Statoil’s Bakken and Eagle Fordoutput up as cost cutting continues

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l M E R G E R S & A C Q U I S I T I O N S

Vol. 3, No. 16 • www.PetroleumNewsBakken.com Publication of record for the Bakken oil and gas industry Week of August 3, 2014 • $2.50

Streamlining stimulations

RockPile Energy hydraulically fractures a Continental Resources wellwith sand supplied by SandBox Logistics about 10 miles southeast ofWilliston, North Dakota. A water stream for numerous completionsalong this energy corridor originates from the tank in the center ofthe photo. A recent study of water use in six western states com-missioned by the Western Energy Alliance found that the amount ofwater used by the oil and gas industry is relatively small.

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Standardization?NDIC considers oil conditioning rules to create a ‘true’ Bakken barrel of oil

By MAXINE HERRFor Petroleum News Bakken

Standardizing a barrel of Bakken oilcould be part of the solution to safer

transportation of the light, sweet crude.The North Dakota Industrial

Commission discussed what may beneeded to regulate oil conditioning attheir monthly meeting on July 29, anddecided to quickly set up an additionalmeeting to gain greater insight on the subject. Oilconditioning can be done one of three ways:through processing at a refinery where variouscomponents are removed through the boilingprocess; by stabilization at a plant by removing

anything lighter than butane; or separat-ing oil from the water and gas at thewellhead. While the conditioningoptions downstream are often utilized,the state’s Department of MineralResources Director Lynn Helms toldthe commission that properly handlingthe oil as it comes out of the wellheadbefore it goes to pipe, on a truck or railcar allows for the safest transport.

“We do want to be sure that weunderstand the conditioning that’s required and ismeant to be taking place in North Dakota,” saidGov. Jack Dalrymple. “What steps do we have totake to begin to monitor and basically regulate

JACK DALRYMPLE

see OIL CONDITIONING page 16

NDIC sees no need for EPA’sproposed frack disclosure rule

A three-year-old petition for federal hydraulic fracturingrules is arguably outdated and unnecessary.

In August 2011, Earthjustice and more than 100 other par-ties submitted a petition to the Environmental ProtectionAgency, EPA, to implement rules that would require chemi-cal disclosure of hydraulic fracturing operations under theToxic Substances Control Act. A week later, FracFocus, avoluntary registry of the chemicals used in fracking, wentlive. The system essentially does what the petition requested.

“There was a legitimate concern four years ago,” NorthDakota’s Department of Mineral Resources Director Lynn

Oneok announces plans for a seventh Bakken natural gas plant

North Dakota’s fight against flaringgot another boost.

Oneok Partners, the largest inde-pendent operator of natural gas gather-ing and processing facilities in theWilliston Basin, announced on July 30that it will construct another plant about15 miles northeast of Watford City, notfar from its Garden Creek processingcomplex.

The new Demicks Lake plant will be

see FRACK RULE page 15

ND’s top paleontologist retiresafter 33 years of fossil hunting

Because a young boy enjoyed smash-ing rocks, North Dakota’s earliest oiloperators were able to drill with greatersuccess.

State Paleontologist Dr. JohnHoganson retired from the North DakotaGeological Survey, NDGS, on July 31after 33 years, but his love for earth sci-ence started early.

When drilling for oil began in the statein the 1950s, paleontology helped opera-tors determine if the various fossils in the rocks would indicatewhere they may strike oil. “Without that baseline information,

JOHN HOGANSON

TERRY SPENCER

see HOGANSON RETIRES page 14

Back on production trackWith Tioga plant expansion complete, Hess Corp. again growing Bakken output

By MIKE ELLERDPetroleum News Bakken

A s Hess Corp. completesits transition to a pure-

play exploration and produc-tion company, it saw a 17percent pro forma increasein second quarter productionover the same quarter of2013. That growth, accord-ing to Chief Executive Officer John Hess “isunderpinned in five key areas,” those being theBakken, the Utica in Ohio, its Tubular Bells playin the deepwater Gulf of Mexico, the Valhall fieldin Norway’s North Sea and the North Malay

Basin in Malaysia. Of those five key areas,

the Bakken provided thehighest production averag-ing 80,000 barrels of oilequivalent per day in thequarter, a 25 percentincrease over the same quar-ter of 2013 following startupof the corporation’s expand-ed Tioga gas in March.

Hess Corp. sees even more Bakken increasesahead with projected third quarter output estimateat between 85,000 and 90,000 boepd, which puts

Better, stronger, fasterSM Energy acquires additional acreage in Williams and Divide counties

By MAXINE HERRFor Petroleum News Bakken

SM Energy has its eye onsurrounding acreage in

the Williston Basin. On July 29, the company

announced that it hadacquired 61,000 net acresfrom Calgary-based BaytexEnergy adjacent to itsGooseneck project area in Williams and Dividecounties. But it isn’t planning to stop there. SMEnergy Chief Executive Officer Tony Best toldanalysts during a quarterly update that the compa-ny sees its highest potential for growing invento-

ry within its current coredevelopment areas.

“A key part of our growthstrategy is to see where wecan add acreage in andaround these core areas,”Best said. “You are going tosee more emphasis on keyacquisitions like weannounced (with Baytex).We’ve got a very compelling

set of assets right now and our focus is on contin-uing to exploit what we’ve captured already.”

The company acquired interest in 126 drillingspacing units under the Baytex acquisition, 81 of

see HESS PRODUCTION page 15

see SM ACREAGE page 16

JOHN HESS GREG HILL

TONY BEST JAY OTTOSON

see ONEOK PLANT page 13

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2 PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014

Petroleum News Bakkencontents12 Lightstream narrows field of assets buyers

12 Strata-X drills first Emmons Co. gas well

12 Summit Midstream expands Bakken interconnection and storage capacity

11 ND well operator transfer, May 31-July 28

11 Montana well permits and completions, July 19-26

BAKKEN STATS6 Oasis and XTO have 8 of the week’s top 10 ND IPs

6 Bakken producers’ stock prices

7 IPs for ND Bakken wells, July 22-28

8 North Dakota oil permit activity, July 22-28

9 ND weekly county permit totals, July 22-28

9 Top 10 Bakken wells by IP rate, July 22-28

LEGAL COLUMN

MOVING HYDROCARBONS

NATURAL GAS

5 POA fight provides land title guidance

Battle over property in Hettinger County offers insightinvolving powers of attorney in ND; authority valid in title once recorded

4 The Canadian rail teeter-totter

Sector faces costs of implementing safety regulationsand increasing construction costs while market share uncertainty persists

COMPANY UPDATE3 Statoil’s cost cutting efforts continue

Overall production declined in the second quarter, and while Marcellus output also fell, Bakken and Eagle Ford both increased

ON THE COVERStandardization?

NDIC considers oil conditioning rules to create a ‘true’ Bakken barrel of oil

Better, stronger, faster

SM Energy acquires additional acreage in Williams and Divide counties

Back on production track

With Tioga plant expansion complete, Hess Corp. again growing Bakken output

NDIC sees no need for EPA’s proposed frack disclosure ruleND’s top paleontologist retires after 33 years of fossil huntingOneok announces plans for a seventh Bakken natural gas plant

5 Eastern railroads sue to stop CBR disclosures

BUILDINGSTRONGwanzek.com

Know your message is found in the right hands.

To advertise in Petroleum News Bakken, call907.522.9469 or visit PetroleumNewsBakken.com

www.PetroleumNewsBakken.com

By MIKE ELLERDPetroleum News Bakken

W hile Statoil’s overall productionfell in the second quarter as its

comprehensive program to reduce costsand improve capital efficiency continues,the integrated Norwegian multinational’sNorth American production increased inthe quarter, driven primarily by increasesin its operated Bakken, the Eagle Ford ofTexas and Canadian oil sands assets, andnon-operated Gulf of Mexico assets.Those increases offset productiondeclines in other North American plays,the largest of which was in Statoil’s oper-ated Marcellus assets.

Statoil’s total North American produc-tion increased from 253,100 boepd in thefirst quarter to 258,800 boepd in the sec-ond quarter. In the Bakken, Statoil’s pro-duction was 50,200 boepd in the secondquarter, up 800 boepd from the first quar-ter. The company’s Eagle Ford produc-tion increased from 31,000 boepd in thefirst quarter to 37,000 boepd in the sec-ond quarter, an increase of 6,700 boepd,the largest increase among the company’sNorth American plays. However, thecompany’s Marcellus production fell7,500 boepd to 121,800 boepd in the sec-ond quarter, which completely offset theincreases in the Bakken and Eagle Fordleaving the company’s second quarterU.S. production flat with the first quarterat 209,700 boepd. Statoil’s other NorthAmerican decline in the quarter was in itsGrand Banks play in offshoreNewfoundland where production fell 300boepd.

