OIL REPORTMidland Reporter-Telegram | mrt★com | Sunday, January 7, 2018 | Section F

Courtesy Photo

This map shows Atlas Sand’s sand reserves in West Texas. The company holds 6,000 acres, or 60 percent, of the Kermit open dune, top left, and 8,500 acres, or 100 percent, of the Monahans open dune, lower left.

GRAINS OF EXPERIENCE

By Mella McEwenmmcewen@mrt.com

As frac sand mines begin to crop up around the Permian Basin — particularly around Monahans, Kermit and Wink — operators are advised to start thinking like oil and gas operators.

“I think mining companies should fol-low the E&P example,” said Ben “Bud” Brigham, chairman and investing founder of Atlas Sand Co. LLC. The company is in the process of building plants at Kermit, expected to be in operation in the second quarter, and Monahans, expected to be in operation in the third quarter. Each facil-ity, which operate 24/7, is expected to em-ploy at least 70 people. He called the jobs well-paying and stable and said he hopes to hire a number of military veterans.

With at least 11 companies building mines, Brigham said the market will have

to become educated on the quality of the reserves.

“Like with oil and gas: There’s tier 1, tier 2, tier 3 and tier 4,” he said.

He thinks demand for frac sand will be suffi cient to take all the sand supplied by the in-basin plants and still not displace the higher-cost sand coming in from else-where. But “as with oil and gas, there will be winners and losers.”

Until now, Brigham has spent his career in the exploration and production side of the industry. He founded Brigham Exploration, which sold to Statoil in 2011 for $4.7 billion, and Brigham Resources, which was sold to Diamondback Energy in early 2017 for $2.55 billion.

Mining sand locally is a new focus for Brigham, as well as for the industry, he said.

“A year ago, it was just an idea, and now Hi-Crush is already making deliver-ies,” he said.

Brigham said his work in the E&P fi eld “gave me insight on local sand and how it could be benefi cial to operators. It will make the market more effi cient and mate-rially cut the costs of completing a well.”

He said two-thirds to three-quarters of the cost of frac sand is transportation. Being able to deliver sand to the wellhead for $65 per ton less would be a signifi -cant disruption to the market and benefi t operators. It would also reduce demand on infrastructure, he said. He said there will be truck traffi c carrying sand from the mines to the well, but that will be “the last mile.”

Atlas Sand’s holdings are of a sig-nifi cant enough scale that it will give the company the opportunity to develop more effi cient transportation and justify building out more effi cient transportation methods, Brigham said.

He calls his company a pure Perm-ian player in the sand mining industry. It

owns the vast majority of the two giant open dunes in the Permian sand fairway. The company controls approximately 6,000 acres, or 60 percent, of the Kermit dune, and approximately 8,500 acres, or 100 percent, of the Monahans dune, with the exception of the state park. Atlas also holds approximately 23,500 acres of off-dune buried sand proximal to the open dunes.

Brigham believes the open dunes offer superior quality sands because they have benefi ted from thousands of years of addi-tional geologic winnowing and processing and have not been subjected to the degree of soil development, organics and impuri-ties as the buried sand deposits. This will allow Atlas to be the lowest-cost producer, he said.

The company will offer high-crush strength 40/70 sand and 100 mesh sand.

New mining company aims to follow E&P playbook

By Christopher Sell and Grant Smith

Bloomberg

Will Saudi Arabia and Russia maintain their grip on production, or could they succumb to another surge in U.S. shale? Is it possible for the economic collapse of a major producer to send crude prices soaring, or perhaps Silicon Valley will usher in the end of the combustion engine?

After ending 2017 at a two-year high, oil prices could go either way this year, and these fi ve individu-

als could play defi n-ing roles.

OPEC kingpin

Saudi Minister of Energy and Indus-try Khalid Al-Falih is

facing a crucial 12 months. Having defi ed skeptics in 2016 by reversing the king-dom’s strategy and sealing the Organization of Petro-leum Exporting Countries’ fi rst output cut in eight years, the former chairman of Aramco fi nished last

year on another high after securing a deal to extend the curbs to the end of 2018.

Now all Al-Falih has to do is ensure fellow members maintain their pledged cuts, keep Russia invested in the deal, and hope oil prices are high enough to ensure a suc-cessful initial public offering of Aramco without spurring another wave of U.S. shale. Simple.

