OGF 20130401 Apr 2013

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THE WORLDS NEWSSTAND
FO
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US
ON
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April 2013
Gulf of Mexico:
Back in Business
INSIDE
The Atlantic Mirror theory

US gas exports to Mexico rise
Downside of latest FWS plan
Man camps are booming
OGFJ 100P quarterly report
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Contents
April 2013
Gulf of Mexico:
Back in Business
INSIDE
Contents
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The Atlantic Mirror theory

US gas exports to Mexico rise
Downside of latest FWS plan
OGFJ 100P quarterly report
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CONTENTS
FEATURES
ON THE COVER:
US Interior Secretary Ken Salazar.
12
6 Gas exports to Mexico

Natural gas consumption is rising faster
in Mexico than natural gas production
and Mexico is relying more on natural
gas imports from the US.
V10/#4
COVER STORY:
Three years after the Deepwater
Horizon explosion brought most new
GOM drilling activity to a halt, the rig
count is back to normal and oil and
gas production is humming.
18 Atlantic Mirror theory

The next several years will prove critically important in the validation of the
Guianas Basins as a low-risk operating
environment for offshore petroleum
investment.
24 FWS workplan
A workplan published by the US Fish
and Wildlife Service to protect wildlife
and habitat will impose federal constraints on project development for
years to come.
27 Catastrophic lightning
31 Man camps
A look at temporary housing for oilfield workers and how companies are
working with the communities in which
these establishments are built.
33 Utica Shale update

Currently, the biggest issues in the
Utica are related to midstream and
transportation infrastructure.
48 Special report: Mexico
DEPARTMENTS
With hundreds of millions of dollars in

assets on the line, executives should
investigate the cost differential for protection against loses due to lighting.
5 Editors Comment
8 Upstream News
34 Deal Monitor
36 OGFJ100P
44 Industry Briefs
46 Energy Players
72 Beyond The Well
Oil & Gas Financial Journal (ISSN: 1555-4082) is published 12 times per year, monthly by PennWell, 1421 S. Sheridan Rd., Tulsa, OK 74112. Periodicals Postage Paid at Tulsa, OK, and additional mailing offices. POSTMASTER: Send address changes to Oil & Gas Financial Journal, 1421 S. Sheridan Rd., Tulsa, OK 74112. Change of address notices should be sent promptly
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www.ogfj.com Oil & Gas Financial Journal April 2013

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Close only counts in

horseshoes and
PennWell Corporation
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Editor
Senior Associate Editor
Don Stowers
Mikaila Adams
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Editors Comment
Inside this months OGFJ

Don Stowers
Editor-OGFJ
e have an interesting lineup of

articles for April, so Im going
to talk about them a little in
this months column. Aprils focus is
on offshore activity, and the issue gets
extra distribution at the annual Offshore
Technology Conference, which begins
in Houston on May 6.
The cover story takes a look at current and recent drilling and production
in the Gulf of Mexico three years after
the deadly explosion and fire aboard the
Deepwater Horizon at BPs Macondo
well off the coast of Louisiana. As our
headline says, companies operating in
the GOM are back in business, as
activity has ramped up to near preMacondo levels.
Since the April 2010 Macondo
accident, the ranks of leading players in
the deepwater GOM has expanded to
include several large international companies such as Brazils Petrobras, which
operates an FPSO; Italys Eni; and BHP
Billiton from Australia. Norways Statoil
is poised to move into the deepwater
soon, and Spains Repsol has been operating in Cuban waters.
Even with damaging hurricanes, the
Macondo disaster, and a six-month drilling moratorium in 2010, the recovery
in the GOM shows that producers still
consider deepwater drilling risks worth
taking. Deepwater production is mostly
oil, and industry analyst Sandy Fielden
tells OGFJ he expects US offshore oil
production to increase over the next
two years.
Atlantic Mirror theory

The petroleum system in the Guianas
basins off the northern coast of South
America is believed to be a mirrorimage of the world-class petroleum

system present in West Africa, says
Justin Stolte, an attorney with Latham
& Watkins, who has examined the
evidence for the so-called Atlantic
Mirror theory. Companies with
investments in the region include
Anadarko, Apache, Chevron, CGX
Energy, ExxonMobil, INPEX, Kosmos Energy, Murphy, Repsol, Shell,
Statoil, TOTAL, and Tullow Oil.
The US Geological Survey estimates that the Guyana-Suriname basin
alone could potentially hold 15.2
billion barrels of oil. The industrys
interest in the offshore Guianas basins
is robust, says Stolte, who adds that
the next several years with prove critical in the validation of the basins.
The region is a low-risk operating
environment for offshore investment,
as Guyana, Suriname, and French
Guiana are generally considered
politically and fiscally stable and offer
contract terms for petroleum investment that are relatively competitive in
the region. If the success of the basins
is validated, expect to see a frenzy of
activity not unlike what has occurred
offshore West Africa.
US gas exports to Mexico

The US Energy Information Administration reports that natural gas
exports to Mexico grew by 24% to
nearly 1.7 bcf/d in 2012, an all-time
high. Mexicos natural gas use is also
at its highest level ever, and imports
now account for more than 30% of
the countrys total supply. Several US
pipeline export projects that could
support additional natural gas exports
to Mexico have been announced.
FWS plan impacts

In their article, Lowell Rothschild
and Kevin Ewing of Bracewell &
Giuliani examine the impact of the
latest US Fish and Wildlife Service

workplan with respect to endangered
and threatened species determinations
and critical habitat designations. The
workplan is a guidepost to the regulated community of where and when
FWS will be taking action to protect
species and their habitat.
Protecting against lightning

With untold millions and even billions
of dollars in assets on the line, oil and
gas companies should understand how
much is at risk from lightning strikes
and the resulting downtime. Avram
Saunders, CEO of Lightning Eliminators & Consultants, says those in
the C-suite dont always focus on the
need for certain precautions, but that
there are cost-effective solutions available to protect those assets.