The company’s Bakken output was92.6 percent liquids and 7.4 percent gasin the second quarter, while production inthe Eagle Ford was 61.8 percent liquidsand 38.2 percent gas. On the other hand,Statoil’s Marcellus output was 95.2 per-cent gas 4.8 percent liquids in the quarter.

Bakken operationsAs Petroleum News Bakken has previ-

ously reported, Statoil takes a long-termapproach on its onshore assets, includingthe Bakken. “We are not in a hurry tomaximize short-term production,”Torgrim Reitan, Statoil’s chief financialofficer said in a July 25 press conferencewith analysts. “Our intention is to getacross all rigs the learning that we do allthe time on completion and drilling andthen making it very efficient – and also …reducing well spacing and all of that.”

Statoil’s onshore philosophy looks forhigh recovery rates with flatter declinecurves rather than shooting for high ini-tial production rates. Interestingly, whileit isn’t the company’s goal, Statoil domi-nated top 24-hour IPs in North Dakota in2013, and could be on track to do thesame in 2014. Statoil had wells in the top10 reported 24-hour IPs in 35 of the 47weeks that Petroleum News Bakkenreported IPs in 2013, and the company

topped the IP list in19 of the thoseweeks. Those top 19IPs ranged from alow of 1,908 barrelsto a record high of5,417 bpd with anaverage of 3,951bpd.

And thus far in2014, Statoil hastopped the IP chart a number of times. Inearly May, Statoil had the top reportedNorth Dakota IP well at 3,129 barrelsfrom a well in the Banks field inMcKenzie County as well as the topreported Montana IP well at 1,004 barrelsfrom a well in Roosevelt County. Morerecently, Statoil wells had the highestreported 24-hour initial production inNorth Dakota for five consecutive weeksbetween June 17 and July 21. Those IPsranged from 2,917 to 3,106 barrels andwere from wells in the Banks andAlexander fields in McKenzie Countyand in the Camp field in WilliamsCounty.

As of May, the latest month for whichproduction data are available from theNorth Dakota Department of MineralResources, Statoil stood as the sixthlargest Bakken oil producer in the stateaveraging 52,270 barrels of oil per dayfor operated, non-confidential wells.Reitan said Statoil is currently runningsix drill rigs in the Bakken.

As for marketing its Bakken crude oil,Statoil prefers to export its oil via rail toaccess premium markets in Ontario andthe East Coast. “As you have seen … railcapacity to transport oil from the Bakkenarea and the pipeline capacity … enablesus to sell our gas to higher prices inToronto and Manhattan,” Reitan told ana-lysts in the July 25 press conference.

2Q output and financialsGlobally, Statoil’s second quarter out-

put averaged 1,798,800 boepd of which1,063,000 barrels per day, 59.1 percent,were liquids and the remaining 40.9 per-cent was gas. That output is down178,700 boepd from the company’s firstquarter production of 1,977,500 boepd, adecline of 9 percent. The first quarter pro-duction was 56.3 percent liquids and thesecond quarter output was 59.1 percentliquids, reflecting the fact that most of thesecond quarter production decline,128,600 boepd or 72 percent was in gasproduction with the remaining 28 percentin liquids production.

The company’s net operating incomedecreased from $8.6 billion in the firstquarter (51.4 billion Norwegian kroner,NOK, based on end-of-quarter exchangerates) to $5.22 billion (32 billion NOK) inthe second quarter. The company’sadjusted earnings decreased from $7.7billion (46 million NOK) to $5.3 billion(32.3 billion NOK). Reitan said theadjusted earnings were impacted by

divestitures the company has made alongwith “seasonal effects and lower gasprices.”

Second quarter operating income wasalso down from second quarter 2013operating income of $5.9 billion (34.3billion NOK), and second quarter adjust-ed earnings was down from $6.5 billion(38.0 billion NOK) in adjusted earningsin the same quarter of 2013.

As part of its efforts to cut costs,Statoil revised downward its 2014-16global capital expenditure, capex, earlierin the year and backed away by four yearsits previously announced productionguidance of reaching average daily pro-duction of 2.5 million boepd by 2020.Reitan said the company is on track withits capex guidance. “Our organic capex sofar this year is $10 billion and our guid-ance for the period 2014 to ’16 is around$20 billion per year.”

Enhancing efficienciesAlso as part of the cost cutting pro-

gram, Statoil began cutting and outsourc-ing positions, mainly in Norway, in 2013,and thus far has reduced staff and supportpositions by approximately 1,000 posi-

tions with a potential for more reductions.“We have identified further potential formanpower reductions in the range of1,100 to 1,400 positions in staffs and inother functions,” Reitan said. “We arealready competitive, very competitivewith regards to Opex and SG&A. Andthese programs will further enhance ourcompetitiveness, resilience and prof-itability.

In addition, Statoil has established sixof what President and Chief ExecutiveOfficer Helge Lund called “high-impactprojects addressing technical efficiencyacross the company” and has begun thefirst phase of implantation. Those sixprojects involve: a reduction in drillingcosts through planning and standardiza-tion; focusing more on early stages ofoperations to ensure that right solutionsare implemented and “developing leanconcepts”; standardization and industrial-ization, “reusing concepts and takingadvantage of synergies and scale”;improvements to operations and mainte-nance; improving planning and executionof projects; and simplification of workprocesses.

“Work has started in all of these pro-grams and I follow it very closely for myorganization,” Reitan said. “It is stillearly days, but I am satisfied with theprogress. This will translate into higherreturns and better profitability. l

l C O M P A N Y U P D A T E

Statoil’s cost cutting efforts continueOverall production declined in the second quarter, and while Marcellus output also fell, Bakken and Eagle Ford both increased

PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014 3

TORGRIM REITAN

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SA “As you have seen … rail capacityto transport oil from the Bakkenarea and the pipeline capacity …

enables us to sell our gas to higherprices in Toronto and Manhattan.”

—Torgrim Reitan, Statoil CFO

By GARY PARKFor Petroleum News Bakken

C anada’s rail industry is being pulledin both directions in the crude oil

sector as it makes steady advances by tak-ing advantage of pipeline bottlenecks, butcasts a wary eye at cost overruns on someterminal projects and shifts in crude prices.

Dale Clark, vice president of TundraEnergy Marketing, which operates a60,000 barrels per day facility at Cromer,Manitoba, admitted the “economics arenot as great as they used to be” as thespread between Canada, U.S. and interna-tional crude prices nosedived from US$20a barrel to US$5-$6.

He said that trend has had a “more sub-stantial impact” on the economics ofcrude-by-rail than any other factor.

But further smudging the horizon is theprospect of additional rail costs stemmingfrom a tightening of safety standards fortransporting crude by rail, with the U.S.Department of Transport rolling out draftrules that cover new braking systems fortank cars, limits on train speeds, closertesting of crude for volatile gases and liq-uids and a two-year process of eliminatingolder model tank cars.

However, that is not expected to haveany additional impact on railroads andshippers operating in Canada.

Even if the U.S. implements all of theproposed rule changes, Canada is alreadyahead of the game in the measures it is tak-

ing to ensure the safe movement of allflammable liquids, a Canadian govern-ment spokesman told Petroleum NewsBakken.

Canada has also jumped ahead of theU.S. in diverting hazardous shipmentsaround urban centers, while BNSFRailway is reportedly moving about 27crude trains a week through Chicago'sCook County and 13 through Seattle’sKing County.

Who bears the cost?What has yet to be figured out by the

rail and petroleum industries is who willcarry the financial load of the modifica-tions and how that will affect per-barrelshipping costs.

Steven Paget, director of institutionalresearch at FirstEnergy Capital, told theFinancial Post it is no longer a guaranteethat shippers can get a better return merelyby loading crude on a train.

The Association of American Railroadshas noted a slowing in the use of rail todeliver crude and petroleum products inCanada, with shipments for the first fivemonths of 2014 up 7.1 percent over theprevious year, compared with a 13.1 per-cent increase last year.

Also troubling is the cost inflation at aCanexus Corp. 100,000 bpd terminal atBruderheim, Alberta, to C$360 millionfrom a budgeted C$225 million.

Operation of the facility has also expe-rienced hiccups. Oil sands producer MEG

Energy loaded the first unit train lastDecember, but Canexus was forced to sus-pend operations while it added more load-ing arms.

The company now hopes to resumebusiness by late August, using seven unittrains of 120 rail cars each, holding up to660 barrels of crude per tanker.

Torq Transloading said it is also facingcost squeezes, but will not be deterredfrom completing its 168,000 bpdKerrobert terminal in Saskatchewan.

Booming terminal projectsRBC Capital Markets has forecast that

an incremental 440,000 bpd of rail capaci-ty will be introduced in Canada this year,pushing the industry over the 1 million bpdthreshold.

The firm said that given the uncertaintysurrounding the future of Keystone XL,more midstream companies and large pro-ducers are turning to rail as their trans-portation alternative.