Putin’s oil man

If OPEC-watchers once fi xated exclusively on every

Oil’s famous fi ve: People who could defi ne market in 2018

Dove

By Mella McEwenmmcewen@mrt.com

Yellow recording boxes are starting to appear in northeastern Midland neighborhoods as Dawson Geophysical prepares to conduct a seismic survey for an exploration and production client.

“We want residents to know, one, the equipment is placed legally” because all permits have been received, “and, two, they’re placed on city easements,” Jason Stockstill, market-ing manager with Dawson, said in a phone interview. “If residents see the boxes, please leave them alone.”

Crews have already begun laying out the boxes, and Stockstill said the actual survey should get underway in the next few days.

He said the boxes do not put out any signals, do not cause any disturbances and most people “won’t know they’re there.”

Dawson will be conduct-ing the survey in northeast Midland, from north of Loop 250 and heading south toward Greenwood. Stockstill estimated the en-tire survey will take about 12 weeks.

The operator “will use the information to deter-mine where to drill, or more importantly, not to drill, to better utilize the resources under the city,” Stockstill said.

When operations get underway, residents of

subdivisions in the survey area may see a Dawson vi-brator truck, escorted by a Dawson scout vehicle and Midland Police Depart-ment cruisers, Stockstill said. He said they won’t be in the subdivisions more than half a day. And he said residents won’t be dis-turbed during the process.

“If you think you feel vibrations or your house is shaking, that is not reality,” he said.

Stockstill said this is the fourth or fi fth survey Daw-son has conducted within the city.

“We take pride in being good neighbors, in being good stewards,” he said. “We certainly have experi-ence. We know the right

procedures, what permits are required, and we’ve developed a good relation-ship with the city.”

He said Dawson Geophysical has been in business 65 years and has “gone with the ebb and fl ow of the industry.”

The economic health of the seismic industry today is more accurately measured in channel count rather than crew counts, he said, especially as the industry’s E&P clients demand high-resolution surveys.

“We’ve ramped up and developed a platform of equipment to deliver the high-resolution surveys our clients want,” Stockstill said.

Dawson Geophysical conducting seismic survey in northeast Midland

Kevin Fujii/Houston Chronicle

Residents of northeast Midland subdivisions are already seeing Dawson Geophysical’s yellow recording boxes. The company is preparing to conduct a seismic survey in northeast Midland from north of Loop 250 down towards Greenwood. When the survey is underway, residents will get a brief visit from Dawson’s vibrator trucks, as seen in this photo, with escorts from Dawson scout vehicles and local law enforcement vehicles.

By Mella McEwenmmcewen@mrt.com

Luxe Energy LLC is celebrating a fatter bank account as the new year gets underway.

The Austin-based company has success-fully closed an upsize in total combined available capital commitment to $820 million, with the funds coming from co-investors and the existing commitment from Natural Gas Partners through its NGP Natural Resources XI LP.

“Our dry equity commitment from NGP

was $500 million last year, and NGP has given us additional capital, bringing the commitment to $820 million, which is the largest dry equity commitment in the history of NGP,” Lance Langford said in a phone interview from his Austin offi ce.

The additional capital means “we’re back in the Permian Basin, buying min-eral and royalty interests through Luxe Minerals LLC and buying E&P properties through Luxe Energy LLC,” said Lang-ford, who owns the company with Jeff Larson.

The Permian Basin is an area the com-pany team knows very well, said Michael Voss, chief fi nancial offi cer.

Though the company is headquartered

Luxe Energy celebrates increased capital commitment■ $820 million will let it focus on Permian Basin minerals, producing properties

Please see ATLAS/2F

Please see PEOPLE/2F

Please see LUXE/2F

PAGE 2F MIDLAND REPORTER-TELEGRAM, SUNDAY, JANUARY 7, 2018OIL REPORT

ATLASFrom 1F

By the end of 2018, both plants will be online with annual production potential of 6 million tons per year. Atlas plans to bring on at least 12 million tons of total production, possibly as early as the end of 2019 and could double that to 24 million tons in 2020 or 2021. Brigham estimates the company has more than a century’s worth of tier one sand reserves available for future demand.

Atlas has conducted and continues to conduct biological assessments to ensure operations won’t disturb habitat, particularly for the dunes sagebrush lizard, he said. Assess-ments have found there was no habitat and no

lizard “and never has been” in Kermit, and an assessment of the south dune is ongoing. Brigham predicted there will be “signifi cant” acreage set aside for habitat protection. He encouraged all min-ing companies planning to operate in the area to do the same.