Christina Lyons of Worys, Sater, Seymour and Pease provides an overview
of man camps, temporary housing for oilfield workers in rural and
remote locations that lack sufficient
living accommodations for workers.
The camps provide more than just the
basic amenities, but in some communities they also put a strain on local
resources. In North America, companies are working with local communities to resolve these issues.
In addition, this months issue
includes the quarterly OGFJ100P
report on privately-held companies
and the monthly Deal Monitor that
looks at global M&A activity. Also,
see if you can find a person or company you know in Upstream News,
Industry Briefs, and Energy Players.
Finally, take a peek at the special
22-page report Winds of Change:
Mexicos Hydrocarbon Resources.
We think youll like what you see this
month. OGFJ
March2013
April
2013 Oil
Oil&&Gas
GasFinancial
FinancialJournal
Journalwww.ogfj.com
www.ogfj.com
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LNG tanker pipelines

Photo courtesy of Allegro
US natural gas exports to Mexico

grow by 24%, reach all-time high
according to Petrleos Mexicanos (Pemex)the state-run oil and natural gas
producer in Mexico.
Before 2006, nearly all of Mexicos natural gas imports came from the
United States. More recently, Mexico has diversified its supply sources by
importing liquefied natural gas from Nigeria, Qatar, Indonesia, Peru, and
Yemen, although the vast majority of the countrys natural gas imports continue to come from the United States.
Fig. 1: US natural gas exports to Mexico

1.8
1.6
Billion cubic feet per day
S natural gas exports to

Mexico grew by 24% to 1.69
billion cubic feet per day
(bcf/d) in 2012, the highest level
since the data collection began in
1973. With imports now accounting
for more than 30% of its total supply,
Mexicos natural gas use is also at its
highest level ever, according to the
US Energy Information Administration.
Natural gas consumption is rising
faster in Mexico than natural gas
production, and as a result, Mexico is
relying more on natural gas imports
from the United States. Between
2007 and 2011, natural gas consumption in Mexico rose 4% per year
on average, while average annual
natural gas production climbed
only 1.2%. Growing demand in the
industrial sector drove the increases
in natural gas consumption in Mexico
to a record-high level in 2011,
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
US natural gas exports to Mexico grew by 24% to 1.69 billion cubic feet per day (Bcf/d) in 2012, the highest level since the
data collection began in 1973. With imports now accounting for over 30% of its total supply, Mexicos natural gas use is
also at its highest level ever.
Source: US Energy Information Administration, based on Office of Fossil Energy

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6.0
5.0
Fig. 3: US natural gas exports to

Mexico by state
1.4
Net imports
Production
Consumption
Exports from Arizona
7.0
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Fig. 2: Mexico natural gas supply and

demand balances (1980-2011)
4.0
3.0
2.0
1.0
0.0
1980
1985
1990
1995
2000
2005
2010
Natural gas consumption is rising faster in Mexico than natural gas production, and as a
result, Mexico is relying more on natural gas imports from the United States. Between
2007 and 2011, natural gas consumption in Mexico rose 4% per year on average, while
average annual natural gas production climbed only 1.2%. Growing demand in the industrial sector drove the increases in natural gas consumption in Mexico to a record-high
level in 2011, according to Petrleos Mexicanos (PEMEX) the state-run oil and natural
gas producer in Mexico. Before 2006, almost all of Mexicos natural gas imports came from
the United States. More recently, Mexico has diversified its supply sources by importing
liquefied natural gas from Nigeria, Qatar, Indonesia, Peru, and Yemen, although the vast
majority of their natural gas imports continue to come from the United States.
Source: International Energy Agency
Between 2009 and 2012, pipeline shipments from Texas

to Mexico rose 34% on average per year to 1.3 bcf/d, which
was about 75% of the US natural gas exports to Mexico
in 2012. Most of the US exports to Mexico departed the
country from Hidalgo County in South Texas, where the
1.2
Exports from California
1.0
Exports from Texas
0.8
0.6
0.4
0.2
0.0
2007
CA
AZ
Capacity: 2,100 MMcf/d

