas Isler, pres, CEO; Scott Sampsell, VP,
43 White Oak Energy LP 1,699,714 Houston TX
finance, admin
Joseph Colletti, VP, bus dev; Kathryn MacAskie, pres, CEO; Matthew
51 Zarvona Energy LLC 1,396,539 Houston TX
Jurgens, VP ops; Robert MacAskie, VP, acq, finance
Nugent Brasher, chair; Matt Ott, dir bus dev; William Coleman, pres;
29 Zavanna LLC 3,734,728 Denver CO
Carole Slinkard, CFO; Cody Duran, VP ops; David Hodges, COO
Source: IHS Markit; For more information on the Private Company Database visit www.ihs.com.
Production totals based on latest year-to-date figures as reported to and recorded by individual state agencies and tabulated by IHS at the time of publication. Some agencies are delayed
by as many as several months in releasing data which may impact company rankings.

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HALCN RESOURCES SELLS NON-OPERATED
WILLISTON BASIN ASSETS FOR $110M
Upon closing of an agreement to sell remaining non-operated
assets in the Williston Basin, Halcn Resources Corp. will have
completed its transition into a pure play Delaware Basin-focused
company. Halcn holds over 41,500 net acres in the core of the
Delaware Basin. In its most recent deal with an undisclosed
private company, Halcn will shed the Williston Basin assets
for approximately $104 million in cash, subject to customary
closing conditions and adjustments. The effective date of the
transaction is April 1, 2017 and is expected to close within 60
days. The properties currently produce approximately 1,891
Bbl/d of oil, 1,931 Mcf/d of gas and 65 Bbl/d of natural gas
liquids. In a separate transaction that closed in August, the
company divested additional non-operated Williston Basin
assets to a different buyer for approximately $6 million in cash.
In less than nine months, the company has sold approximately
2,000 wellbores across its legacy assets for aggregate cash pro-
ceeds in excess of $2 billion. The borrowing base on Halcns
senior secured revolving credit facility will be reduced to $100
million upon closing of the non-operated asset sale. As of June
30, 2017, Halcns liquidity was approximately $773 million pro
forma for these asset sales and other previously announced
transactions.
CENOVUS TO SELL PELICAN LAKE ASSETS FOR $975M
Cenovus Energy Inc. has agreed to sell its Pelican Lake heavy
oil operations, as well as other miscellaneous assets in northern
Alberta with production of approximately 19,600 boe/d, to
Canadian Natural Resources Ltd. for gross cash proceeds of
$975 million. Proceeds from the sale will be applied against the
$3.6 billion asset-sale bridge facility put in place to help fund
Cenovuss acquisition of assets from ConocoPhillips earlier this
year. With the close of this asset sale, the company intends to
retire the first tranche of the bridge facility. The remaining two
tranches mature in November 2018 and May 2019. CIBC Capital
Markets and Barclays Capital Canada Inc. acted as financial
advisors to Cenovus for the Pelican Lake transaction.
IOG CAPITAL TO PARTICIPATE IN EAGLE FORD, MERGE,
ARKOMA-WOODFORD DRILLING PROGRAMS
IOG Capital LP announced today three new development drilling
programs located in the Eagle Ford, the Merge portion of the
STACK play, and the Arkoma-Woodford, respectively. These
three new projects are anticipated to require up to $130 million
of gross capital. These projects will be conducted through IOGs
newly formed affiliate, IOG Resources LLC (IOGR). IOGRs first
joint development agreement was established in July 2017 with
Woodlands, Texas based Earthstone Energy Inc. IOGR and
ESTE will initially partner on the development of 11 Eagle Ford
wells located in Gonzales County, Texas in 2017. IOGR has the
potential to participate in up to 15 additional wells in the project.
IOGRs second joint development program closed in August
2017 with an Oklahoma City based private family operator. This
OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM
1710OGFJ_55 55
INDUSTRY BRIEFS
new development program in the Merge calls for up to 18 wells
to be funded in Canadian County, OK. The third development
program closed at the end of August 2017 with Oklahoma City
based Red Mountain Energy (RME). IOGR and RME will jointly
fund up to 20 wells targeting the Woodford in the Arkoma
Basin.
CARRIZO TO SELL UTICA SHALE ASSETS FOR $62M
Carrizo Oil & Gas Inc. has agreed to sell its assets in the Utica
Shale to an undisclosed buyer. On August 31, 2017, Carrizo
entered into an agreement to sell substantially all of its assets
in the Utica Shale, located primarily in Guernsey County, OH,
for $62 million in cash, subject to customary closing conditions.
Additionally, Carrizo could receive contingent payments of up
to $15 million in aggregate based on average annual WTI prices
exceeding certain thresholds over the next three years. Accord-
ing to its website, Carrizos nearly 26,000 net Utica acres hold
over 130 net undrilled locations. Carrizo Oil & Gas, Inc. is a
Houston-based energy company actively engaged in the explo-
ration, development, and production of oil and gas from resource
plays located in the United States. Its current operations are
principally focused in oil and gas plays primarily in the Eagle
Ford Shale in South Texas, the Delaware Basin in West Texas,
the DJ Basin in Colorado, and the Marcellus Shale in Pennsyl-
vania. The transaction is currently expected to close by October
31, 2017.
NORTHERN OIL AND GAS SETTLES LAWSUIT
WITH FORMER CEO
Northern Oil and Gas Inc. has entered into an agreement to
settle the lawsuit brought against the company by its former
CEO and founder, Michael Reger. In addition to receiving three
million shares of Northern Oil and Gas stock, Reger will be
named chairman emeritus. The Minnesota-based company
terminated Reger as Northerns CEO in August 2016 and removed
him from the board of directors after Reger received a Wells
Notice from the staff of the Securities and Exchange Commis-
sion (SEC) in connection with a then-ongoing investigation of
2012 trading patterns in the securities of Dakota Plains Holdings
Inc. in which Reger was an initial investor in 2008. Upon Regers
termination, Northern Oil and Gas determined he was not
entitled to a severance package and Reger sued the company
days later. Weeks later, Reger and the SEC settled and Reger
agreed to pay nearly $8 million, neither admitting nor denying
the SECs findings.
WILDHORSE RESOURCE DEVELOPMENT TO LAUNCH
$150M OFFERING OF SENIOR NOTES
Subject to market conditions, WildHorse Resource Development
Corp. intends to offer $150 million in aggregate principal amount
of its 6.875% senior notes due 2025. The notes are expected to
rank equally with, and be treated under the Indenture as a single
class of debt securities with, the $350 million aggregate principal
amount of the currently outstanding 6.875% senior notes due
55
10/6/17 2:52 PM
 INDUSTRY BRIEFS
2025 previously issued by WRD on February 1, 2017. WRD in-
tends to use the net proceeds from the proposed offering to
repay the borrowings outstanding under its revolving credit
facility and for general corporate purposes.