Even TransCanada said it is consider-ing a “rail bridge” to feed crude into theoperating southern leg of XL to reach GulfCoast refineries.

Imperial Oil, in a joint venture withKinder Morgan, said its new rail-loadingterminal of up to 250,000 bpd inStrathcona County near Edmonton willstart service in December.

Enbridge, meanwhile, is pondering a140,000 bpd unit train unloading facility inPontiac, Illinois, to lift the pressure on itscrude oil pipeline network.

The terminal is designed to handle twounit trains a day and could be ready forshipments within two years, according to afiling with the U.S. Federal EnergyRegulatory Commission.

Pontiac is the starting point forEnbridge’s 600,000 bpd Flanagan Southpipeline to Cushing, Oklahoma, connect-ing with the Seaway system and sidestep-ping congestion on the Canadian sectionsof Enbridge’s export system.

Enbridge Energy Partners has also pro-posed to establish a new receipt point onthe Lakehead system at Flanagan, allow-ing crude to be transferred from rail on toFlanagan South.

Enbridge said the project is still beingexplored as a means to provide regionalrefineries with access to growing suppliesof crude from North American producersand to lift the pressure at a time whenupstream apportionment prevents the useof an all-pipeline route to carry the crude.

The company said in its FERC filingthat a terminal in Pontiac would overcomechoke points in Canada’s upstream andmatch the anticipated rise in takeawaycapacity at Flanagan.

There is also the prospect of consolida-tion in the terminal sector, with CIBCWorld Markets suggesting the Canexusasset in Bruderheim would appeal to mid-stream companies — identifyingEnbridge, Pembina, Inter Pipeline andTransCanada as possible buyers — that areeager to provide a full package of trans-portation and terminal service.

CIBC said the potential buyers appreci-ate that “land is very tight” in bothEdmonton and the Hardisty hub along therespective pipeline alleys, while a thirdhub could be necessary to handle thegrowing demand for diluents and solventto facilitate the shipment of oil sandscrude.

Pipeline uncertaintyFirstEnergy, which now includes

“pipeline risk” in its outlook, said it isunsure that Keystone XL and Enbridge’sAlberta Clipper will get approvals fromU.S. regulators, while Enbridge’s NorthernGateway is increasingly seen as a long-shot.

In that context, FirstEnergy said itexpects rail to pick up the slack, by han-dling volumes that would otherwise havemoved through pipelines.

Paget conceded the risks of overbuild-ing rail capacity are counter-balanced bythe lack of certainty surrounding newpipeline projects.

In addition, he said the talk of newpipelines out of the Bakken could put adent in crude-by-rail, which explains whythe executives of CP Rail and CN Rail arenot getting caught up in the outlook for railby building new terminals and orderingtank cars.

CIBC echoed the view of many byarguing that “pipelines remain the cheap-est transportation method for liquid hydro-carbons. As new pipeline capacity startsup, we would expect demand for crude-by-rail to fall.

“Based on current expectations for newpipeline in-service dates, the need forcrude-by-rail in the Western CanadaSedimentary Basin will fall in the 2018-19timeframe,” CIBC said. l

4 PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014

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The Canadian rail teeter-totterSector faces costs of implementing safety regulations and increasing construction costs while market share uncertainty persists

PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014 5

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MOVING HYDROCARBONSEastern railroads sue to stop CBR disclosures

Norfolk Southern and CSX railroads have filed lawsuits in an attempt to stopthe state of Maryland from releasing information on crude-by-rail, CBR, ship-ments through the state. Maryland had entered into agreements with the two rail-roads to keep CBR shipment information confidential after the U.S. Departmentof Transportation issued its directive in May requiring railroads to provide stateswith information on CBR shipments of 1million gallons or more.

However, as reported by McClatchyNewspapers and the Baltimore Sun,Maryland received a request for CBRinformation by McClatchy and theAssociated Press under the PublicInformation Act, after which Maryland’sattorney general notified the railroads thatit was voiding the confidentially agree-ment and would be releasing the informa-tion. The state of Maryland gave NorfolkSouthern, the first of the two railroads tofile suit, until July 24 to challenge thestate’s decision. Norfolk Southern filedsuit on July 23 and CSX filed on July 24.

The confidentially agreement wassigned in May on behalf of the state ofMaryland by the director of the state’sEmergency Preparedness and Planning Program. However, the state maintainsthat person did not have the legal authority to sign such an agreement.

The two railroads claim that releasing CBR shipment information could posea threat to security and both suits seek restraining orders blocking the release ofthe information.

Several other eastern states have agreed to keep CBR shipment informationconfidential including Delaware and Pennsylvania, while other eastern states,including New Jersey, have not yet made a decision. A number of other stateshave also agreed to keep CBR information confidential including Colorado, Ohio,Minnesota, Nebraska, Oklahoma, West Virginia and Wyoming.

However, a number of other states have opted not to enter into confidentiallyagreements and will release information on CBR shipments including California,Idaho, Illinois, Minnesota, Montana, New York, North Dakota, Oregon, Virginiaand Wisconsin. Washington decided not to post the information but insteadrequires requests for information.

—MIKE ELLERD

Several other eastern stateshave agreed to keep CBR

shipment informationconfidential including

Delaware and Pennsylvania,while other eastern states,

including New Jersey, have notyet made a decision. A numberof other states have also agreed

to keep CBR informationconfidential including

Colorado, Ohio, Minnesota,Nebraska, Oklahoma, West

Virginia and Wyoming.

l L E G A L C O L U M N

POA fight providesland title guidanceBattle over property in Hettinger County offers insight involvingpowers of attorney in ND; authority valid in title once recorded

By JANNELLE STEGER COMBSFor Petroleum News Bakken

On July 17, the North DakotaSupreme Court issued a unanimous

decision in the “Estate of Vizenor, et al.”matter. Ragna Mesling owned land outsideof New England, North Dakota. CarolynVizenor, her daughter, resided inMinnesota. Clifford and Linda Stecherwere longtime renters of the farmland. InFebruary 2005,Ragna transferred theland, mineral inter-ests and a home toCarolyn, whilereserving a life estateto herself. InNovember of thatyear, Carolynappointed Ragna herattorney-in-fact usinga standard Minnesotapower of attorney. InNovember 2006, Carolyn was sufferingthrough the last stages of terminal cancerand returned to live in New England.

On Nov. 28, 2006, Ragna deededCarolyn’s remainder interest in the farm-land to the Stechers for no considerationusing the power of attorney. Ragna con-veyed Carolyn’s remainder interest in thehome and minerals back to herself. Thenext day Carolyn passed away at the ageof 70. The Vizenors, who were Carolyn’shusband’s family, started this action seek-ing to rescind the farmland transfer. Thetrial court found that Carolyn had author-ized Ragna to act on her behalf and thatthere was no evidence of undue influence.

Court case argumentsThe Vizenors argued Minnesota case

law and statutes did not allow an unrelatedthird party to receive a gift absent a currentexpression of intent by the principal to doso. They also argued that North DakotaStatute 47-10-01 would not allow theagent to gift the land to the unrelatedStechers, “who did not ‘have any meaning-ful relationship with Carolyn.’”

The court first clarified that while thelaw of where a document is executed gen-erally controls its interpretation, the law of

the state where “immovable property is sit-uated controls the interpretation and validi-ty of powers of attorney to transfer aninterest in such property.” The documentreferenced that the powers granted were“defined in Minnesota Statutes, section523.24.” In that statute, gift transactionsallow an agent to gift to organizationswhere the principal has made gifts, to theprincipal’s family or in some instances tothe agent or those he or she supports. TheSupreme Court found that since “and allother matters” was included in the powerof attorney, the agent was not limited togifting only to those that Minnesota lawallows.

Power of attorney was validThe Vizenors also alleged that no origi-

nal power of attorney was recorded andthat an affidavit of non-revocation shouldhave been filed. The Supreme Court rein-forced that absent intent of revocation, thepower of attorney is presumed to continue.The justices also rejected the argumentabout a lack of original. North Dakotadeems that a recorded power of attorneycan only be revoked by a proper documentrecorded in the same office where thepower of attorney was recorded.

The Vizenors also tried to find thatCarolyn did not intend to give the land.The attorney who drafted the deedbelieved Carolyn was competent when shedirected the drafting, and that when Ragnaconveyed interests in property to theStechers, Carolyn told him that she did notwant her husband’s relatives, the Vizenors,to get the property when she died. Anotherwitness also heard Carolyn indicate thatshe wanted the Stechers to have the farm-land because she did not want the propertyto go to relatives with whom she did nothave a relationship.