Expected ISD: 12/2014
Samalayuca lateral
Capacity: 238 MMcf/d
Norte crossing project
South Texas expansion
project
Willcox lateral 2013

expansion project
M
Pacific
Ocean
Gulf
of
California

Natural gas export projects less than 50 miles

Natural gas export projects greater than 50 miles
Natural gas export points of exit
Existing natural gas pipelines
ISD = in-service date
Several US pipeline export projects that could support additional natural gas exports to Mexico have been announced.
According to company announcements, these projects are expected to be completed by the end of 2014 and, if they are all
built, could add up to 3.5 Bcf/d of additional export capacity to Mexico, doubling existing capacity. This additional capacity
would serve an expected increase in natural gas demand from Mexicos electric power sector. Mexico plans to add about
28 gigawatts of new electric generating capacity between 2012 and 2027, mostly in northern Mexico, according to Comisin Federal de Electricidad (CFE) Mexicos state-run electricity provider. CFE estimates that this could raise natural gas
needs for power generation by 5.1 Bcf/d. This level of growth would likely require increased natural gas imports from the
United States.
Source: US Energy Information Administration
2010
2011
supplies were mainly coming from the

Eagle Ford shale play.
Several US pipeline export projects
that could support additional natural gas
exports to Mexico have been announced.
According to company announcements,
these projects are expected to be completed by the end of 2014 and, if they
are all built, could add up to 3.5 bcf/d
of additional export capacity to Mexico,
doubling existing capacity.
This additional capacity would serve
an expected increase in natural gas
demand from Mexicos electric power
sector. Mexico plans to add about 28
gigawatts of new electric generating
capacity between 2012 and 2027,
mostly in northern Mexico, according
to the Comisin Federal de Electricidad
(CFE)Mexicos state-run electricity
provider.
CFE estimates that this could raise
natural gas needs for power generation by 5.1 bcf/d. This level of growth
would likely require increased natural
gas imports from the United States.
OGFJ
2012
Several US pipeline export projects that could

support additional natural gas exports to Mexico
have been announced. According to company
announcements, these projects are expected to be
completed by the end of 2014 and, if they are all
built, could add up to 3.5 bcf/d of additional export
capacity to Mexico, doubling existing capacity.
Eagle Ford Shale pipeline

system expansion
Sierrita lateral
2009
Source: U.S. Energy Information Administration, based on Office of Fossil Energy.
Texas
NM
2008
Pipeline shipments from Texas to Mexico between 2009 and 2012 rose 34% on average per
year to 1.3 Bcf/d, which was about 75% of the US natural gas exports to Mexico in 2012.
Most of the US exports to Mexico departed the country from Hidalgo County in southwest
Texas, where the supplies were likely coming from the Eagle Ford play.
Fig. 4: Major proposed natural gas pipeline

projects for exports to Mexico
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Upstream News
Shenandoah appraisal well
deemed one of the largest
GOM discoveries for Anadarko
ith its Shenandoah-2 well, Anadarko Petroleum Corp. (NYSE: APC) has made one of its
largest oil discoveries in the Gulf of Mexico,
the company noted March 19. The deepwater appraisal
well encountered more than 1,000 net feet of oil pay in
multiple high-quality Lower Tertiary-aged reservoirs.
The successful Shenandoah-2 well marks one of
Anadarkos largest oil discoveries in the Gulf of Mexico,
with more than 1,000 net feet of oil pay and reservoir
rock and fluid properties of much higher quality than
previously encountered by industry in Lower Tertiary
discoveries, said Bob Daniels, Anadarko senior vice
president Deepwater and International Exploration.
With ownership in the successful Shenandoah wells,
the adjacent Yucatan prospect, and the very encouraging results from the nearby Coronado well, Anadarko is
strategically positioned in the Shenandoah Basin, which
has the potential to become one of the most prolific new
areas in the deepwater Gulf of Mexico.
The Shenandoah-2 well, located in Walker Ridge
block 51, was drilled to a total depth of 31,405 feet in
approximately 5,800 feet of water, more than 1 mile
southwest and approximately 1,700 feet structurally
down-dip from the Shenandoah-1 discovery. Similar to
the initial Shenandoah discovery well, log and pressure
data from the Shenandoah-2 well indicate excellentquality reservoir and fluid properties. The well was
drilled to test the down-dip extent of the accumulation,
and the targeted sands were full to base with no oilwater contact.
We are incorporating the information obtained from
Shenandoah-2 into our planning and anticipate further
appraisal drilling to advance this potentially giant project, Daniels added.
With the thick oil zone encountered at the well, analysts at Jefferies & Co. Inc. anticipate Anadarko will rework the existing rig schedule to accommodate further
appraisal drilling this year. Based on the recent testing,
the discovery could turn into another mega-project for
the company with resource potential possibly exceeding
Heidelbergs 300+MMboe, said the analysts in a note to
investors following the announcement.
Based on Heidelbergs development schedule, we
estimate that Shenandoah could come online by 2017.
If the nearby Yucatan exploration well (APC 15% WI) is
successful, these two Shenandoah Basin properties could
potentially be jointly developed, the analysts continued.
Anadarko is the operator of the Shenandoah-2 well
and the previously announced Shenandoah-1 discov8
ery well, located in Walker Ridge block 52, with a 30%

working interest. Other co-owners in Shenandoah are
ConocoPhillips (NYSE: COP) with a 30% working interest, Cobalt International Energy LP (NYSE: CIE) with a
20% working interest, Venari Resources LLC with a 10%
working interest and Marathon Oil Company (NYSE:
MRO) with a 10% working interest.
Additionally, in the Shenandoah Basin, Anadarko
has a 15% working interest in both the Coronado well,
located in Walker Ridge block 98, and the Yucatan prospect, located in Walker Ridge block 95.
Total, Chevron launch Moho Nord

development in the Republic of the Congo
hevron Corp. (NYSE: CVX) subsidiary Chevron