GLOBELTR CLOSES WELL SERVICING DIVISION SALE
GlobeLTR Energy Inc., a portfolio company of affiliates of Clear-
lake Capital Group LP, has closed the sale of its well servicing
division to Brigade Energy Services LLC, a portfolio company
of Turnbridge Capital Partners LLC and affiliates. Financial
terms of the transaction were not disclosed. Parks Paton Hoepfl
& Brown, LLC acted as financial advisor to Clearlake and
GlobeLTR.
NABORS ACQUIRES ROBOTIC DRILLING SYSTEMS
Nabors Industries Ltd. has acquired Stavanger-based Robotic
Drilling Systems AS (RDS), a provider of automated tubular and
tool handling equipment for the onshore and offshore drilling
markets. The RDS modular systems are applicable both in
onshore and offshore markets, on new builds as well as retrofits.
Nabors Industries owns and operates a large land-based oil and
gas drilling rig fleet and is also a provider of offshore platform
rigs in the United States and numerous international markets.
Nabors also provides directional drilling services, performance
tools, and technologies.
RIMROCK COMPLETES WILLISTON BASIN ASSETS BUY
RimRock Oil & Gas, a start-up oil and gas exploration and
production company, has completed the acquisition of upstream
assets located in the Williston Basin from Whiting Petroleum
Corp. for $500 million. The acquired assets are located on the
Fort Berthold Indian Reservation of Dunn and McLean Counties
in North Dakota and include approximately 30,000 net acres
and current net production of approximately 8,000 barrels of
oil equivalent per day. Whiting Petroleum used the proceeds
from the sale to pay $500 million down on its revolver. RimRock
was formed in 2016 through a $500 million line-of-equity in-
vestment from Warburg Pincus, a global private equity firm
focused on growth investing. In July 2017, the company relocated
its headquarters from Calgary, Alberta to the Denver, Colorado
area to further focus on oil and gas exploration in the US Rocky
Mountain basins.
FORUM ENERGY TECHNOLOGIES SIGNS ON FOR
REMAINING INTERESTS IN GLOBAL TUBING
Forum Energy Technologies Inc. has signed a definitive agree-
ment to acquire the membership interests in Global Tubing
from its joint venture partner Quantum Energy Partners. As
part of the transaction, Forum will also acquire managements
interest in the joint venture and repay Global Tubings net debt.
The aggregate transaction value is approximately $237 million,
including the issuance of 10 million shares of Forum common
stock to Quantum, cash from Forums existing bank credit facility
and cash on hand. Located in Dayton, Texas, Global Tubing
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1710OGFJ_56 56
provides coiled tubing, coiled line pipe and related services to
customers worldwide. Forum Energy Technologies is a global
oilfield products company, serving the drilling, subsea, com-
pletions, production and infrastructure sectors of the oil and
natural gas industry.
QUORUM ACQUIRES WELLEZ
Quorum has acquired privately-held WellEz, a cloud-based well
lifecycle analytics company for the upstream oil and gas industry.
From land management to accounting, field operations, energy
marketing, and now the addition of well lifecycle analytics,
Quorum offers a complete suite of cloud-based digital oilfield
solutions. Quorum, a portfolio company of Silver Lake Partners
and Silver Lake Kraftwerk, did not disclose deal terms or any
financial details.
KEY ENERGY SERVICES SELLS WELL
INTERVENTION BUSINESS IN RUSSIA
Key Energy Services Inc. has closed on the sale of its well inter-
vention business in Russia to an undisclosed buyer for an un-
disclosed amount. Keys president and CEO, Robert Drummond,
stated, The sale of Keys Russian Business marks the culmina-
tion of the strategic initiative set forth in early 2015 to fully-exit
markets outside of the US. Key Energy Services is the largest
onshore, rig-based well servicing contractor based on the num-
ber of rigs owned. Key provides a complete range of well inter-
vention services and has operations in all major onshore oil
and gas producing regions of the continental United States.
PACIFIC DRILLING MOVES TO OTC MARKET
Pacific Drilling SA received notice from NYSE Regulation Inc.
that trading of the companys common stock on the New York
Stock Exchange was suspended after market close today, Sep-
tember 12, 2017. The company was not in compliance with the
NYSEs continued listing standard, which currently requires a
company with listed common stock to maintain an average
global market capitalization of not less than $15.0 million over
a consecutive 30 trading-day period. The companys common
shares began trading in the over-the-counter market on the
Pink Quotes ( formerly the Pink Sheets) on September 13, 2017.
The company is also taking steps to apply for registration and
quotation of its common stock on the OTC Bulletin Board
(OTCBB). The companys NYSE ticker symbol PACD has been
discontinued and its OTC ticker symbol will be PACDF.
CAPITAL ONE LEADS $70M CREDIT FACILITY
FOR PERMIAN BASIN MATERIALS
Capital One NA Sponsor Finance led a $70 million senior secured
credit facility for Permian Basin Materials LLC (PB Materials),
majority owned by funds managed by WL Ross & Co. LLC.
Capital One acted as administrative agent and sole lead arranger
for the transaction. PB Materials is a regional producer of ready-
mix concrete and sand and gravel and limestone aggregates in
the Permian Basin region of West Texas and New Mexico.
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CALFRAC SEES CREDIT FACILITIES EXTENSION,
AMENDMENT
Calfrac Well Services Ltd. has entered into an agreement with
its lenders which amends and extends its credit facilities. The
principal amendments to the credit facilities include, among
others, the following items:
an extension of the maturity date from September 27, 2018
to June 1, 2020;
a voluntary reduction in the credit facilities from $300
million to $275 million;
the continued inclusion of the equity cure provision which
permits the previously funded equity cure to be utilized at
any time prior to the extended maturity date, subject to
the same conditions which were included in the December
2015 amendments;
a reduction in the maximum funded debt-to-EBITDA ratio
to 3.0x;
the continued inclusion of a borrowing base which limits
advances under the credit facilities based on North Amer-
ican accounts receivable, cash on hand and fixed asset
values;
the removal of the pricing levels which were added in the
December 2015 amendments, although provision was made
for increased pricing of up to 100 basis points during periods
where the net total debt-to-EBITDA ratio exceeds 5.0x;
and
a prohibition on utilizing advances under the credit facilities
to redeem or repay subordinated debt while net total debt-
to-EBITDA exceeds 5.0x.
PIN OAK ENERGY PARTNERS SEES BANK CREDIT
FACILITY INCREASE TO $150M
Pin Oak Energy Partners LLCs borrowing base has been reaf-
firmed and its credit facility has been extended and increased
to $150 million by CrossFirst Bank. Pin Oak Energy Partners
LLC is an Appalachian Basin energy company engaged in the
exploration and production of conventional and unconventional
oil and natural gas wells and the operation of associated assets.