Title examiners should be careful ofpowers of attorney that grant powersdefined by statutes in those states; howev-er, the power of attorney will continue tobe valid in title, once recorded, so long asthere is no instrument recorded whichrevokes the power of attorney. l

JANNELLE STEGERCOMBS

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6 PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014

BAKKENStats● B A K K E N C O M M E N T A R Y

Oasis and XTO have 8 of the week’s top 10 IPsMIKE ELLERD

Petroleum News Bakken

Of the 10 North Dakota Bakken wells with the highest

24-hour initial production, IP, volumes reported for the

week of July 22-18, five belong to ExxonMobil subsidiary

XTO Energy and three to Oasis Petroleum (see chart, page

7).

Oasis filled the No. 1 spot with a well in the Camp field

in north-central McKenzie County that produced 2,525 bar-

rels in the first 24 hours of production (see map). This is the

third consecutive week that wells in the Camp field topped

the IP list with Statoil wells in that field topping the list in

the two previous weeks.

Oasis also filled the No. 7 spot at 1,835 barrels from a

well in the Alger field in central Mountrail County. And an

Oasis well in the neighboring Robinson Lake field filled the

No. 10 spot at 1,750 barrels.

XTO wells filled the second through sixth positions on

the top 10 list. Two common-pad wells in the Siverston

field in northeast McKenzie County filled the Nos. 2 and 3

spots at 2,290 and 2067 barrels, respectively. Another XTO

well in the Siverston field was fourth at 1,943 barrels.

XTO’s No. 5 well is in the Heart Butte field in northeast

Dunn County and had an IP of 1,940 barrels. And XTO

filled the No. 6 spot with a well in the Tobacco Garden field

in north-central McKenzie County at 1,872 barrels.

A Newfield Production well in the Westberg field in

northeast McKenzie County filled the No. 8 spot at 1,808

barrels, and a Whiting well in the Ellsworth field, in central

McKenzie County, came in ninth at 1,800 barrels.

Reported IPs for the week ranged from the high of 2,525

barrels to a low of 50 barrels for a well in the Little Knife

field in Billings County.

ND well permitsA total of 55 well permits were issued in North Dakota

between July 8 and 14 (see pages 8 and 9), down from the

70 permits that were issued last week. Williams County

received the most permits at 15, and those went to

Continental (6), XTO (4), Slawson (2) and one each to

Crescent Point, Hess and Statoil.

In Dunn County, 14 permits were issued to Hess (6),

WPX Energy (4), Newfield (2) and Petro-Hunt (2).

Eight permits were issued in Mountrail County and went

to Hess (6) and Whiting (2); and seven permits were issued

in McKenzie County and went to Newfield (3), Oasis (3)

and QEP Energy (1).

In Divide County, Samson Resources was issued three

permits, and Continental and North Plains Energy were

issued one each for a total of five permits in the county.

Petro-Hunt was issued two permits in Burke County and

Oasis was issued one.

Rounding out the permits was Legacy Oil and Gas,

which was issued two permits in Bottineau County;

Continental was issued one permit in Stark County.

A total of seven location resurveys were reauthorized in

North Dakota, five in Dunn County and one each in Stark

and Williams counties.

Montana permittingIn eastern Montana, permits were issued for six Bakken

wells (see page 11). Whiting was issued permits for three

Richland County wells, Oasis was issued permits for two

wells in Roosevelt County, and Continental was issued a

permit for a Richland County well. Continental was also

reissued three Richland County well permits, and Enerplus

Resources was reissued one, also for a Richland County

well. ●

Company Exchange Symbol Closing price Previous Wed.

Abraxas Petroleum Corporation NASDAQ AXAS $5.52 $5.89

American Eagle Energy Corporation NYSE AMZG $6.36 $6.40

Arsenal Energy USA, Inc. TSE AEI $8.49 $8.50

Baytex Energy USA Ltd NYSE BTE $43.91 $45.33

Burlington Resources Co., LP (ConocoPhillips) NYSE COP $84.63 $86.76

Continental Resources, Inc. NYSE CLR $150.20 $152.51

Crescent Point Energy US Corporation TSE CPG $44.83 $45.29

Denbury Onshore, LLC NYSE DNR $17.29 $17.79

Emerald Oil, Inc. NYSEMKT EOX $7.81 $7.89

Enerplus Resources USA Corporation NYSE ERF $23.53 $24.21

EOG Resources, Inc. NYSE EOG $113.63 $115.95

Fidelity Exploration & Production (MDU) NYSE MDU $32.33 $33.19

Halcon Resources NYSE HK $6.04 $6.99

Hess Corporation NYSE HES $101.05 $100.16

Kodiak Oil and Gas (USA), Inc. NYSE KOG $15.51 $16.00

Legacy Reserves Operating LP NASDAQ LGCY $30.35 $32.26

Marathon Oil Company NYSE MRO $39.66 $40.48

Mountain Divide, LLC (Mountainview Energy) CVE MVW.V $0.44 $0.44

Newfield Production Company NYSE NFX $41.48 $44.92

Northern Oil and Gas NYSE NOG $15.93 $16.21

Oasis Petroleum North America NYSE OAS $55.23 $57.19

Oxy USA, Inc. (Occidental Petroleum) NYSE OXY $98.11 $101.60

PetroShale Inc. CVE PSH $1.62 $1.50

QEP Energy Company NYSE QEP $33.94 $34.32

Resolute Natural Resources Company, LLC NYSE REN $7.89 $7.92

Samson Resources Company (KKR & Co) NYSE KKR $24.31 $25.32

SM Energy Company NYSE SM $80.17 $77.64

Statoil Oil and Gas LP NYSE STO $28.81 $30.60

Triangle USA Petroleum Corporation NYSE TPLM $11.26 $11.92

Whiting Oil and Gas Corporation NYSE WLL $87.76 $89.73

WPX Energy Williston, LLC NYSE WPX $21.06 $21.06

XTO Energy, Inc. (ExxonMobil) NYSE XOM $103.25 $104.25

Bakken producers’ stock pricesClosing prices as of July 30 along with those from previous Wednesday

BIG

HO

RN

EN

GIN

EER

ING

North DakotaThe best list for North Dakota is updated daily by the North Dakota Oil and Gas Division at www.dmr.nd.gov/oilgas/riglist.asp

SaskatchewanWeekly drilling activity report from the government of Saskatchewan: www.economy.gov.sk.ca/Daily-Well-Bulletin-Weekly-Drilling-Reports

ManitobaWeekly drilling activity report from the government of Manitoba: www.manitoba.ca/iem/petroleum/wwar/index.html

PHOTO COURTESY CONTINENTAL RESOURCES

Looking for a rig report?

PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014 7

IPs for ND Bakken wellsJuly 22–28, 2014

see ND IP page 8

This chart contains initial production rates, or IPs, for active wells that were filed as completed with the state of North Dakota from July 22-28, 2014 in the Bakken petroleum system,which includes formations such as the Bakken and Three Forks. The completed wells that did not have an available IP rate (N/A) likely haven’t been tested or were awarded confidential(tight-hole) status by the North Dakota Industrial Commission’s Department of Minerals. This chart also contains a section with active wells that were released from confidential statusduring the same period, July 22-28. Again, some IP rates were not available (N/A). The information was assembled by Petroleum News Bakken from NDIC daily activity reports and othersources. The name of the well operator is as it appears in state records, with the loss of an occasional Inc., LLC or Corporation because of space limitations. Some of the companies, ortheir Bakken petroleum system assets, have been acquired by others. In some of those cases, the current owner’s name is in parenthesis behind the owner of record, such as ExxonMobilin parenthesis behind XTO Energy. If the chart is missing current owner’s names, please contact Ashley Lindly at alindly@petroleumnewsbakken.com

County (Co.) abbreviations are as follows — BIL: Billings, BOT: Bottineau, BOW: Bowman, BRK: Burke, DIV: Divide, DUN: Dunn, GV: Golden Valley, MCH: McHenry, MCK: McKenzie, MCL:McLean, MER: Mercer, MNT: Mountrail, REN: Renville, SLP: Slope, STK: Stark, WRD: Ward, WIL: Williams

8 PETROLEUM NEWS BAKKEN • WEEK OF WEEK OF AUGUST 3, 2014

ND IP continued from page 7

North Dakota oil permit activityJuly 22–28, 2014

see ND PERMIT page 9

see ND IP page 9

PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014 9

Top 10 Bakken wells by IP rateJuly 22–28, 2014

ND weekly county permit totalsJuly 22–28, 2014

ND IP continued from page 8

ND PERMITS continued from page 8

—Ashley Lindly | alindly@petroleumnewsbakken.com

see ND IP page 10

10 PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014

subscribe atPETROLEUMNEWSBAKKEN.COM

ND PERMITS continued from page 9

*Note - The geologic target for these wells was not listed in its well file because they are tight (confidential) holes, but the following fields produce from the Bakken pool; Alkali Creek, Beaver Lodge,Bell, Blooming Prairie, Brooklyn, Crazy Man Creek, Dollar Joe, Ellisville, Little Knife, Mandaree, New Home, Noonan, North Tioga, Sand Creek, Siverston, Spotted Horn, Stockyard Creek, and Stony Creek.