Overseas (Congo) Ltd. will proceed with the
joint development of the Moho Bilondo Phase
1 bis and Moho Nord projects offshore the Republic
of the Congo with Total, operator of the Moho-Bilondo
license.
The project is expected to cost a total of $10 billion
and achieve first oil from the Moho Bilondo Phase 1
bis project in 2015 and first oil from the Moho Nord
project in 2016. The joint development will produce
140,000 barrels per day of crude oil at its peak production in 2017.
Situated approximately 46 miles (75 kilometers) offshore southwest of Pointe-Noire in water depths ranging from 1,500 to 4,000 feet (450-1,200 meters), the
Moho-Nord joint development is the largest-ever oil and
gas project in the Republic of the Congo. The Moho
Bilondo Phase 1 bis project includes 11 subsea wells
tied back to an existing floating production unit with
a processing capacity of 40,000 barrels of oil per day.
Production in the permit area began in 2008 with the
Moho Bilondo 1E development. The Moho Nord project involves a tension leg platform, a floating production
unit with a processing capacity of 100,000 barrels of oil
per day, and a new 50-mile (80 kilometer) pipeline to
the onshore Djeno terminal.
The development of Moho Nord marks another
milestone in Totals long established presence in the
Republic of the Congo and leverages our demonstrated
expertise in successfully managing major projects, especially in the deep offshore. The launch enhances visibility
on Totals production growth objective, commented
Yves-Louis Darricarrre, president of Total Upstream.
The installations have been designed to limit environmental impact. Measures include eliminating flaring
under normal operating conditions and reinjecting all
produced water.
We are proud to partner with the Republic of the
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Upstream News
Congo to develop the nations offshore resource potential, said Ali Moshiri, president of Chevron Africa and
Latin America Exploration and Production Company.
Moho Nord is further indication of our commitment
to West Africa where Chevron has made sizable investments.
Total E&P Congo, the Groups wholly owned subsidiary, operates the Moho Bilondo license with a 53.5%
interest, alongside state-owned Socit Nationale des
Ptroles du Congo (15%) and Chevron Overseas Congo
(31.5%).
Aker Solutions to support

redevelopment of landmark subsea field
nternational oil services provider Aker Solutions has

secured a NOK 650 million (GBP 70 million) contract with BP to help redevelop one of the largest oil
fields in the UK sector.
The Aberdeen operation of Aker Solutions will manufacture and supply all subsea controls equipment for the
Quad 204 project, the redevelopment of the Schiehallion and Loyal fields located approximately 100 miles
west of the Shetland Islands.
The scope of work includes subsea controls equipment for subsea trees, manifolds and subsea safety isolation valves as well as controls distribution assemblies.
The Schiehallion and Loyal fields are estimated to
contain a further 450 million barrels of recoverable oil
and a GBP 3 billion upgrade is underway. Due to the
water depth in the area, Schiehallion is entirely reliant on subsea production technology and is collected
on a floating production, storage and offloading vessel
(FPSO).
Alan Brunnen, head of Aker Solutions subsea business said: West of Shetland is an exciting area for oil
and gas and we are delighted to continue our successful
relationship with BP by playing such a significant role in
the continuing development of this project.
The first deliveries are expected to be made in the first
half of 2014.
Lundin Petroleum discovers

oil offshore Malaysia
undin Petroleum has discovered oil in the Ara-1

well that was drilled in Block PM308A, offshore
Peninsular Malaysia.
Ara-1 was drilled to a total depth of 13,221 feet by
the jackup West Courageous (350 ILC) in 246 feet
water depth. The objective of the well was to target the
extension of the Paleogene intra-rift oil sands that had
been encountered in the Janglau-1 well drilled by Lun10
din in 2011.
Ara-1 encountered 9 thin oil-bearing sands in a highpressured intra-rift section extending over a vertical
interval of 2,624 feet.
The well confirmed the extension of the new intrarift oil play across a very large structural complex in the
northeast of PM308A below a major regional seal. The
well also found effective sand reservoirs at depths below
11,482 feet. The oil pay zones intersected by Ara-1 were
however individually thinner than pre drill expectation.
Ara-1 was plugged and abandoned as an oil discovery
well after completion of the well evaluation program.
Work has commenced to estimate the range of resources
discovered.
Lundin intends to incorporate the well results into
the recently extended regional 3D seismic data set to
identify areas where local sand reservoir sources may
be better developed and can high grade future drilling
prospects.
The West Courageous jackup rig will be demobilized
following completion of Ara-1, the final well of Lundins
2012 drilling campaign.
The PM308A production sharing contract (PSC)
is operated by Lundin Malaysia BV with 35% equity
interest. Partners are JX Nippon Oil & Gas Exploration
(Peninsular Malaysia) Limited with 40% and PETRONAS Carigali with 25%.
Eni discovers oil offshore Angola
ni has made its ninth oil discovery in Block