In addition to being a pure Permian player, Brigham sees another advantage for Atlas: It was initially funded “with our own capital, particularly my own capital.” The com-pany also has a number of Midland investors. Because it is not backed by private equity, “we don’t have a clock ticking so we can do what’s best for the company long-term.”

PEOPLEFrom 1F

word of Saudi Arabia, they now obsess over a country that isn’t even part of the cartel. Russia’s decision last year to join OPEC in cutting oil production, after years of keeping its distance, has been critical in the success of the strategy.

Consequently, crude traders are just as likely to pore over the statements of Russian Energy Minister Alexander Novak as of his Saudi counterpart. Novak, 46, has developed a clear personal bond with Al-Falih, helping the two countries to set aside years of mutual distrust and seal a historic cooperation agreement. Their partnership has been so strong that Citigroup Inc. calls it a “bromance,” but it may be tested by pressure from Russian companies pushing for an early end to the cuts.

Shale pioneer

Growth in U.S. shale out-put is the biggest wild card for 2018, with estimates from 700,000 barrels a day to more than 1 million, depending on who you ask. At the center of the industry is the Permian in Texas, and Pioneer Natural Resources Co. is one of the biggest acreage holders in the basin.

Its CEO Tim Dove sees the area as the “lifeblood” of U.S. production for many years, forecasting produc-tion there will rise to 3.3 million barrels a day this year from about 2.85 million currently. But it’s not all plain sailing. The company underperformed the S&P Energy index in the second half of 2017, possibly a victim of investors losing patience with the shale industry as a whole. Still, the company had already locked in selling prices for more than 70 percent of 2018 production as of the third quarter, according to a Bloomberg New Energy

Finance survey.

Latin strongman

Crippling U.S. sanctions, overdue bond payments and dwindling crude produc-tion: Venezuela’s president Nicolas Maduro has a lot on his plate heading into 2018. Promising a “new oil revolution,” the increasingly authoritarian leader named a military general as the nation’s chief oil supremo and embarked on a wide-reaching purge of offi cials at state oil company Petroleos de Venezuela SA, includ-ing two former petroleum ministers.

The Latin American na-tion’s economic crisis has been worsened by dwindling crude output, which fell to 1.86 million barrels a day in November from more than 3 million in 2001. In 2018, the consultant Rystad Energy estimates some crude fi elds could decline by as much as 30 percent. That would put Venezuela’s output well below its OPEC target, meaning the market could be tighter than the group intends.

Tech rockstar

Re-usable rockets and dreams of launching manned fl ights to Mars have long made Elon Musk a famous name for tech en-thusiasts, but 2018 could be the year the oil market really takes notice. The six-foot-two South African entre-preneur hopes that 5,000 units of Tesla Inc.’s new lower-cost Model 3 electric car will roll off the assembly line every week by April. That would be a break-through for battery-powered vehicles, bringing what has been a luxury technology to the mass market.

If Musk succeeds, it will surely stoke speculation that electric cars will displace the internal combustion engine faster than expected.

LUXEFrom 1F

in Austin, it recently opened a Midland of-fi ce, and Langford said he makes regular visits to his old hometown.

The company — squeezed out by its in-ability to compete with the larger public companies entering the market — had divested its Delaware Basin assets in a $560 mil-lion sale to Diamondback Energy in the summer of 2016.

“What’s changed is the public companies are no longer in the acquisition and divestiture market,” said Langford.

He said the markets are no longer supporting pub-lic companies seeking to make acquisitions because investors are now more interested in seeing returns on their investments.

This opened the door for his company to return to the oil basin where he was raised. Langford’s father, Al, was the fi rst president of Midland College and was also active in the oil and gas business. One of his companies was named Luxe Energy.

Langford said the addi-tional funding will give the company the opportunity to seek larger acquisition opportunities and “show what we can do operation-ally and in execution.”

The change in the markets have opened up

opportunities over the last six months, and he said he hopes those opportunities will continue.

Public companies are looking at their inventories and spinning off what may be their best opportunities but are still good opportu-nities for smaller compa-nies like Luxe, he said. Plus, private equity-backed companies may be looking to cash in on their invest-ments by selling, he said.