The company currently operates 363 wells producing nearly
5.7 MMcfe/d (32% liquids) across more than 32,000 acres and
is also involved in midstream, field services and operations
through its affiliate companies.
TALLY ENERGY SERVICES LAUNCHES IN HOUSTON
Tally Energy Services, a private equity backed firm with a buy
and build strategy in specialized North American shale products
and services, recently launched its operations in Houston, Texas.
With sponsorship from RedBird Capital Partners and Sallyport
Investments, Tally Energy Services raised over $130 million of
capital commitments with additional equity available for larger
acquisitions. Tally is principally focused on directional drilling,
completion equipment, and artificial lift. Led by CEO Chris
Dorros, the firm recently completed two Texas-based acquisi-
tions: Terra Directional Services, a full-service directional drilling
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INDUSTRY BRIEFS
company specializing in horizontal wells for shale projects
throughout the United States, and Tech-Flo Consulting, a world-
wide supplier of hydraulic lift systems. Douglas L. Foshee joins
Tally Energy Services as chairman of the board. As founder and
owner of Sallyport Investments LLC, Foshee has more than
thirty years in the energy industry. He is the former chairman,
president, and CEO of El Paso Corp. Founded in 2013, RedBird
Capital Partners is a principal investment firm focused on
transformational growth equity investments in partnership
with entrepreneurs and family owned businesses. Founded in
2012, Sallyport Investments provides capital and leadership to
companies in the upstream, midstream, and service sectors of
the energy industry.
SCS TECHNOLOGIES SEES EQUITY COMMITMENT
FROM BLACK BAY ENERGY CAPITAL
Black Bay Energy Capital, a private equity firm focused on the
North American oilfield service sector, has completed a recap-
italization of, and growth equity investment in, SCS Technologies
LLC alongside the SCS management team. Black Bays invest-
ment will be used by SCS to expand its product offerings, cus-
tomer base, and management team, and will enable the company
to pursue opportunistic acquisitions. Gene Gradick Sr., the
former CEO of J-W Measurement and the broader J-W Energy
enterprise, joins the SCS team as a director. Fishman Haygood
served as Black Bays counsel on the transaction. Romanchuk
& Co. served as the financial advisor to SCS and Atkins, Holl-
mann, Jones, Peacock, Lewis & Lyon served as SCSs legal coun-
sel. Based in Big Spring, Texas, SCS provides turnkey measure-
ment and control system solutions for oil and gas production
and midstream operators throughout the Permian Basin. The
company custom designs, fabricates and installs advanced
liquid measurement systems and provides related services
including Programming Logic & Control (PLC) Systems, mobile
meter proving services, electrical infrastructure installation
and service, and other site services.
ALTUS, QINTERRA MERGE
Qinterra Groups North Sea well intervention specialist Altus
Intervention and its international technology arm, Qinterra
Technologies have united to form one global force in well ser-
vices. With headquarters in Stavanger, Norway, the combined
group will be known as Altus Intervention, bringing together
over 1,000 staff across four global regions: UK and West Africa,
Norway and Denmark, the Americas and Middle East, and Asia
Pacific. Following EQTs acquisition in 2014, the two companies
Altus Intervention and Qinterra Technologies were created.
Group chief executive, ge Landro, who joined in February
2016, will continue to lead the company.
ANTERO COMPLETES $1B DELEVERING PROGRAM
Antero Resources Corp. has monetized over $1 billion of non-ex-
ploration and production assets including the previously an-
nounced sale of 10 million common units representing limited
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 INDUSTRY BRIEFS
partner interests in Antero Midstream Partners LP and the
restructuring of a portion of its commodity hedge portfolio.
Highlights:
Sold $311 million of Antero Midstream common units
Monetized approximately $750 million of its natural gas
hedge portfolio
Second half 2017 natural gas hedge prices and volumes
remain unchanged at 1,860 BBtu/d at $3.64/MMBtu
Restructured the hedge swap prices with no change to
hedge volumes
Anteros restructured portfolio has 80% of targeted gas
production hedged through 2020 at $3.43/MMBtu
Swap prices have been reset at $3.50/MMBtu for 2018 and
2019, $3.25/MMBtu for 2020 and $3.00/MMBtu in 2021 and
2022
The pro forma value of the hedge portfolio after restruc-
turing is $1.3 billion as of June 30, 2017 strip pricing
Intends to utilize a portion of net operating losses carried
forward to eliminate cash taxes on the realized gains
Reduced pro forma standalone E&P net debt to last twelve
months adjusted EBITDAX from 3.2x to 2.4x as of June 30,
2017
DISTRICT 5 INVESTMENTS MAKES COMMITMENT
TO PATHFINDER RESOURCES
District 5 Investments LP (D5), a private equity firm focused
on investing in middle-market oil and gas and oilfield services
companies, has made a growth equity investment into newly
formed Pathfinder Resources LLC. Based in Dallas, Texas, Path-
finder was formed to acquire North American mineral and
royalty interests, with an initial focus on the Marcellus and
Utica Shale plays in Pennsylvania, Ohio, and West Virginia. This
is D5s third Fund I platform investment. The firm is actively
seeking opportunities across the energy sector. Investment sizes
range from $5 million to $35 million. Irving, TX-based District
5 Investments LP was formed in 2016.
KEYERA CLOSES $400M PRIVATE PLACEMENT
DEBT FINANCING
Keyera Corp. has closed its previously announced CAD$400
million private placement of 10-year senior unsecured notes
with a group of institutional investors in Canada and the United
States. The notes will bear interest at 3.68% and mature on
September 20, 2027. Proceeds from the notes will be used to
repay short-term debt incurred to execute Keyeras capital
program and for general corporate purposes. Keyera Corp.
operates one of the largest midstream energy companies in
Canada, providing services to oil and gas producers in the
Western Canada Sedimentary Basin. Its predominantly fee-for-
service based business consists of natural gas gathering and
processing, natural gas liquids processing, transportation, stor-
age, marketing, iso-octane production and sales, and a conden-
sate system in the Edmonton/Fort Saskatchewan area of
Alberta.
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1710OGFJ_58 58
ANADARKO AUTHORIZES $2.5B SHARE-REPURCHASE
PROGRAM
Anadarko Petroleum Corp. has authorized a $2.5 billion share-re-
purchase program. The authorization extends through the end
of 2018, and repurchases will be made in accordance with ap-
plicable securities laws from time to time in open market or
private transactions, depending on market conditions, and may
be discontinued at any time. In a written statement, Al Walker,
Anadarko chairman, president, and CEO, said: At the current
share price, this represents approximately 10 percent of the
companys outstanding common shares, and we will initially
target $1 billion of share repurchases prior to year-end 2017.