15/06, in deep water offshore Angola, increasing the resource base of the West Hub project.
The discovery was made through the Vandumbu 1 well,
located approximately 93 miles (150 kilometers) from
the coast. The well was drilled at a water depth of 3,202
feet (976 meters) and reached a total depth of 13,474
feet (4,107 meters).
Additional drilling has been carried out from the
Vandumbu 1 well in different direction (side track),
Vandumbu 1 ST, that reached a depth of 11,417 feet
(3,480 meters), finding a net oil (34 degree API) pay
of 374 feet (114 meters), contained in Lower Miocene
high quality sand. As suggested by data acquired, Eni
estimates that Vandumbu 1 ST has a production capacity
in excess of 5,000 barrel of oil per day. Eni is operator of
Block 15/06 with 35%. The other partners of the joint
venture are SSI Fifteen Limited (25%), Sonangol (15%),
Total (15%), Falcon Oil Holding Angola SA (5%) and
Statoil Angola Block 15/06 (5%).
Eni has been present in Angola since 1980 with a net
production of 102,000 barrels per day in 2011. OGFJ
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Reason says:
its hard to tell
if a firm really
understands
energy.
Instinct says:
drill deep.
At Grant Thornton, more than 300 specialists from Texas to

Oklahoma and Colorado to Ohio help upstream and downstream
clients in exploration and production, drilling and energy services,
pipeline and distribution, and refining and marketing grow
their businesses. To help unlock your potential for growth, visit
GrantThornton.com/energy.
Grant Thornton refers to Grant Thornton LLP, the U.S. member rm of Grant Thornton International Ltd.
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GOM DRILLING AND PRODUCTION ON THE UPSWING
Deepwater Gulf of Mexico

rebounding from Macondo
Don Stowers, Editor OGFJ
n April 20, 2010, the horrific Deepwater Horizon explosion in the Gulf of Mexico brought a
halt to most new drilling in the Gulf as the US
government imposed a six-month moratorium on drilling activity while trying to sort out the problem and
determine how to prevent another such event. Even after
the moratorium was lifted, permit delays and the global
economic malaise kept drilling down significantly during
2010 and 2011. Now, three years later, the rig count is
finally back to normal and oil and gas production in the
Gulf of Mexico is humming.
Drilling and exploration activity in the deepwater is
also on the rise. An example is the recently announced
Coronado prospect about 200 miles south of the central
Louisiana coast. Chevron and its partners struck oil in a
well drilled more than six miles deep (31,866 feet) in an
We need to power our economy. We also need

to make sure were taking maximum advantage
of clean energy sources. But even if we were
doing everything we possibly could to harness
the power of [renewable energy], were still
going to need oil and gas.
US Interior Secretary Ken Salazar
area known as the Lower Tertiary Trend. Pacific Drillings Santa Ana drillship, operating in 6,000 feet of water,
bored through a thick subsurface salt layer to find 400
feet of net oil pay. Few wells have been attempted in this
part of the Gulf in part because the salt layer makes seismic scans difficult to read.
At a time when the whole world seems focused on
onshore shale deposits, the deepwater discovery highlights the continuing importance of the Gulf of Mexico as
a source of oil and gas production for the United States.
A test well at a nearby location produced oil at a rate of
13,000 barrels per day.
Chevron holds a 40% stake in the Coronado pros12
pect well. Other owners include ConocoPhillips (35%),

Anadarko Petroleum (15%), and Venari Offshore (10%).
The rise in GOM drilling activity is driven in no small
part by sustained high oil prices. However, following
the 2010 Macondo well blowout and the subsequent oil
spill that caused substantial environmental damage along
the coastline of Louisiana and adjacent states, the federal
government has placed increased emphasis on convincing the offshore industry to be better prepared both in
preventing future blowouts and containing spills when
they occur.
To date, offshore operators have funded two firms to
deal with such spills Marine Well Containment Co.
and Helix Well Containment Group. Each has teams of
highly trained personnel ready to act quickly to deploy
specialized emergency equipment intended to cap subsea
wells. The creation of these firms has played no small part
in convincing regulatory agencies that operators were
prepared to deal with future emergencies and that drilling
activity should resume.
Since the historic new safety standards were put in
place, the pace of permitting is finally back at pre-spill
levels and millions of offshore acres have been made available to the industry.
As a result, Central Gulf of Mexico Lease Sale #227
drew $1.2 billion in high bids in March, as 52 companies
submitted 407 bids on 320 tracts. Conducted by the
Department of the Interiors Bureau of Ocean Energy
Management (BOEM), the sale included 7,299 blocks,
covering around 38.6 million acres, located from 3 to
about 230 nautical miles offshore, in water depths ranging from 9 feet to more than 11,115 feet (three to 3,400
meters).
BOEM estimates the areas available for sale could
result in the production of up to 890 MMbbl of oil and
3.9 trillion cubic feet of natural gas.
Tommy Beaudreau, director of BOEM, which ran
the auction, called it an extremely successful and an
extremely robust sale the sixth-highest grossing since
the Gulf of Mexico auctions began decades ago. The
increase in individual bids is believed to indicate a focus
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Shells Perdido spar deepwater development

is the worlds deepest drilling and production
platform, but the real story lies in the
myriad details of planning, constructing,
and commissioning this engineering marvel.
Photo courtesy of Shell US
13
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Fig. 1: Offshore GOM crude production
Fig. 2: Gulf of Mexico crude production