“This will give us the opportunity to get back into the Permian Basin in a big way,” he said.

Langford said he plans to use the capital commit-ment to begin acquiring multiple companies and combining them into a larger entity. He said he also plans to focus on hori-zontal drilling to develop any producing properties it acquires.

“I actually worked these fi elds. When I was at Brigham Exploration, Jeff and I worked West Texas,” he said. “I’ve spent my career with horizon-tal drilling, at Burlington resources, at Brigham, then at Statoil. I’ve been in the horizontal world since the 1990s.”

He said he expects to incorporate technical advancements in Luxe’s operations. “That’s just who we are as an industry — we’re always trying to improve.”

By David HunnHouston Chronicle

The oil services company Weather-ford International has scrapped plans for a joint venture with competi-tor Schlumberger and instead sold outright its pressure pumping and hydraulic fracturing fl eet to the international giant for $430 million in cash.

The move will push Schlumberger, the world’s largest oil services com-pany, another step toward catching the industry’s largest frac fl eet owned by Halliburton, based in Houston, while allowing a smaller Weatherford to focus on a return to profi tability.

It’s also a harbinger for a heated 2018 oil services race, said Jonathan Garrett, an analyst at the Houston en-ergy research fi rm Wood Mackenzie.

With prices low and profi ts thin,

fracking fi rms had been reluctant to buy more equipment, worried they’d be stuck with the fl eet and no work. But several companies have an-nounced in recent months that they’d be adding horsepower, gearing up for what they expect will be a busy year with oil prices back around $60 a barrel.

The addition of Schlumberger bolsters the outlook.

“They don’t want to miss the boat,” Garrett said. “It looks like people are getting more comfortable with where oil prices are.”

Schlumberger, which has one of its four principal offi ces in Houston, will take ownership of Weatherford’s U.S. pressure pumping facilities and contracts, Weatherford said Friday. About 100 Weatherford employ-ees will transfer to Schlumberger. Weatherford will hold onto its well completions portfolio, manufacturing capability and supply chain, and use the cash to pay down debt.

Weatherford, which operates out of Houston, reported more than $7.5 billion in debt at the end of Septem-

ber, and $256 million in losses in the third quarter.

“Although not as originally antici-pated, this transaction delivers cash proceeds,” Weatherford CEO Mark McCollum said. It will lead the com-pany to a “leaner” future and higher profi ts, he added.

McCollum suggested Weatherford will refocus on onshore completions, a process that involves cementing and other steps to make wells ready for production.

The companies had planned to close on the joint venture by year’s end. It recently was approved by U.S. regulators.

It’s unclear why the companies abandoned that plan.

But this deal will give Schlum-berger complete control and make operations simpler, including eliminating the need to integrate the software of two companies to run equipment, Garrett said.

The deal also will help Weather-ford focus on other segments of the oil services market, he added.

Eddie Seal/Bloomberg

Weatherford International signage is displayed at the DUG Eagle Ford Conference & Exhibition in San Antonio in 2012.

Weatherford dumps joint venture with Schlumberger and sells frac fl eet instead

■ Schlumberger buys Weatherford pressure pumping business for $430 million

WTGS to host AAPG GeoLegends

Members of the West Texas Geological Society will meet 11:30 a.m. Tues-day in the upstairs ball-room at Midland Country Club.

The meeting will feature AAPG GeoLegends – Superior Story clips with Jerry Sides and Charlie Tierce narrating, elaborat-ing and answering ques-tions about discovering the Chapman Deep, Grey Ranch, Rojo Caballos and Mi Vida Fields in the Dela-ware Basin.

Cost is $25 in advance, $35 at the door. Reserva-tions may be obtained by calling 683-1573 or by email at wtgs@wtgs.org. Online registration is also available at www.wtgs.org and clicking on the Events tab.

HOUSTON

Enterprise Products to expand Orla Natural

Gas Processing Complex

Enterprise Products Part-ners LP plans to add 300 million cubic feet per day of incremental capacity at its cryogenic natural gas processing facility under construction near Orla in Reeves County.

The addition of a third processing train at Orla would increase inlet volume capacity to 900 MMcf/d and allow Enter-prise to expand its natural gas liquids extraction capabilities by an incre-mental 40,000 barrels per day to 120,000 bpd. The third processing train is ex-pected to begin service in the second quarter of 2019 and will complement trains one and two, which are on schedule for completion in the second and third quar-ters of 2018, respectively.