Separately, we want to highlight and reaffirm the guidance
we have previously provided for the deepwater Gulf of Mexico
(GOM), DJ and Delaware basin assets, added Walker. In the
deepwater GOM, we continue to expect average production
rates approaching 130,000 barrels of oil per day (BOPD) for the
full-year 2017. In the Delaware and DJ basins, we are on track
to deliver our combined projected exit rate of approximately
150,000 BOPD in 2017. Our ability to continue to meet previous
targets is indicative of the quality of the companys assets and
the efforts of our organization to deliver strong performance,
despite challenges from recent storms.
Going forward, we will continue to demonstrate financial
discipline with a focus on returns. Our 2018 upstream investment
plan is anticipated to produce substantial free cash flow, as-
suming an average oil price of $50 per barrel, while total capital
spending, including midstream investments, should be approx-
imately break-even to discretionary cash flow from operations,
said Walker.
FREEDOM TO SEE UP TO $20M FROM RAMAS CAPITAL
Freedom Oil and Gas Ltd. has closed on $10 million of financing
with Ramas Capital Management LLC, with the ability to expand
to $20 million within five months if certain well performance
is met. The funds will be used to finance the ongoing develop-
ment of Freedoms Eagle Ford acreage, including drilling, com-
pletion, land acquisition, and associated activities. Commenting
on the Ramas Capital transaction, executive chairman and CEO,
J. Michael Yeager, said, This financing positions Freedom to
continue developing our acreage without delay and provides a
flexible financial bridge to meet the requirements to activate
the much larger and lower cost reserves based lending facility
we established with Wells Fargo. The Wells Fargo facility is
intended to provide capital for ongoing drilling once adequate
production levels are reached. With this support from Ramas
Capital, we plan to drill and complete two to four additional
horizontal wells to more fully test our Dimmit County, TX
acreage in the Eagle Ford Shale formation and grow our pro-
duction to meet the Wells Fargo criteria. Freedom Oil and Gas
Ltd. is a development stage company. It continues to acquire
undeveloped acreage in the liquids rich area of the Eagle Ford
Shale in South Texas.
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WIRTH TO SUCCEED WATSON
AS CHEVRON CHAIRMAN AND CEO
Chevron Corp. has elected Michael K. Wirth chair-
man of the board and CEO, effective February 1, 2018.
Wirth, who is currently vice chairman of the board
and executive vice president of midstream and devel-
opment, succeeds John S. Watson, who will retire
from the company and its board on February 1, 2018,
after 37 years of distinguished service, including eight
years as chairman and CEO. Wirth joined Chevron in
1982 as a design engineer. He was named vice chairman
of the board of directors in February 2017. He has held
the position of executive vice president of midstream
and development since 2016. Previously, he was exec-
utive vice president of downstream and chemicals for
nearly a decade. Watson, who turns 61 in October,
joined Chevron in 1980 as a financial analyst and went
on to hold financial, analytical, and supervisory posi-
tions before being appointed president of Chevron
Canada Limited in 1996. In 1998, he was named a
corporate vice president with responsibility for stra-
tegic planning and mergers and acquisitions. In 2000,
Watson led the companys integration effort following
the Chevron-Texaco merger and then became the
corporations CFO. In 2005, he became president of
Chevron International Exploration and Production.
In April 2009, he was named vice chairman of the
company, before being elected chairman and CEO in
September of that year. In a related move, Mark A.
Nelson will become vice president of midstream, strat-
egy and policy, effective February 1, 2018. Nelson will
be responsible for the companys supply and trading,
shipping, pipeline and power operating units. He will
also oversee corporate strategy, as well as policy, gov-
ernment and public affairs. Prior to his current posi-
tion, Nelson, 54, served as the president of international
products, responsible for the refining and marketing
businesses in Europe, Africa, Middle East, and Asia.
Before that, he was president of Chevron Canada
Limited, an upstream business headquartered in Cal-
gary, Alberta.
DEA NAMES MORAEUS HANSSEN AS CEO
DEA Deutsche Erdoel AG, the international oil and
gas company wholly owned by LetterOne, has appoint-
ed Maria Moraeus Hanssen as its new CEO and
chairman of the management board. The appointment
is expected to take effect in January 2018, when Maria
Moraeus Hanssen succeeds Thomas Rappuhn, who
is handing over after 30 years at the company, including
12 years on the Executive Board and eight years as
CEO. Maria Moraeus Hanssen is currently CEO of the
French utility group ENGIEs exploration and produc-
tion business. She has extensive oil and gas industry
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ENERGY PLAYERS
experience having worked for Hydro ASA, Statoil ASA,
and Aker ASA. She trained as a reservoir engineer and
petroleum economist, and spent the first 15 years of
her career with Hydro ASA. Shortly after Statoil bought
Hydros oil and gas activity, Maria Moraeus Hanssen
left to join Kjell Inge Rkkes Aker Group. Maria Mo-
Wirth
raeus Hanssen returned to a more operational role in
2014, heading up GDF SUEZs Norwegian business. In
2015, she was promoted to run GDF SUEZs interna-
tional E&P business. GDF SUEZ changed its name to
ENGIE in the same year.
CARL MARKS ADVISORS PROMOTES
WILLIAMS TO PARTNER
Carl Marks Advisors, a corporate restructuring and
Watson
investment banking firm serving middle market com-
panies, has promoted Brian Williams to partner.
With a primary focus in the energy industry, Williams
has 20 years of strategic advisory, operating and in-
vestment banking experience, including executive
management, mergers and acquisitions, private capital
raises, restructuring and principal investing. Prior to
joining Carl Marks Advisors, Williams served as CFO,
co-founder, and director of Cretic Energy Services, a
Hanssen
provider of completion services to oil and gas produc-
ers. Before that, Williams led the oilfield services in-
vestment banking practices at Macquarie Capital and
Tristone Capital. Williams earned a bachelors degree
in industrial engineering from Rensselaer Polytechnic
Institute and an MBA from Harvard Business School.
EOG RESOURCES APPOINTS GAUT TO BOARD
EOG Resources Inc. has appointed C. Christopher
Williams
Gaut to its board of directors, effective October 1,
2017. Gaut most recently served as chairman and CEO
of Forum Energy Technologies Inc. (Forum), a publicly
traded oilfield manufacturing company, from 2010
through May of this year, and continues to serve as
executive chairman of Forum. Gaut also serves as a
director of Ensco plc (Ensco) and Key Energy Services
Inc. Prior to Forum, Gaut was a managing director of
SCF Partners, a private equity firm investing in oilfield
Gaut
service and equipment companies, from 2009 to 2010.
Prior to SCF, Gaut worked for Halliburton Company
for six years, first as executive vice president and CFO,
then as president of drilling and evaluation. Prior to
Halliburton, Gaut was Enscos senior vice president
and CFO for more than 15 years. Gaut also served as
co-COO during his final year with Ensco.