1.9
1.8
Apr 2010
EIA forecast
1.8
1.7
MMb/d
1.6
MMb/d
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1.4
1.6
1.4
1.3
First new
deepwater
drilling permit
1.2
1.2
Feb 2013
EIA forecast
Macondo
blowout
1.5
Actual
1.1
1.0
Sep-2012
May-2012
Jan-2012
Sep-2011
May-2011
Jan-2011
Sep-2010
May-2010
Jan-2010
Sep-2009
May-2009
Jan-2009
1.0
Q1
2009
Q1
2010
Q1
2011
Q1
2012
Q1
2013
Q1
2014
Source: EIA STOE and RBN Energy
Source: EIA
on a smaller number of promising tracts, all guided by

seismic data.
The top five bidding companies by dollar amount
were as follows:
1. ExxonMobil Corp. 7 high bids totaling
$220,254,446
2. Shell Offshore Inc. 38 high bids totaling
$139,925,720
3. BHP Billiton Petroleum (Deepwater) 24 high bids
totaling $107,160,240
4. Plains Exploration & Production Co. 11 high bids
totaling $92,575,000
5. Venari Offshore LLC 15 high bids totaling
$86,796,442
Outgoing US Interior Secretary Ken Salazar has overseen the drilling moratorium and the recent comeback.
His reviews from the offshore industry are mixed, but he
has said that the current administration will continue to
push domestic oil drilling.
Despite environmentalists misgivings, Salazar has
urged continued use of hydraulic fracturing in onshore
shale plays and more deepwater exploration offshore.
He has heaped praise on the offshore industry for its
improved safety standards.
We need to power our economy, said Salazar. We
also believe that we need to make sure were taking
maximum advantage of clean energy sources. But even if
we were doing everything we possibly could to harness
the power of the sun and the wind and geothermal and
biofuels even if we did all that, were still going to need
oil and gas.
President Obamas choice to head the Interior Department after Salazars departure this year is business execu14
tive Sally Jewell, who is currently awaiting Senate confirmation.

To appreciate how much drilling and production activity has increased since Macondo, its necessary to understand how sharply crude oil production in the offshore
Gulf of Mexico declined during 2010 and 2011 (see
Figure 1).
Sandy Fielden of RBN Energy notes that before
Macondo in March 2010, GOM crude oil production
was 1.6 MMb/d. During 2011, average production
dropped to 1.3 MMb/d and continued to fall to a low of
1.1 MMb/d in June 2012. The latest EIA data indicates
that production has recovered since then, increasing to
1.4 MMb/d by November 2012. The increase was driven
mainly by the initiation of production at new deepwater
fields with a combined expected peak production of about
195 Mb/d.
Fielden continued: The EIA short-term energy outlook published in April 2010, just before the Macondo
accident, indicated that after a decline in the first half of
2010, new GOM production expected online during the
second half of that year would boost production above
1.8 MMb/d. That April 2010 forecast is the blue line in
Figure 2.
In the same graph, you can see that actual production
(red line) was falling before Macondo and that instead
of the forecasted uptick, production continued to fall
after Macondo. The chart also shows the latest February
2013 forecast (purple line) that GOM crude production
will continue its recovery in 2013 and 2014 to reach 1.5
MMb/d by the end of 2014.
The expected increase in 2013 comes from six new
start-ups and a redevelopment project. In 2014, several
relatively high-volume deepwater projects are expected to
come on stream.
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Fig. 4: Top 10 GOM oil producers

by volume 2009 and 2012
Fig. 3: GOM rig count

70
600
2009
500
Jan-2013
Jul-2012
Jan-2012
Jul-2011
Jan-2011
Jul-2010
Jan-2010
Jul-2009
Jan-2009
Source: Baker Hughes
Energy XXI GOM LLC
Murphy Exploration
& Production Co.
10
Eni Petroleum Co. Inc.
100
Apache Corp.
20
Anadarko
200
BHP Billiton
Petroleum (GOM) Inc.
30
Chevron USA Inc.
300
Shell Offshore Inc.
40
2012
400
BP Exploration
& Production Inc.
MMb/d
50
Hess Corp.
60
Source: EIA and RBN Energy
The expected recovery in production over the next few

years is confirmed by drilling rig count data from Baker
Hughes in Figure 3. The rig count fell off a cliff after
Macondo (circled above) and stayed low during the moratorium but has now recovered to 53 rigs just two below
the level immediately before the accident, said Fielden.
We can also look at GOM production data for individual companies published by BOEM, he continued.
Figure 4 shows the output in 2009 (before Macondo)
and 2012 for the top 10 oil producers in the Gulf. Before
Macondo (blue columns), BP was by far the largest

producer with more than double the output of its closest
rival, Shell. Last year, shell was the biggest producer as a
result of the drilling moratorium and BP not requesting
new drilling permits until the end of 2011 (Note: BP did
not bid on any of the leases in the recent auction.).
Fielden continued, Interestingly, the profile of the top
10 GOM offshore producers did not change dramatically
during this three-year period. At the same time, onshore
US crude production was revolutionized by tight oil
Transocean is building four new ultra-deepwater

DP drillships, like the as-yet-unnamed model
depicted in this rendering, which will be leased to
Shell under four 10-year contracts worth a total
of $7.6 billion. The rigs will be built at the Daewoo Shipbuilding and Marine Engineering yard in
South Korea, with delivery of the first scheduled
for 2015. Image courtesy Transocean
16