**Note - The geologic target for this well was not listed in its well file because it is tight (confidental) hole, but the Red Rock and North Souris fields produce from the Spearfish pool.

—Ashley Lindly | alindly@petroleumnewsbakken.com

PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014 11

ND well operator transferMay 31–July 28, 2014

—Ashley Lindly | alindly@petroleumnewsbakken.com

County (Co.) abbreviations are as follows — BIL: Billings, BOT: Bottineau, BOW: Bowman, BRK: Burke, DIV: Divide, DUN: Dunn, GV: Golden Valley, MCH: McHenry, MCK: McKenzie, MCL: McLean, MER: Mercer, MNT: Mountrail, REN: Renville, SLP: Slope, STK: Stark, WRD: Ward, WIL: Williams

Montana well permits and completionsJuly 19–July 26, 2014

New locations

Continental ResourcesBahls HSL; Wildcat; NENE 10-23N-56E; 345’FNLand 330’FEL; N/A; SESE 15-23N-56E; 200’FSL and

0’FEL; 20,281’; N/A; N/A; N/A; Bakken; Richland;7/24/2014; N/A; N/A

Oasis Petroleum North AmericaJimbo Federal 2759 44-11-5B; Wildcat; SESE 11-27N-59E; 168’FSL and 1,107’FEL; N/A; SWSE 23-27N-

59E; 200’FSL and 1,560’FEL; 20,936’; N/A; N/A; N/A;Bakken; Roosevelt; 7/21/2014; N/A; N/AJimbo Federal 2759 44-11 6B; Wildcat; SESE 11-27N-59E; 168’FSL and 1,074’FEL; N/A; SESE 23-27N-59E; 200’FSL and 800’FEL; 20,883’; N/A; N/A; N/A;Bakken; Roosevelt; 7/21/2014; N/A; N/A

Whiting Oil and GasIverson Bros 31-1-2H; Wildcat; NWNE 1-25N-57E;345’FNL and 1,980’FEL; N/A; SESW 12-25N-57E;240’FSL and 1,980’FWL; 20,519’; N/A; N/A; N/A;Bakken; Richland; 7/21/2014; N/A; N/AIverson Bros 31-1-3H; Wildcat; NWNE 1-25N-57E;300’FNL and 1,980’FEL; N/A; SWSE 12-25N-57E;240’FSL and 1,980’FWL; 20,185’; N/A; N/A; N/A;Bakken; Richland; 7/21/2014; N/A; N/AIverson Bros 31-1-4H; Wildcat; NWNE 1-25N-57E;255’FNL and 1,980’FEL; N/A; SESE 12-25N-57E;

240’FSL and 660’FEL; 20,404’; N/A; N/A; N/A;Bakken; Richland; 7/21/2014; N/A; N/A

Reissued locations

Continental ResourcesAlma 3-25H; Wildcat; SWNW 25-23N-56E;2,270’FNL and 275’FWL; N/A; SENE 30-23N-57E;2,550’FNL and 200’FEL; 20,385’; N/A; N/A; N/A;Bakken; Richland; 7/24/2014; N/A; N/ACharlie 3-5H; Wildcat; SWNW 5-25N-54E;2,611’FNL and 260’FWL; N/A; SENE 4-25N-54E;1,980’FNL and 200’FEL; 19,522’; N/A; N/A; N/A;Bakken; Richland; 7/24/2014; N/A; N/ARuben 1-9H; Wildcat; SWSE 9-26N-55E; 180’FSL and1,660’FEL; N/A; NWNE 4-26N-55E; 200’FNL and1,980’FEL; 19,979’; N/A; N/A; N/A; Bakken; Richland;7/24/2014; N/A; N/A

Enerplus Resources USAStockade-Calesto 33-3-HSU; Wildcat; NENW 33-25N-54E; 383’FNL and 1,863’FWL; N/A; SESE 2-24N-54E; 670’FSL and 670’FEL; 16,073’; N/A; N/A; N/A;Bakken; Richland; 7/24/2014; N/A; N/A

—Compiled by Ashley Lindly

ABBREVIATIONS & PARAMETERSWith a few exceptions, the Montana weekly oil activity report includes horizontal well activity in theBakken petroleum system in the eastern/northeastern part of the state within the Williston Basin. It alsoincludes the Heath play and what is referred to as the South Alberta Bakken fairway innorthwestern/west-central Montana, which is at least 175 miles long (north-south) and 50 miles wide(east-west), extending from southern Alberta, where the formation is generally referred to as the Exshaw,southwards through Montana’s Glacier, Toole, Pondera, Teton and Lewis & Clark counties. The SouthernAlberta Bakken, under evaluation by several oil companies, is not part of the Williston Basin.

Following are the abbreviations used in the report and what they mean.

BHL: bottomhole location | BOPD: barrels of oil per dayIP: initial production | PBHL: probable bottomhole locationPD: proposed depth | SHL: surface hole location | TD: total depth

And public land survey system abbreviations: FNL = from north line | FEL = from east line | FSL = from south line | FWL = from west line

LEGENDWell name; field; SHL location; SHL footages; PD;PBHL location; PBHL footages; PBHL depth; BHLlocation; BHL footages; BHL depth; pool; county;approved/completion date; IP rate; BOPD

12 PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014

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NATURAL GASStrata-X drills first Emmons Co. gas well

Strata-X, the Denver-based independent that was issued permits in Decemberto drill four vertical natural gas wells in Emmons and McIntosh counties in south-central North Dakota, announced in its report for the quarter ending June 30 thatit spudded the first of those wells in its 120,000-acre Sleeping Giant Gas Projecton June 20. The company’s Rohweder No. 1-11 well was drilled to a depth of1,450 feet into the targeted Niobrara formation in east-central Emmons County.

In drilling the well, Strata-X said “gas shows were encountered immediatelyafter penetrating the regional hydrocarbon seal,” adding that, in total, “gas showswere encountered over an 80-foot interval of the targeted Niobrara formation,with gas shows peaking at approximately 300 units over a background of 25units.” In addition, the company said that oil fluorescence and oil cut were alsoobserved during drilling in portions of the Niobrara formation.

The well was shut-in after it was cased while Strata-X designs what it calls “anoptimal completion stimulation method” based on data acquired during drilling.The company is putting the design and completion stimulation out to bid. Strata-X expects the well to be completed in the third quarter. The company said it antic-ipates the other three permitted wells in the project may be drilled later in the year“following successful production testing” of the Rohweder well.

—MIKE ELLERD

Summit Midstream expands Bakkeninterconnection and storage capacity

Summit Midstream Partners announced activity updates on July 29 for its mid-stream subsidiaries operating in the Williston Basin of North Dakota. Newly formedsubsidiary Epping Transmission Co., also known as Epping Transco, has reached anagreement with Enbridge Energy Partners to provide a crude oil interconnection fromSummit subsidiary Meadowlark Midstream’s Polar and Divide gathering systems inWilliams and Divide counties to Enbridge’s North Dakota Pipeline Co. system. Thatinterconnection, known as the Little MuddyInterconnect, will provide up to 55,000 barrelsper day of incremental capacity to customers ofMeadowlark’s two gathering systems.

In addition, Meadowlark is expanding capac-ities for its Epping and Divide crude oil storagefacilities, which are expected to be by service inthe third quarter 2015. Initially each facility willhave 75,000 barrels of storage capacity withcapability for future expansion. The DivideStorage facility will serve the company’s Divide gathering system and the EppingStory facility will serve both the Divide and Polar gathering systems. In addition toaccess on the Enbridge system, the Epping facility will provide access to Crestwood’sCOLT rail terminal at Epping.

The Divide facility will also provide access to Crestwood’s COLT terminal and theEnbridge System via the Epping facility as well as Basin Transload’s Columbus railterminal. Both the Divide and Epping facilities will include truck offloading services.

“Our commercial team continues to find ways to enhance both the operating capa-bility of our Bakken crude oil gathering systems and our service offerings for our cus-tomers,” said Summit President and Chief Executive Officer Steve Newby in the July29 press release. “With today’s announcement, we add another delivery outlet for ourBakken customers to utilize, which provides them with improved reliability andgreater flexibility to access the most favorable crude oil markets and optimizereturns.”

—MIKE ELLERD

COMPANY UPDATELightstream narrows field of assets buyers

Lightstream Resources has encountered choppy waters in its search for a buyerof its East Pembina assets in Alberta.

The Calgary-based producer, which is one of the underpinnings of theSaskatchewan Bakken, said it has “received competitive bids” for the Albertapackage, but has “not yet been able to finalize a transaction.”

“We will continue to operate these assets, which contribute C$15 million of netoperating income to Lightstream annually,” it said.

The company said that in the meantime its 2014 guidance is unchanged at43,000-45,000 barrels of oil equivalent per day, with second quarter output at42,500 boe per day. More details are expected during an Aug. 7 conference call.