VANGUARD NATURAL RESOURCES HIRES
FINANCIAL ADVISOR, NAMES NEW CFO
Vanguard Natural Resources Inc. has outlined changes
to the company including the retention of a financial
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 ENERGY PLAYERS
advisor and the appointment of a new CFO. The board
of directors has retained Jefferies LLC to advise the
company in connection with one or more potential
strategic transactions, including possible sales or dis-
positions of assets, joint ventures, strategic partner-
ships or other similar transactions. The company has
Wallis
also appointed a new CFO. Effective immediately,
Richard Scott Sloan will serve as executive vice pres-
ident and CFO. Sloan will remain on the board, on
which he has served since August 2017, but step down
from his roles as chair of the audit committee and
member of the compensation committee of the board.
Sloan previously held various senior leadership posi-
tions over his 27-year career at BP and Hess. He re-
ceived his BA in Economics from Colgate University
Keating
and MBA in Corporate Finance from the University
of Chicago. On September 26, 2017, Richard A. Robert,
Vanguards former executive vice president and CFO
tendered his immediate resignation. On September
26, 2017, Randall M. Albert was elected to join the
board, filling the vacancy created by Roberts resigna-
tion. Albert will stand for reelection at the companys
next annual meeting of stockholders. Albert most
recently retired from CONSOL Energy after a 34-year
Grossi
career, last serving as COO-Gas. Albert also currently
serves as an independent director of Eclipse Resources
and non-executive board member at Wellsite Rentals,
and is the immediate past chairman of the Marcellus
Shale Coalition and a member of the Virginia Tech
Mining and Minerals Engineering Advisory Board.
Albert holds a BS in Mining Engineering from Virginia
Tech. Additionally, the common stock of Vanguard
Natural Resources will begin trading over-the-counter
Rawlinson
today on the OTCQX Market under the symbol VNRR.
WALLIS JOINS NGP AS PARTNER
James Wallis has joined NGP, a private equity firm in
the energy and natural resources industry, as a partner
in the firms Houston office. Wallis was previously a
managing director with Lime Rock Partners in its
Houston office. He joined the firm in 2007 and was
primarily focused on sourcing, evaluating, and invest-
ing in North American E&P and oilfield service op-
portunities. Prior to joining Lime Rock, Wallis worked
in the energy investment banking groups of Merrill
Lynch and Petrie Parkman & Co.
CHESAPEAKE APPOINTS KEATING TO BOARD
Chesapeake has appointed Leslie S. Keating to the
Board of Directors. Keating will serve as a member of
the Audit Committee and the Compensation Com-
mittee and will stand for re-election at the 2018 annual
meeting of shareholders. Keating currently serves as
executive vice president of supply chain strategy and
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1710OGFJ_60 60
transformation for Advance Auto Parts. Keating joined
Advance Auto Parts in March of 2017 following a 31-
year career with PepsiCo. While at PepsiCo, Keating
most recently served as senior vice president supply
chain. Keating graduated from Virginia Tech with a
bachelors degree in mechanical engineering and holds
an executive MBA from Georgia State University.
OPENLINK NAMES GROSSI CEO, OMALLEY
ASSUMES ROLE OF CHAIRMAN
Openlink, a provider of trading, treasury, and risk
management solutions for the energy, commodities,
corporate, and financial services industries, has pro-
moted Rich Grossi to CEO. John OMalley has tran-
sitioned to the role of executive chairman of the board.
Grossi holds nearly 20 years of operational and tech-
nological experience at Openlink. As CTO, he oversaw
the development of Openlinks products and technol-
ogy as well as management of the companys IT and
information security. Previously, Rich spent nearly a
decade directing Openlinks global operations.
RAWLINSON JOINS EVERSHEDS SUTHERLAND
Matthew C. Rawlinson has joined the litigation
practice group of Eversheds Sutherland in the firms
Houston office. Rawlinson previously served as a part-
ner at Hicks Thomas LLP. Rawlinson represents a
broad array of clients in complex commercial and
energy-litigation matters in many state and federal
courts at both the trial and appellate levels. With more
than 18 years of experience, he is well-versed in han-
dling oil and gas industry commercial disputes. He
regularly works with investors, energy providers, proj-
ect developers, underwriters and commodity trading
firms to navigate the emerging issues that arise from
oilfield services, interstate gas pipeline projects, and
energy sector contracts.
SECURE ENERGY SERVICES MAKES
MANAGEMENT CHANGES
Secure Energy Services Inc. has made various man-
agement changes. Allen Gransch has been named
executive vice president of corporate development.
Gransch joined Secure in September2007 and has
served as the companys executive vice president and
CFO since December2012. Secure has appointed Chad
Magus as executive vice president and CFO. Magus
joined Secure in June 2014 and most recently served
as the companys vice president of corporate finance.
Prior to joining Secure, Magus spent over 10 years with
an oil and gas exploration and production company
in a variety of finance, accounting, and financial re-
porting roles. Magus is a Chartered Accountant and
holds a bachelors degree from the University of Sas-
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katchewan. Additionally, Secure has made the following changes
to its executive team: Corey Higham, executive vice president
of midstream, will transition to EVP of processing, recovery,
and disposal; Dave Engel, executive vice president of processing
recovery and disposal, will transition to EVP of technical services;
Dan Steinke, executive vice president of corporate development,
will transition to EVP of new ventures and government affairs;
and Mike Mikuska will join Secures executive team as EVP of
commercial and transportation. Secure is a TSX publicly traded
energy infrastructure and services company that provides
management of fluids and solids solutions to the oil and gas
industry in Western Canada and certain regions in the United
States.
SUMRULD TO JOIN PARKER DRILLING AS CFO
Parker Drilling Company has appointed Michael (Mike) W.
Sumruld as senior vice president and CFO, effective October 1,
2017. With Mr. Sumrulds appointment, Jon-Al Duplantier, Parker
Drillings senior vice president, chief administrative officer and
general counsel will relinquish his additional responsibilities
as interim CFO. Sumruld most recently held the position of vice
president and chief accounting officer from January through
September 2017 at LyondellBasell Industries NV. Prior to Lyon-
dellBasell, Sumruld worked at Baker Hughes Inc. During his 18
year tenure, he held a range of financial roles, including most
recently vice president and treasurer; vice president finance
Eastern Hemisphere; and director investor relations. Sumruld
is a certified public accountant and holds a bachelors degree
in accounting from the University of Houston and an MBA from
Texas A&M University.