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shale production led largely by independent producers.

class potential of the Gulf of Mexico deepwater has also
Significant differences in development costs and return on attracted foreign-headquartered companies such as Petroinvestment horizons for deepwater drilling make the GOM bras, Eni, BHP Billiton, and Statoil.
a very different environment from the US shale plays.
Petrobras is the worlds largest deepwater producer
US crude oil production topped 6 MMb/d by the end with extensive heavy oil assets in Brazil. Petrobras is now
of 2012 up by 790 Mb/d during the year, the largest
operating the first FPSO in the GOM. Statoil, while not
increase in annual output on record. Most of that increase currently operating in the GOM deepwater, has posiwas in the Bakken and Eagle Ford shale plays and in the
tioned itself for future growth in that area.
Permian basin. Prior to the shale revolution, increases
Ziffs recent analysis of field-level operations of 190
in US crude production between 2007 and 2010 came
GOM producing assets found significant opportunities
from offshore GOM fields. The Macondo accident halted for improving operating efficiency by reducing downtime.
production growth, and recovery has slowly returned to
Total planned and unplanned production efficiency in the
near pre-Macondo levels.
Gulf was found to be 88%.
The recovery proves that deepwater drilling risks are still
This result indicates that significant potential exists to
considered worth taking by producers. GOM offshore pro- increase production by reducing the frequency and duraduction may not be headline news like shale oil, but it still
tion of unplanned downtime, says the firm.
represents 20% of US production, and that number looks
The E&P sector is historically a 10% to 15% rate-ofset to increase in the next two years, Fielden concluded.
return business, which means the last 10% to 15% of proZiff Energy, a
duction is profit.
North American
If an operator
energy consultcould eliminate
ing group, has
or reduce half
been conducting
the GOMs
benchmarking
unplanned prostudies in the
duction loss, it
GOM for more
could potentially
than a decade.
double the rate
The firms latest
of return from
deepwater study,
assets, said Ziff.
launched in JanuWhile hurary, will evaluate
ricanes impacted
2012 operations
oil and gas
for more than
production in
three dozen pro2005, 2006, and
ducing deepwater
2008, production
assets.
in 2009 surged
Ziff says that
by more than
prior deepwa250Mb/d with
ter studies have
the start-up of
Secretary Salazar (center) speaks with Secretary of Natural Resources, Commonwealth
of Virginia Doug Domenech, Tom McNeilan (left) and Ray Wood from Fugro Atlantic
found a surmany new assets,
with a model of an offshore geophysical vessel in front of them.
prisingly wide
including the
Tami A. Heilemann-Office of Communications, US Department of the Interior
range of uptime
Atlantis, Thunreliability, which
der Horse, Blind
represents an opportunity for the industry to add tens of
Faith, and Thunder Hawk semi-submersibles, the Tahiti
millions of dollars in annual revenue.
spar, and the Neptune and Shenzi TLPs.
The firms last study in 2011 assessed results for 2010.
Additional assets began production in 2010, includIt found that, compared to other deepwater areas, such as ing the Perdido and ATP Titan spars, the Droshky subsea
Brazil and West Africa, the US has the broadest types of
asset, and Helixs Phoenix FPU. The GOM deepwater
deepwater production systems and diversity of operators, has continued to have new world-class discoveries and
and therefore is the leading incubator for the worldsignificant new field developments, although, as previwide deepwater industry.
ously noted, production suffered post-Macondo in 2011
Compared to the pioneer deepwater days of the 1990s, and 2012.
the ranks of leading players has expanded beyond the
A majority of deepwater production is associated with
original super-majors (Shell and BP) to include leading
oil, and growth in deepwater oil production has been
independents such as Anadarko and Murphy Oil, both
essential to partly offset gas production declines this
operators of spars and semi-submersibles. The worlddecade in the mature GOM shelf. OGFJ
17
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Testing the Atlantic Mirror theory

Justin T. Stolte, Latham & Watkins LLP, Houston
With editorial contributions by Michael P. Darden, Latham & Watkins LLP
he task of an explorer is difficult and demanding. Shareholders and

management, along with the broader market, expectand, in some
cases, mandatethe relentless generation of prospects located in
regions of the world that are stable, both politically and fiscally, at entry costs
that are relatively insignificant (i.e., limited signature bonuses, limited work
commitments, and/or limited promotes).
Given the current state of depressed natural gasand, recently, natural
gas liquidsprices and the significant cost and time requirements associated
with LNG projects, the task is further burdened with the expectation that
such prospects will be oil-bearing. This task has proved somewhat daunting to
explorers in recent years, given the lack of white-space currently available to
international oil and gas companies that satisfy such expectations.
Nonetheless, as the US unconventional land-rush shifts to a development
stage, explorers have refocused, or, for some companies, enhanced, their
efforts towards identifying prospects in parts of the world that, for a host of
reasons, have been under-explored by the industry. Frontier basins in isolated
portions of the world have been the recipientsand, in most cases, beneficiariesof such efforts. One such area, the Equatorial Margin of offshore
Guyana, Suriname, and French Guiana in South America (the Guianas Equatorial Margin), has seen a great deal of attention, as several companies have
recently become very active in the area. It is the belief of many in the industry
that the petroleum geology of the area closely resembles that of West Africa.
Fig. 1: Suriname Guyana Basin