Lightstream also said its sales process for conventional assets in southeasternSaskatchewan is ongoing, with initial bids expected by late July.

The company recently closed a C$98 million sale of Saskatchewan assets thatproduce about 1,000 boe per day (96 percent liquids).

Michael Harvey, an analyst with RBC Dominion Securities, said in a note thelatest quarter volumes were about 3 percent below what he had expected, suggest-ing the failure to sell the 900 boe per day of production in East Pembina will “comeas a disappointment to some investors.”

Brian Kristjansen, an analyst with Dundee Securities, wrote to clients that thecompany is dealing with another hiccup, posed by slower-than-forecast develop-ment of Swan Hills operations in Alberta, where the latest production figures are1,300 boe per day from seven wells, 700 boe per day short of his target.

Lightstream said that its drop of 3 percent in volumes from the first quarter wassignificantly lighter than the average seasonal drop of 11 percent it has experiencedover the last three years.

“For 2014 one of our goals is to maintain 2013 production levels with an atten-uated capital program, prior to the impact of dispositions,” it said.

During the second quarter the company drilled three wells, reflecting the springmelt, while facility construction allowed it to bring 29 wells into production.

In the Bakken it completed four gross wells (one net), while bringing eight(three net) on stream, with three gross wells (two net) awaiting completion and/ortie in.

In the Cardium unit, gross results included two wells drilled, 14 completed and25 brought on production.

The company said it plans to execute 45 percent of its 2014 drilling program inthe second half of 2014, drilling 17 wells in southeastern Saskatchewan, 17 in theAlberta Cardium and 7 in northwestern Alberta/northeastern British Columbia.

Lightstream has an inventory of 770,000 net undeveloped acres, 200 millionboe of proved plus probable reserves and more than 2,000 drilling locations.

—GARY PARK

MOVING HYDROCARBONS

In addition, Meadowlark isexpanding capacities for itsEpping and Divide crude oilstorage facilities, which areexpected to be by service in

the third quarter 2015.

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capable of processing 200 million cubicfeet of natural gas per day and is expect-ed to be complete in the third quarter of2016. Oneok has invested between $605million and $785 million for the project.

“When it’s completed, coupled with ourother plants, natural gas flaring is expectedto be reduced substantially,” Oneok’s ChiefOperating Officer Terry Spencer said at apress conference at the North DakotaCapitol in Bismarck.

Since 2010, Oneok has made $4 billionworth of investments in the state whichinclude the completion of the Garden Creekand two Stateline natural gas processingplants in McKenzie and Williams counties,respectively. Two more plants are beingconstructed to add to the Garden Creek sta-tion by the end of this year and theLonesome Creek plant is slated for comple-tion in the fourth quarter of 2015. TheDemicks Lake facility will be the second ofits size in the state. The combined capacityof this plant and the three under construc-tion will increase Oneok’s total capacity toapproximately 1.1 billion cubic feet per day.Construction of additional compressioninfrastructure at existing Oneok plants inthe Bakken will provide another 100 mil-lion cubic feet of natural gas per day forareas undergoing continued aggressivedevelopment. By late 2015, the state’s natu-

ral gas processing will reach a capacity ofnearly 2 billion cubic feet per day with theseand other projects under development.

The facility will also include 12 miles ofpipeline from the plant to Oneok’s Bakkennatural gas liquids pipeline to provide addi-tional takeaway capacity.

“We continue to invest in this regionbecause our customers need this necessarynatural gas infrastructure to help in thereduction of natural gas flaring,” Spencersaid.

In recent months, the North DakotaIndustrial Commission has implementednew rules to capture 90 percent of all natu-ral gas by the year 2020. As of June 1, oper-ators are required to submit a gas captureplan with drilling permits detailing howthey intend to connect their wells to facili-ties and avoid flaring. While the gas captureplans have producers seeking connectionsto companies like Oneok, Spencer said thecompany’s development plans are inresponse to the activity in the Bakken, not

the new gas capture targets. “We have always had a very high sense

of urgency with respect to the flaring,”Spencer said. “This plant — as well as otherprojects we continue to develop — are inthe development phase for many, manymonths prior to the time we announce theseprojects.”

Gov. Jack Dalrymple praised Oneok fortheir commitment to the state’s natural gasprocessing needs.

“It is essential that we have the opportu-nity to process the product as it’s produced,and we thank Oneok for their foresight andtheir planning — being ready to meet thissupply as it becomes available in 2016,”Dalrymple said. “The growth in our naturalgas processing capacity is remarkable, butwe know there is much work ahead to gath-er and process this rich natural resource andreduce flaring.”

—MAXINE HERR

PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014 13

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continued from page 1

ONEOK PLANT

MA

XIN

E H

ERR

541-447-0712

Left to right: Oneok Executive VP Rob Martinovich, North Dakota Gov. Jack Dalrymple,Oneok CEO Terry Spencer and Dick Vande Bossche, director of Oneok projects.

Since 2010, Oneok has made $4billion worth of investments in thestate which include the completion

of the Garden Creek and twoStateline natural gas processing

plants in McKenzie and Williamscounties, respectively.

you can’t really have an effective management plan for thefossil resources,” Hoganson told Petroleum News Bakken.

“My earliest memories I recall asking my dad to take medown our gravel road and let me use his claw hammer so Icould break open rocks just to see what was inside of them,”Hoganson explains. “I had some great professors in myearly course work at NDSU that continued to grow mycuriosity of geology and paleontology.”

The North Dakota native graduated from West FargoHigh School, earned his bachelor’s degree from NorthDakota State University, his master’s in geology with apaleontology emphasis from the University of Florida, andlater returned to his home state to earn his doctorate in geol-ogy with an emphasis in paleontology from the Universityof North Dakota.

While with the NDGS, Hoganson was curator of thestate fossil collection, which was created by the Legislaturein 1989. Since then, the collection has grown to containhundreds of thousands of fossils, many of which are fromNorth Dakota.

“He got this program in effect on state lands that savedthe science on these fossils that otherwise would have beenlost,” State Geologist Ed Murphy told Petroleum NewsBakken.

The program involves obtaining a permit from theNDGS before collecting any fossils from state lands. Thenscientists need to record where the fossils were taken fromand provide a sampling of what they collected. Because ofHoganson’s efforts, many of those fossils are now in anexhibit as a part of the “Adaption Gallery: GeologicalTime” for the state’s Heritage Center expansion. Hogansonsays fossils are important because they are our most ancientobjects of our natural heritage. He adds that fossils are real-ly the only means of knowing what kinds of animals and

plants lived in the geologic past. In addition, Murphy says the occurrence of certain fos-

sils reveals potential water depths, as well as salinity or clar-ity of the water. “If fossils were in good shape or very frag-mented, it will tell you about the energy in that environmentthat they were deposited in,” Murphy said.

Paleontology plays important role in western ND In recent weeks, the NDGS program allowed some fos-

sils to be preserved prior to oil impacts. As a new highwaybypass was being designed and constructed in McKenzieCounty to alleviate traffic congestion, Hoganson said thesurvey’s evaluation of the area identified some petrified treestumps along the route.

“These fossils needed to be preserved in a public view-ing place, so the museum in Alexander now has them dis-played in front of their museum in town,” Hoganson said ashis smile brightened. “Those are the good things.”

Early on in Hoganson’s career, he worked as a micropaleontologist for an oil company in California reviewingcuttings and core from oil wells to determine where theywere stratigraphically. Murphy said the expertise Hoganson

brought to North Dakota still carries value today.“We now have so many wells drilled and we have a pret-

ty good idea stratigraphically where the rocks fall in, but it’sjust looking at different environments,” Murphy said.“Paleontology can tell you the age of the rocks and provideindex fossils,” he continued. “You want a fossil that existeda relatively short range of time or came in at a specific timeso you can use its occurrence to say that okay, these rocksare at this age or younger. When that species went out, thenyou can say these are rocks are at least this old or older.”

Hoganson had a love for teaching his craft, particularlyto children who may also be satisfying a curiosity by crack-ing open a rock or two.

“I loved the public and educational outreach of my job,fossil digs, lectures and working with all the kids groups,”Hoganson adds. “We’ve made major discoveries as far asfossil discoveries and that’s been satisfying. The numbers ofnew animals we’ve been able to discover have been veryexciting.”

Murphy said Hoganson’s shoes will be difficult to fill, asnot all scientists have the enthusiasm or ability to conveyscientific information to the general public in a way thatspurs additional interest.

“Finding somebody who understands, and can do theresearch, and then has the desire to express or convey thatto young people — I think that takes a special person,”Murphy said.

Going forward, Murphy said the survey will likely seeka replacement who may spend more time concentrating onfossils in oil cores.

“John was already trained to do that and was very capa-ble, but there were so many other things going on,” Murphysaid. “I will certainly miss John, but I am very appreciativeof all of the things he has done for the State of NorthDakota.”