FRANKS INTERNATIONAL NAMES NEW CEO
Douglas G. Stephens, CEO and member of the board of super-
visory directors for Franks International NV, has left the com-
pany to pursue other interests. The company has named Michael
C. Kearney as president and CEO, effective immediately, in
addition to his ongoing role as chairman. Kearney was appointed
to the companys supervisory board in 2013 and was lead su-
pervisory director from May 2014 until December 2015, when
he was named chairman. In addition, he has served on the
audit committee since 2013 and the compensation committee
from 2014 until 2016. Kearney previously served as president
and CEO of DeepFlex Inc., a privately-held oil service company
following service as the companys CFO. Kearney also served
as executive vice president and CFO of Tesco Corp. and as CFO
and vice presidentadministration for Hydril Company. Kearney
received a Bachelor of Business Administration from Texas
A&M University as well as a Master of Science degree in Ac-
countancy from the University of Houston.
WELL-CENTRIC APPOINTS NEW CEO
Well Centric, an independent specialist operating in the well
integrity and production technology sectors, has appointed
Gary Smart as CEO. Smart brings 30 years oil and gas industry
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1710OGFJ_61 61
ENERGY PLAYERS
experience to the role. He has held a variety of management
positions throughout his career, spending 11 years at Weath-
erford before joining Tendeka in 2009, where he spent six years
as CEO.
ENERGY LITIGATORS JOIN HAYNES AND BOONE
Craig Stahl and Jeffrey Kuehnle have joined the Houston office
of Haynes and Boone LLP as partners in the Litigation and
Energy Practice Groups. Stahl has decades of experience han-
dling oil and gas litigation, including serving as lead counsel
for oil and gas producers in multidistrict litigation and class
actions. He has particular experience handling disputes over
royalty payments and joint operating agreements and has ap-
peared in state and federal courts across Texas and the US.
Stahl most recently co-chaired the Energy Litigation Practice
at Andrews Kurth Kenyon LLP. Kuehnle, who has worked with
Stahl for 20 years, also was an Andrews Kurth partner and has
focused much of his career on representing major energy pro-
ducers in multimillion-dollar lawsuits and appeals. He has a
mechanical engineering degree from Texas A&M University.
VAN BERGH JOINS DEUTSCHE BANK AS VICE
CHAIRMAN, AMERICAS NATURAL RESOURCES GROUP
Deutsche Bank has appointed Scott Van Bergh as vice chairman
of Americas Natural Resources Group. Van Bergh joins from
Bank of America Merrill Lynch where he has been since 2003,
most recently as vice chairman of Global Energy Investment
Banking. During his career at BofAML, Van Bergh built out the
banks oil and gas investment banking business, including
heading the Americas energy practice from 2008 to 2014. He
also ran or co-ran the energy businesses at Paine Webber, Sa-
lomon Brothers and Citi before joining Bank of America. He
will be based in New York.
NOBLE NAMES ROBERTSON TO BOARD
Offshore drilling contractor Noble Corporation plc has named
Julie J. Robertson to the companys board of directors. Robertson
will fill a board vacancy created by a recent retirement. She will
serve as a director of the company until the next shareholder
vote at the annual general meeting in 2018. Robertson has spent
more than 38 years with Noble and its subsidiaries. She has
served as the companys executive vice president since 2006
and corporate secretary since 1993, and will retain both roles.
Robertson is a graduate of the University of Texas at Austin and
attended the Advanced Management Program at Harvard
School of Business.
KP ENGINEERING APPOINTS TWO NEW MIDSTREAM
EXECUTIVES
KPE has appointed two new executives to lead its midstream
operations in the Northeast Region. David A. Fitch, senior vice
president of operations and John Paul Elder, vice president of
engineering will establish KPEs midstream operations and work
to significantly increase the companys presence in the Marcellus
61
10/6/17 2:52 PM
 ENERGY PLAYERS
and Utica natural gas basins. Fitch has a distinguished military
career with the United States Navy and more than 15 years of
experience in the oil, gas, and energy industries. His most recent
position was senior vice president of operations for the nnorth-
east region for MarkWest Energy Partners LP. , where he was
responsible for the companys operations in the Marcellus and
Utica Basins. Elder has a deep background in midstream oper-
ations and engineering, and he most recently served as vice
president, northeast engineering for MarkWest Energy Partners
LP.
BHGE ELECTS SIMONELLI AS BHGE BOARD CHAIRMAN
Baker Hughes, a GE company has elected BHGE president and
CEO Lorenzo Simonelli as chairman of the BHGE board, effective
October 2. Simonelli will continue in his president and CEO
role, which he has held since the closing of the combination of
Baker Hughes Inc. and GEs Oil and Gas business on July 3, 2017.
Simonelli replaces former GE Chairman and CEO Jeff Immelt,
who retired from the BHGE board of directors effective October
2. In addition to Immelts departure, BHGE board member Larry
Nichols has announced his decision to resign from the board.
Nichols served as a member of the legacy Baker Hughes Inc.
board, and for the past 16 years has provided valuable counsel
and board leadership. With these two resignations, BHGE has
reduced the size of its board to nine members and has named
current GE-designee BHGE board member W. Geoffrey Beattie
as the new lead director. GE owns approximately 62.5% of BHGE,
and retains five designated seats on the BHGE board.
PAINTED PONY NAMES KESSY COO
Painted Pony Energy Ltd. has named Rick Kessy as COO. Effec-
tive October 1, 2017, Kessy will oversee all aspects of the cor-
porations well activities and field operations, including drilling
and well completion operations, production facilities and in-
frastructure, and production operations. Kessy brings over 34
years of oil and gas industry experience. Most recently Kessy
was the vice president and director of the Marcellus Business
Unit, Repsol Oil & Gas USA. His previous roles include vice
president Marcellus Infrastructure and Production Operations
at Talisman Energy Inc. Kessy earned a bachelors degree in
chemical Engineering from the University of Saskatchewan and
is a professional engineer registered with APEGA. Painted Pony
is a publicly-traded natural gas company based in Western
Canada. The corporation is primarily focused on the develop-
ment of natural gas and natural gas liquids from the Montney
formation in northeast British Columbia.