“The ongoing expansion

of our Orla facility is be-ing driven by the contin-ued growth of NGL-rich natural gas production in the Delaware Basin and is supported by long-term commitments with producers,” said A.J. “Jim” Teague, chief executive offi cer of Enterprise’s general partner. “Over the next fi ve years, supplies of natural gas and NGLs in the Permian Basin could nearly double, and Orla is ideally situated to capital-ize on growth opportunities in the region.”

Mixed NGLs from Orla will be delivered into En-terprise’s fully integrated pipeline system, including the new Shin Oak Pipeline that is under construction and scheduled to begin operations in the second quarter of 2019. Residual natural gas from Orla will be transported to the Waha area through a 68-mile, 36-inch diameter pipeline scheduled to begin service commensurate with the fi rst Orla train, and will connect to Enterprise’s Texas Intrastate pipeline system at the Waha hub. Upon completion of the Orla expansion projects, Enterprise will have total natural gas processing capacity of more than 1.2 billion cubic feet per day, and the capability to extract more than 200,000 BPD of NGLs in the Perm-ian Basin.

DALLAS

EnLink Midstream announces executive leadership changesThe EnLink Midstream

companies have announced several executive leader-ship changes.

Barry E. Davis has tran-sitioned from his role as chairman and chief execu-tive offi cer to become ex-ecutive chairman, a newly created role in which he will continue to guide the company’s long-term

strategy. Davis has served as CEO since EnLink was created in 2014, follow-ing the merger of Crosstex Energy and Devon Energy Corp.

Michael J. Garberding was appointed president and will succeed Davis CEO. In his new role, Gar-berding is responsible for developing and leading En-Link’s corporate strategy. He has served as EnLink’s chief fi nancial offi cer since 2011 and president and CFO since 2016.

Eric D. Batchelder has joined EnLink as executive vice president and CFO. In his new role, Batchelder is responsible for EnLink’s economic strategy and oversees fi nancial forecast-ing and reporting, as well as capital markets activity. Batchelder brings more than 15 years of fi nancial leadership experience in the energy sector, most recently as managing di-rector, Energy Investment Banking at RBC Capital Markets.

Additionally, EnLink named R. Alan Marcum to the boards of directors for both EnLink Midstream Partners LP and EnLlink Midstream LLC. Steve J. Hoppe, EnLink executive vice president and presi-dent of the Gas Business Unit, is leaving the company to pursue other interests.

HOUSTON

Gryphon Oilfi eld Solutions receives new

round of funding Gryphon Oilfi eld Solu-

tions LLC has secured a signifi cant investment to support its continued tech-nological advancements in the completions and down-hole tool sector.

The capital investment comes from Saudi Aramco Energy Ventures, the cor-porate venturing subsidiary of Saudi Arabia’s national oil company, and CSL

Capital Management, a private equity fi rm with multiple interests in energy and oilfi eld service com-panies. The funds will be used to expand Gryphon’s rapidly evolving dissolv-able tool portfolio and support ongoing commer-cialization activities.

Gryphon’s primary focus is on developing “solution-based” technology that ad-dresses challenges facing operators in conventional and unconventional oil and gas plays around the world. Much of Gryphon’s expanding portfolio of completion tools incorpo-rates unique dissolvable and reactive technologies that enable improved ef-fi ciencies and enhanced recovery.

Headquartered in Hous-ton, Gryphon has bases established in Midland and in Oklahoma, South Texas, East Texas, Canada and the United Kingdom.

LOUISIANA

Amelia Resources sells acreage in Louisiana

Austin ChalkNEW ORLEANS —

Amelia Resources LLC has sold 85,000 net acres of newly acquired leases in the Louisiana Austin Chalk play to an undisclosed large U.S.-based operator for $87 million.

“With the rapid emer-gence of this exciting new play, this focused package of leases presents a large new player an excellent acreage foundation to build upon,” said Amelia’s presi-dent, Kirk Barrell. “Frac design improvements in the Austin Chalk of Texas along with very high initial fl ow rates are bringing more attention to this play across both Texas and Louisiana. We are excited to deliver an operator to the play with signifi cant experience in drilling and completing these same reservoirs in Texas.”

ENERGY BRIEFSFROM WIRE REPORTS