—MAXINE HERR

continued from page 1

HOGANSON RETIRES

14 PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014

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Northern Electric Inc.Northern Oilfield Services Inc.Northwest Linings & GeotextileOasis PetroleumOilfield ImprovementsPacific TorquePercheron, LLCPetroleum News Bakken.....................................13PetroShalePolyguard ProductsQEP Resources.....................................................12Quality MatShelterLogicTenCateTrinity Health Occupational MedicineUmiaqUnit Drilling CompanyVactor ManufacturingWanzek Construction ............................................2

Oil Patch BitsPercheron opens Bakken regional office

Percheron LLC has opened a regional office in Dickinson, North Dakota. The newoffice is at 2493 4th Avenue West in Dickinson and will service Percheron’s existingclient base in the Bakken shale as well as support the continued development of thesurvey, field services and energy divisions of the company in the region.

“Percheron’s move into the Bakken was a natural expansion from our extensivework in shale plays throughout the United states, such as the Marcellus, Utica,Niobrara, Permian and Eagleford. We are excited to be a part of a fast-paced and grow-ing area and look forward to providing a fully integrated service offering to our clientsin the area,” said Asa Bowers, CEO of Percheron LLC.

Percheron currently has regional offices in Bridgeport, West Virginia; Charlotte, NorthCarolina; Pittsburgh, Pennsylvania; Odessa, Texas; Houston, Texas; and Denver, Colorado,as well as more than 40 field offices across the U.S. With a network of skilled landmen,right-of-way agents and professional surveyors, Percheron has expertise in all producingstates and is able to meet the needs of clients nationwide.

For more information about Percheron visit www.percheronllc.com.

Agriculture Commissioner Doug Goehring, John Hoganson,Gov. Jack Dalrymple and Attorney General Wayne Stenehjem.

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PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014 15

the corporation on track to meet its 2014Bakken production forecast of 80,000 to90,000 boepd, Hess told analysts in a July30 conference call.

Furthermore, those production increas-es come at the same time Hess Corp. isseeing yet further reduction in well costswith second quarter costs averaging $7.4million per well, a 12 percent decreasefrom the second quarter 2013. “As wehave said before, our goal is to deliver thehighest value wells, and our results con-tinue to demonstrate that we are consis-tently delivering wells with some of thehighest returns in the Bakken,” Hess toldanalysts.

2Q Bakken operationsFor the second quarter, the 80,000

boepd output represents a 27 percentincrease over the 63,000 boepd produc-tion in the first quarter, production thatwas affected by wells shut-in duringexpansion of the Tioga gas plant.According to Hess Corp. President andChief Operating Officer for Explorationand Production Greg Hill, 30 percent ofthat second quarter production came fromwells completed in the Three Forks for-mation. “This demonstrates the high qual-ity of our acreage position in the ThreeForks, as well as the Middle Bakken,”Hill said in the July 30 conference call.

One of the factors contributing to HessCorp.’s lower well costs is a reducedcycling time. “Compared to the year-agoquarter, we have seen a 19 percentdecrease in spud-to-spud days, whichleads not only to lower drilling cost, butalso accelerates production,” Hill said.

In the second quarter, the corporationoperated 17 drill rigs in the Bakken andbrought 53 wells on production, up fromthe 30 wells brought on production in thefirst quarter. Over the third and fourthquarters, Hess Corp. plans to bring anoth-er 140 to 150 wells on production,according to Hill.

Hess Corp. is also seeing successes indownspacing pilots using 13 and 17 wellsper 1,280-acre drill spacing unit, pilotsthat Hill said are in line with the corpora-tion’s expectations and will determineoptimum densities. “These pilots are crit-ical for us to determine optimal spacingacross play,” Hill said. “By the end of thisyear, we expect to have sufficient data toprovide updated guidance for well spac-ing, production, forward drilling locationsand estimated recoverable resources.”

In terms of overall development, Hillsaid the corporation’s main objective is tomaximize asset value, which he said is afunction of both the pace of developmentand the build-out of infrastructure. “Sowe’re constantly trying to manage thosetwo dimensions to ensure that we maxi-mize ultimate NPV (net present value)from the Bakken development, becauseyou can go really fast and over buildinfrastructure that you don’t need, and sowe’re really trying to optimize — basedon those two dimensions — to maximizevalue from the asset,” Hill told analysts.

Tioga gas plant The Tioga gas plant was shut down in

late November in order to increase capac-ity from 115 million cubic feet, mmcf, perday to 250 mmcf per day. In addition, nat-ural gas liquids, NGLs, processing capac-ity also more than doubled to 50,000gross boepd. Hill said the plant’s grossinlet volumes are currently at approxi-mately 180 mmcf per day, and the plant isprocessing approximately 35,000 grossboepd of NGLs. “Looking forward, weintend to debottleneck the plant to enableprocessing of up to 300 million cubic feet

per day,” Hill said. “The plant will be amajor enabler for us to reduce flaring toless than 10 percent by 2017,” he added.

Second quarter numbersHess Corp.’s total world-wide net pro-

duction in the second quarter averaged319,000 barrels of oil equivalent per day,up slightly from the first quarter produc-tion of 318,000 boepd, but down from the341,000 boepd average in the secondquarter 2013, although much of thatdecline is due to asset divestitures in thelast year. Of the 319,000 boepd in thequarter, 67.7 percent was crude oil, 25.5percent was natural gas and the remaining6.80 percent was natural gas liquids.

Hess Corp. divides its global crude oilproduction into the following categories:U.S. Bakken, other U.S. onshore, U.S.offshore, Europe, Africa and Asia. Ofthose, the highest production came fromthe Bakken followed by U.S. offshore at54,000 bpd, Africa at 51,000 bpd, Europeat 36,000 bpd, other U.S. onshore at 9,000bpd and Asia at 2,000 bpd. At 127,000bpd, U.S. onshore accounted for 58.9 per-cent of the corporation’s total crude pro-duction. The U.S. also accounts for most

of the corporation’s NGL productionwhile most of its natural gas productioncomes from Asia.

In the second quarter, Hess Corp. com-pleted $1.6 billion in asset sales in theUtica play, in Thailand as well as a NewJersey power plant. Also in the quarter thecorporation announced the $2.9 billionsale of its retail business. “With the saleof our retail business, which wasannounced in May, we have essentiallycompleted our transformation to a pure-play E&P company,” Hess told analysts.Also announced in the second quarter wasan increase in the authorized share repur-chase program from $4 billion to $6.5 bil-lion.

The corporation’s net income was$931 million and adjusted net income was$432 million for the quarter. In the samequarter of 2013, net income was $1.43billion and adjusted net income was $520million. The decreases were due todivestitures along with shut-in of thecompany’s operations in Libya due topolitical unrest. l

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HESS PRODUCTION

Helms told members of the state’sIndustrial Commission on July 29. “Butthe states recognized that concern as realand built FracFocus. Earthjustice recog-nized that concern as real and filed a peti-tion with EPA. I think that the resultspeaks for itself,” he continued. “Within ayear the states had a system up and run-ning — and we’re just now dealing withan advanced notice of proposed rulemak-ing from the EPA.”

Helms presented the NDIC with com-ments on the proposed rulemaking whichthe commission will need to submit byAug. 18. The letter describes the exten-sive hydraulic fracturing rules imple-mented by North Dakota, not onlythrough chemical disclosure onFracFocus but regulatory emphasis onwell construction. All of which, Helmssaid, makes the rulemaking “unneces-sary.”

The greatest concern of environmental

groups pushing for EPA rules is thatFracFocus allows for trade secrets to beprotected. But Helms noted that the pro-tections are important for companies thatmanufacture and use hydraulic fracturingchemicals to invest in newer, greener, andcleaner chemicals.

“If we take that away, then we’re goingto lock ourselves into 2014 chemical mix-tures and we may miss a real opportunityto make hydraulic fracturing safer andcleaner,” he said.

Under the FracFocus system, tradesecrets are protected temporarily in orderfor companies to introduce their chemi-cals and develop a market. Once thepatent expires, the chemicals are dis-closed. However, public safety willalways trump proprietary rights.

“If there was a leak and a health carephysician or someone requested thatinformation, we could penetrate thatshield to protect the public,” Helms said.

Commissioner Doug Goehring alsonoted the robust construction system inplace to protect the public, saying that the

state has done far more than was requiredby the federal government.

“We’ve got the leading well bore con-struction rules in the nation,” Helmsagreed. “We put more layers of protectionbetween the drinking water and the frackchemicals than anyone in the country.”

EPA could consider funding FracFocusCurrently, 24 of the 30 oil-producing

states use FracFocus. In the comments toEPA, the NDIC will recommend that all30 oil producing states adopt FracFocusas a standard for chemical disclosure, andHelms said the ideal compromise may befor EPA to become the funding mecha-nism for FracFocus. EPA could then haveinput into the system and the federal gov-ernment could obtain trade secret infor-mation and hold it confidential.