CGG CONGRATULATES SAM GRAY ON RECEIVING
THE SEG MAURICE EWING MEDAL
Sam Gray, who recently retired as Senior Researcher, Subsurface
Imaging, CGG, has been distinguished with the Society of Ex-
ploration Geophysicists (SEG) Maurice Ewing Medal in rec-
ognition of his impressive work with major contributions in the
areas of depth imaging, velocity estimation, and seismic mod-
62
1710OGFJ_62 62
eling, his ability to convey complicated mathematical formulas
behind seismic imaging, and inspiring newcomers to the geo-
physical industry to carry the torch to further advance imaging
technology. The Maurice Ewing Medal is awarded from time
to time to a person who, in the unanimous opinion of the SEG
Honors and Awards Committee and of the Board of Directors,
is deserving of special recognition through having made major
contributions to the advancement of the science and profession
of exploration geophysics. After gaining a PhD in mathematics
at the University of Denver in 1978, Sam worked for the US
Naval Research Lab and then as an instructor at the General
Motors Institute, now Kettering University. His career in explo-
ration geophysics began in 1982 when he joined Amoco. There,
he took the lead in giving the company a pioneering capability
in 3D Kirchhoff prestack depth migration in the late 1980searly
1990s. Sam moved to Veritas, now CGG, in 1999 where he played
a pivotal role in developing true-amplitude migration, especially
various key components of beam migration technology, as a
member of the R&D team. In 2010 his contributions to beam
migration and other true-amplitude imaging issues were rec-
ognized with the SEGs Reginald Fessenden Award. He also
became the first author to win the combination of SEG awards
for Best Paper in Geophysics (1999), Best Paper Presented at
the Annual Meeting (2004), and Best Paper in The Leading Edge
(2009). In 2012 he was an SEG Distinguished Lecturer, presenting
A brief history of depth and time seismic imaging. CGG is
a fully integrated geoscience company providing geological,
geophysical, and reservoir capabilities to its broad base of
customers primarily from the global oil and gas industry.
DEEP DOWN APPOINTS EXECUTIVE CHAIRMAN, CFO
Deep Down Inc., an oilfield services company specializing in
complex deepwater and ultra-deepwater oil production distri-
bution system support services, has accepted the resignation
of executive chairman and CFO, Eugene Butler, effective Sep-
tember 30, 2017. Current audit committee chairman, Mark
Carden, has been named chairman of the board and current
business manager, Charles Njuguna, has been named CFO.
Butler will continue to provide financial and SEC guidance in
a consulting capacity until December 31, 2018.
ECKERT JOINS FLOWSERVE AS CFO
Lee Eckert has joined Flowserve Corp. , a provider of flow control
products and services for the global infrastructure markets, to
serve as senior vice president and CFO, effective October 9,
2017. Eckert joins Flowserve from CHC Group LLC, a global
commercial helicopter service provider to the offshore oil and
gas industry, where he served as senior vice president and CFO
since 2015. Eckert has over two decades of financial experience.
Before joining CHC Group LLC, he served as CFO of the US
division of National Grid Plc.
WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017
10/6/17 2:52 PM
 Companies mentioned in this issue of Oil & Gas Financial Journal are listed in
alphabetical order with advertisers in boldface type. The index is provided as a COMPANY/ADVERTISER INDEX
service. The publisher does not assume any liability for errors or omission.

COMPANY PAGE COMPANY PAGE COMPANY PAGE COMPANY PAGE

ABN AMRO Capital USA LLC 14 East West Bank 14 Lime Rock Partners 61 Rystad Energy 16
Accenture 37 El Paso Corp. 57 Locke Lord 15 Sabinal Energy LLC 49
Aker ASA 59 Empire Petroleum 46 LyondellBasell Industries 60 Sallyport Investments 57
Alberta Geological Survey 12 Enable Midstream Partners LP 15 Mabells Petroleum Advisors 30 Salomon Brothers 61
Align Midstream Partners 15 EnCap Flatrock Midstream 15 Macquarie Capital 59 Samson Exploration 47
Anadarko Petroleum Corp. 58 Energent Group 10 Maersk 47 Samson Resources II LLC 48
Andrews Kurth Kenyon LLP 61 Energie Beheer Nederland BV 12 Magellan Midstream Partners LP 14 Sanchez Energy 47
Antero Midstream Partners LP 58 ENERGYNET 1 Marcellus Shale Coalition 60 Santa Fe Midstream LLC 14
Antero Resources Corp. 57 ENGIE 59 MarkWest Energy Partners LP 61 SAP 37
Aramco 31 Ensco plc 60 McKinsey Consulting 36 SCS Technologies LLC 57
Atkins, Hollmann, Jones, Peacock, 57 Enterprise Products Partners 14 Mercer Management 37 SEC 55,62
Lewis & Lyon EOG Resources 60 Merrill Lynch 61 Secure Energy Services Inc. 60
Badger Mining Corp. 10 EPCM Professional Services Partners 40 Mewbourne Oil Co. 48 SEG 62
Baker Hughes Inc. 60,62 Eureka Midstream LLC 14 Microsoft 37 Sheridan Production 48
Bank of America Merrill Lynch 61 Eversheds Sutherland 61 Murphy Oil Corp. 12 Sidley Austin LLP 6
Barclays Capital Canada Inc. 55 ExL Petroleum 47 Nabors Industries Ltd. 56 Siemens 37
BBVA Compass 14 ExxonMobil 13 Nadel and Gussman 50 Silver Lake Partners 56
Berry Petroleum Co. LLC 48 EY 5 National Grid plc 62 Simmons & Company International 15
Black Bay Energy Capital 57 Fairmount Santrol 10,18 NEB 12 Simpson Thatcher & Bartlett LLP 14
Black Mountain Sand LLC 10 Financial Accounting Standards 42 NETHERLAND, SEWELL & BC Southeast Supply Header LLC 15
BP 13,59 Board ASSOCIATES Stakeholder Midstream LLC 14
Bracewell LLP 27 Fishman Haygood 57 NGP 10,61 Statoil 13,59
Branch Banking and Trust Co. 14 FLOTEK INDUSTRIES INC. IBC Noble Corp. 61 Sundown Energy 47
Brigade Energy Services LLC 56 Flowserve Corp. 62 Northern Oil and Gas Inc. 55 Tailwater Capital 15
Cadence Bank 14 Forum Energy Technologies Inc. 56,60 Norwegian Petroleum Directorate 13 Talisman Energy Inc. 62
Calfrac Well Services Ltd. 57 Franks International NV 60 NV LLC 50 Tall Oak Midstream III LLC 15
Callon Petroleum Co. 14 Freedom Oil and Gas Ltd. 58 NYMEX 24 Tally Energy Services 57
Canadian Natural Resources Ltd. 55 Gartner 37 NYSE 56 Tech-Flo Consulting 57
Capital One NA Sponsor Finance 56 Gazprom 13 ONGC Videsh 13 Tellurian Inc. 46
Cark Marks Advisors 59 GDF SUEZ 59 OPEC 22,30,46 Terra Directional Services 57
Carrizo Oil & Gas Inc. 47,55 GE 36,62 Openlink 61 Tesco Corp. 60
CEFC China Energy 47 GeoPark Ltd. 12 Opportune LLP 42 The Carlyle Group 48
Cenovus Energy Inc. 55 Glencore 47 Oracle 40 The Huntington National Bank 14
CGG 62 GlobeLTR Energy Inc. 56 Oranje-Nassau Energie BV 12 Thompson & Knight LLP 14
CHC Group LLC 62 Goodnight Midstream 14 Pacific Drilling SA 56 Total 47
Cheniere 46 Halcn Resources Corp. 47,55 Paine Webber 61 TPAO 13
Chesapeake Energy 61 Halliburton Co. 60 Painted Pony Energy Ltd. 62 TRAVELERS 3
Chevron 13,49,59 Hansa Hydrocarbons Ltd. 12 Parker Drilling Co. 60 Traverse Midstream Partners LLC 14
Chief Oil & Gas LLC 48 Haynes and Boone LLP 61 Parks Paton Hoepfl & Brown LLC 56 TSX 60
CIBC Capital Markets 55 Hess 59 Pathfinder Resources LLC 50,58 Turnbridge Capital Partners LLC 56
Cisco 36 Hicks Thomas LLP 61 Permian Basin Materials LLC 56 US Bank 14
CIT Bank 14 Hilcorp Energy Co. 48 Petrie Parkman & Co. 61 US Silica Holdings 10
Citation Oil & Gas Corp. 48 Hydril Co. 60 Pin Oak Energy Partners LLC 57 Valero Energy Corp. 15
Citi 61 Hydro ASA 59 PLS Inc. 46 Vanguard Natural Resources Inc. 59
Citizens Bank 14 Iberiabank 14 Post Oak Energy Capital LP 50 Vitruvian 46
Clearlake Capital Group LP 56 IEA 31 Presenso 36 Warburg Pincus 56
ConocoPhillips 55 IHS Markit 48 PWC 22 Weatherford 61
CONSOL Energy 60 Indigo Minerals LLC 48 Qatar Investment Authority 47 Well Centric 61
Cowen and Company 10 IOG Capital LP 55 Qinterra Group 57 WellEz 56
Cretic Energy Services 59 IOG Resources LLC 55 Quantum 47 Wells Fargo 58
CrossFirst Bank 57 IPAA IFC Quantum Energy Partners 47,56 Whiting Petroleum Corp. 56
Dakota Plains Holdings Inc. 55 Itochu 13 Ramas Capital Management LLC 58 WildHorse Resource Development 55
DEA Deutsche Erdoel AG 59 Jefferies LLC 59 Red Mountain Energy 55 Corp.
Deep Down Inc. 62 Jonah Energy Inc. 48 RedBird Capital Partners 57 WL Ross & Co. LLC 56
DeepFlex Inc. 60 JP Morgan Chase Bank NA 14 Regions Bank 14 Wolfe Research LLC 10
Deutsche Bank 14,61 J-W Energy 57 Repsol Oil & Gas USA 62 Wood Mackenzie 22
Diamondback Energy Inc. 10 Kayne Private Energy Income Fund LP 49 RimRock Oil & Gas 56 ZB NA DBA Amegy Bank 14
District 5 Investments LP 50,58 Key Energy Services Inc. 56,60 Robotic Drilling Systems AS 56
Douglas Westwood 10 Keyera Corp. 58 Rockcliff Energy II LLC 48
Earthstone Energy Inc. 55 KPE 61 Romanchuk & Co. 57

OCTOBER 2017 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM 63

1710OGFJ_63 63 10/6/17 2:52 PM

 THE FINAL WORD

Measuring E&P performance

IT IS NO SECRET that a companys CEO, it is important to increase the value of the company by dutifully
owners, shareholders, and creditors have a sticking to the main business of E&P and adding new
deep interest in how a company is progressing. reserves.
This short article explores an important ques- To achieve the objectives of maximizing profit and increasing
tion: if CEOs, shareholders, or creditors are the value to shareholders, a company needs to produce oil and
asked to single out only one key performance gas at a sustained rate, but it must also try to produce more in
DR. SALMON SAIF
indicator (KPI) to measure the overall perfor- each succeeding year. But production of oil and gas resources
KHAN GHOURI mance of a multinational oil and gas explo- from a given reserve means that a barrel of oil or MMSCF gas
ration and production company, which one produced today will not be available tomorrow. That is, with
will they pick? the production of each barrel of oil or gas, the remaining proved
There are a number of KPIs that measure the performance recoverable reserves will deplete unless new reserves are added
of an organization by assessing its financial health, physical to replenish the quantity produced. This is what is called Re-
performance, operational excellence, and health, safety, and serves Replacement Ratio (RRR), and this is the KPI that CEOs,
environment (HSE). shareholders, or creditors would be interested in to measure
Company manage- the overall perfor-
ment will often develop mance of the
a series of KPIs for each organization.
category and display Thus, if the compa-
them on the manage- ny fails to discover and
ment dashboard to as- add new proved re-
sess the health of the serves, then the avail-
organization. The ob- able resources eventu-
jective of such KPIs is ally will be exhausted
to enable management and the company will
to make appropriate not be in a position to

and timely decisions in
order to steer the com-
pany towards its set
objectives. For each
category, there could be
many KPIs, and each
one of them is undoubtedly important. However, if the share-
holders, CEO, or creditors are interested in one single KPI, which
one should be given greater emphasis and why?
The discussion must start with oil and gas company objectives
linked to corporate strategy. Any layman can come up with the
main objective of an oil and gas company: maximize profit and
increase the value of the company year after year.
For this they need to generate more revenues and cut costs
in order to increase profit. To achieve this apparently simple
objective, a company must enhance its oil and gas production
level year after year. For the sake of discussion, we are assuming
that oil prices will remain steady at about $50 per barrel for
many years. This means that revenues and profitability hinge
on the production level and vigilance of reducing costs.
That is, the company must constantly invest its available
financial resources in exploration and development activities
in order to continue to add more oil and gas reserves to its
portfolio. Adding more proven oil and gas reserves to a com-
panys resource base will improve the companys market image,
which will in turn elevate the market value of its shares. Thus,
Convisum | Dreamstime
achieve its corporate
objective of growth;
rather, it may go bank-
rupt. Therefore, stake-
holders are quite inter-
ested in this ratio and
want to ensure that in any given year, this ratio should be greater
than one or 100%.
This ratio is crucial as it indicates the overall progress of the
company, including how well the companys upstream opera-
tions are performing, i.e. exploration and development activities.
Are they acquiring enough blocks, acreage, drilling exploratory
wells and making enough discoveries? Failure to achieve this
single KPI means the company is not able to increase oil and
gas production year after year, and this will be reflected in the
financial performance of the company and its profit and loss
statement.
Dr. Salman Ghouri is an oil and gas industry advisor with expertise in
long-term forecasting, macroeconomic analysis, and market assess-
ments. He holds MS and PhD degrees in petroleum economics from
the Colorado School of Mines.
The views expressed in this article are his personal views and do
not necessarily reflect the views or interpretation of his organiza-
tion.

64 WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL OCTOBER 2017

1710OGFJ_64 64 10/6/17 2:52 PM


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