“My experience is that the EPA-fund-ed, delegated programs like undergroundinjection control have been the most suc-cessful in the nation,” Helms said. “That’sbeen the best model. It means that there’sa constant fight over the rules and param-

eters — but that’s healthy. That tensionbetween state regulators who are imple-menting it and EPA helps us to arrive inthe right place; we don’t end up too far inone direction.”

During the discussion, Gov. JackDalrymple questioned EPA’s involvementin regulating hydraulic fracturing.

“We’re state of the art when it comesto regulating the fracking process,”Dalrymple said. “Isn’t this just like every-thing that we do dealing with EPA —whether it’s air quality or water quality —the whole idea is for the state to followthe laws and it’s intended to work thatway unless it can be shown that we’refalling down on the job. So the presump-tion is that we would do it unless there’s aproblem.”

“The system does and should presumethat states will take care of this,” Helmsreplied, “That’s the best place for this reg-ulation.”

—MAXINE HERR

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FRACK RULE

which will be operated by SM Energy.The $330 million deal brings the compa-ny’s Gooseneck assets to 97,000 netacres. SM Energy expects to fund theacquisition with cash on hand and bor-rowings under its existing credit facility.Baytex said the sale is part of its plan todirect capital to the highest rate of returnprojects in its portfolio. Best said thefinancial transaction was the largest incompany history, and President and ChiefOperating Officer Jay Ottoson said itcomes with “a ton of upside.”

“My math suggests … that we onlyneed to drill one good well per spacingunit to pay for this,” Ottoson said. “We’redrilling our other Gooseneck acreage atfour Three Forks wells per spacing unitand we haven’t even gotten to theBakken yet.”

The company touts itself as the lead-ing operator in terms of well performancein the Gooseneck area while improvingcost efficiencies by shaving 30 percentoff of drilling time over the past twoyears.

“We don’t think we’ve reached thelimit on our optimization yet, and weexpect to continue to improve our wells,”Ottoson said.

Based on May production data fromthe North Dakota Department of MineralResources, the combined pro forma ofSM Energy and Baytex assets moves SMEnergy to the number 14 slot among thetop 50 Bakken oil producers in the statefor operated, non-confidential wells withan average daily output of 23,763 barrels.

The Baytex acreage lies between SMEnergy’s north and south Gooseneckareas, and the company is confident itwill be able to develop the new acres toproduce similar results to Gooseneck.

Sand loading to improve well resultsSM Energy has been testing new com-

pletion techniques including longer later-als that run 30 percent longer comparedto last year and increased sand loading.Results on the longer laterals will not beavailable under later this year as the com-pany prefers to change the variables oneat a time on its fracks.

“We fully expect longer lateral wellsto outperform short lateral wells,”Ottoson said. “I think it’s a no-brainer tosome extent.”

In the Bakken and Eagle Ford regions,SM Energy tested seven wells each withmuch higher sand loading which showeda “compelling economic value” accord-

ing to the company. Several wells weredrilled at the shorter 5,000-foot lateral,but with twice as much sand per lateralfoot, shifting from 1,100 pounds of sandto more than 2,000 pounds per lateralfoot. It resulted in higher sustained pro-duction rates over time and 40 percenthigher returns. In the Bakken, theimproved completion results have causedthe company to re-evaluate its spacing.

“Clearly when the wells are perform-ing this much better you have to look atwhether you can push them a little closertogether,” Ottoson said.

SM Energy has typically used a slid-ing sleeve completion technique on itsThree Forks wells and even with the sandloading increase, well costs are lowerthan other operators, the company said.

“We saw a 45 percent rate of return in

Gooseneck and the numbers are gettingbetter over time,” Ottoson said.

He added that 90 percent of the com-pany’s wells in the area are connected togas pipelines and the other 10 percent arecoming on soon in order to avoid flaring.However, Baytex had been trucking oilfrom its wells so SM Energy feels there isan opportunity to connect to oil sales as ithas done on its own acreage.

“We think there’s a positive associatedwith that in terms of our economicswhich we, frankly, have rolled into ouracquisition economics,” Ottoson said.

‘Big, chunky assets’In addition to its faster drilling times,

SM Energy said average daily productionfrom its Three Forks wells increased by 3percent over the prior quarter andincreased 21 percent from the secondquarter of 2013. Also during the secondquarter, the company completed 12 grosswells.

“The whole theme here is bigger,stronger, faster,” Ottoson said. “If you goback four or five years, this companydidn’t have these big, chunky assets thatyou could really work on. This is a hugeopportunity for us, to go in and make thisstuff better and more valuable.”

The company’s overall productionexceeded its guidance range of 136,000to 143,000 barrels of oil equivalent perday, boepd, in the second quarter, climb-ing to 147,000 boepd which is led by itsEagle Ford assets in Texas. SM Energyruns five rigs in that region and complet-ed 23 wells in the quarter, averaging83,000 boepd.

It also is developing acreage in thePowder River Basin and completed onewell in the second quarter. Though it rana 3,300-foot lateral due to an oddly con-figured lease, it turned out to be one ofthe best wells the company has drilled todate in the basin with a 30-day initial pro-duction rate of 737 boepd. During 2014,the company acquired approximately33,000 net acres in the Powder Riverregion resulting in a total asset base ofapproximately 166,000 net acres. SMEnergy plans to add a fourth rig in thePowder River Basin in the third quarterof 2014.

In the Permian Basin, the companycompleted two of its most productivewells in the program with a peak 30-dayinitial production rate of 1,093 boepd onone well and 1,559 boepd on the other. l

16 PETROLEUM NEWS BAKKEN • WEEK OF AUGUST 3, 2014

that, oversee it? We assume (operators)are doing conditioning but we have nomechanism to verify that.”

Study will give some insightA recent study conducted by Turner

Mason, a Dallas-based consulting compa-ny, reviewed Bakken crude samples col-lected at refineries by the U.S. Departmentof Transportation’s Pipeline andHazardous Materials SafetyAdministration, to create a set of parame-ters so that if a company buys or hauls abarrel of oil, it would be standardizedmuch like a West Texas Intermediatebenchmark.

A unique aspect of the study was thatTurner Mason also recorded field-operateddata to determine what conditions resultedin a certain type of barrel versus another.Helms said that is the only study that pro-

vides the parameters to achieve a uniform,safe barrel.

“By having those, they can now modelhow many separators should it go through,what should the conditions at a heatertreater be, how many tanks should it movethrough, so at the end it has no propane init and very, very little butane,” Helms said.“It can go into a truck, rail car, or any-where and not have potential problems.”

To this point, oil conditioning has var-ied depending on what was cost effectivefor an operator. “I think the goal of thecommission is to get to a set of parametersthat allow for that but make sure the oil issafe to transport,” Helms said.

Obtaining a scientific basisWith conflicting Bakken volatility stud-

ies and new federal rail regulations on thehorizon, the NDIC wants to respond to theinformation in the study as soon as possi-ble. The commission plans to meet duringthe week of Aug. 3 to hear from TurnerMason and clarify what needs to be done

to develop a Bakken standardization. “This recent stuff that’s come out from

DOT … apparently it keeps referring to‘Bakken oil’ like everybody’s supposed toknow what that means,” Dalrymple said.“That doesn’t sound very scientific to meand we have to get it on some type of sci-entific basis.” Dalrymple said the meetingcould help determine whether the commis-sion needs to set up a hearing for input onpotential oil conditioning regulations.

A Bakken benchmark?Speaking with reporters following the

commission meeting, Helms said the ques-tion people should be asking is not howvolatile or flammable Bakken oil is, butwhat is a Bakken barrel when it is proper-ly conditioned and safe for transportation?

“In almost every way we can controlthat,” Helms said. “We can separate thosecomponents through different pressuresand temperatures … we already have a lawin place for NDIC to establish some stan-dards.”

No other states have such standards toarrive at a type of oil, Helms said, so“again, we’ll be at the tip of the spear,” hesaid. “We need to invent a new paradigmon how to do this.”

And the state may not stop there. One ofTurner Mason’s specialties, according toHelms, is standardizing an oil product inorder to develop a crude oil benchmarkthat could be traded on the commodityexchange.

“I think it will really enhance the valueof a Bakken barrel because people will nolonger be buying a barrel and comparing itto a WTI or an Eagle Ford or a Brent bar-rel. They’ll know what’s in it so when itarrives at the refinery they know what theyield is going to be,” Helms explained. “SoI think in the long run the operators willreally benefit from this because whatthey’ll be selling will be a higher valuecommodity.” l

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OIL CONDITIONING

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SM ACREAGE

“You are going to see moreemphasis on key acquisitions like

we announced (with Baytex).We’ve got a very compelling set ofassets right now and our focus is

on continuing to exploit whatwe’ve captured already.”

—Tony Best, SM Energy