60 W
55 W
Atlantic Ocean
ab
ian
Gu
nch
Fre
me
na
Onshore
producing fields
Su
ri
GUYANA
Sur
ina
me
Gu
yan
ab
ord
er
ord
er
Suriname Guyana Basin
5 N
Area
shown
SOUTH
AMERICA
Brazil
18
FRENCH
GUIANA
SURINAME
Miles
124
Km
200
The basins of the Guianas Equatorial Margin, which are comprised

of offshore and onshore portions,
encompass the coastal areas of
Guyana, Suriname, French Guiana,
and small portions of Venezuela and
Brazil. This article briefly reviews the
offshore petroleum geology, recent
offshore activity, and legal and fiscal
regimes of Guyana, Suriname, and
French Guiana.
Petroleum geology
The Guianas Equatorial Margin
includes two sedimentary basinsthe
Guyana-Suriname Basin and the Foz
do Amazonas Basin (collectively,
the Guianas Basins)which are
separated by the Demerara Plateau,
a structurally high, thick succession
of Jurassic and Lower Cretaceous
carbonate-rich sediments.
The Guyana-Suriname Basin lies
to the west of the Demerara Plateau,
along the coastal regions of Guyana
and the central and western parts
of Suriname. A thick succession of
Jurassic to recent-age sedimentary
rocks of alluvial to deep-marine
origins, along with a limited number
of carbonates, are found in the basin.
At least two world-class source rocks
of Middle and Upper Cretaceous age,
sometimes referred to as the Canje
Formation, are found in such sedimentary packages. To the east of the
Demerara Plateau lies the western
extension of the Foz do Amazonas
Basin, which is located along the
coastal regions of French Guiana and
the western part (west of the Amazon
Delta) of Brazil.
The Foz do Amazonas Basin contains a similar succession of sediments
to that found in the Guyana-Suriname Basin. A large portion of the
Guianas Basins is located offshore,
where the sediments thicken as the
water depth increases. In its World
Petroleum Assessment 2000, the US

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Geological Survey estimated that the

Upper Cretaceous sediment package
of the Guyana-Suriname Basin alone
could potentially hold 15.2 billion
barrels of oil.
The petroleum system of the
Guianas Basins is believed to be a
mirror-imagelabeled the Atlantic
Mirror theoryof the petroleum
system present in West Africa, where
several large petroleum accumulations (e.g., the Jubilee discovery in
the Tano Basin, offshore Ghana)
have been discovered in recent years.
The Canje Formation was deposited
(approximately 90 million years ago)
during the time that South America
and Africa drifted apart at the Equatorial Atlantic Transform Margin
and is believed to be the same source
rock found in petroleum systems
associated with significant petroleum
discoveries in West Africa. Accordingly, the industry has identified
several similarities with respect to
source, timing, burial, compaction,
and trapping mechanisms between
the offshore Guianas Basins and the
offshore basins of West Africa.
The similarities of such basins led
Tullow Oil, which drilled the Jubilee
discovery, to test the Atlantic Mirror
theory through the drilling in 2011 of
the Zaedyus-1 well in offshore French
Guiana. The Zaedyus-1 well substantiated the theory, in part, by finding
approximately 236 feet of net pay in
two turbidite fans of CenomanianTurionian age, which are believed to
contain 500 to 850 million barrels of
recoverable oil equivalent.
Suriname, Guyana, and French Guiana

may soon share electrical interconnection
our major international energy

companies jointly with the
Agence Franaise de Dveloppement (AFD) and the Inter-American Development Bank (IDB) have
joined forces to explore an electrical
interconnection among the South
American countries of Suriname,
Guyana, French Guiana, and the
northern Brazilian states of Amap
(capital Macap) and Roraima (capital Boa Vista). Coincidentally, these
countries have recently entered into
petroleum contracts with a number
of oil and gas companies for exploration, development, and production rights in the Guianas Basin,
onshore and offshore, which have
the potential for transforming their
economies.
As part of a Memorandum of
Understanding (MOU) signed March
15 for the Northern Arc Project, prefeasibility studies will be planned to
identify and evaluate electricity demand and power supply options. In
addition, the studies will assess the
political, institutional, regulatory,
technical, economic, environmental,
and social implications of a potential electrical interconnection of the
Northern Arc countries.
The partners, NV Energiebedrijven Suriname (EBS), Guyana
Energy Agency (GEA), lectricit
de France (EDF), Centrais Eltricas
Brasileiras SA (Eletrobras), the AFD,
and the IDB will obtain recommendations from the studies on the best
alternatives to satisfy the electricity
needs of the region along with a
Recent activity
While few wells have been drilled in
the Guianas Basins, there has been a
recent wave of drilling in the region:
(i) in Guyana, the Jaguar-1 well and
the Eagle-1 well were drilled on the
Georgetown Block and the Corentyne Block, respectively, in 2012; (ii)
in Suriname, wells were drilled on
Block 31 in 2011 and Block 37 in
2010 and 2011; and, (iii) in French
Guiana, the Zaedyus-1 well and
Zaedyus-2 well were drilled on the
Guyana Maritime block in 2011 and
plan detailing critical action areas

for the short, medium, and longterm development of the project.
The Northern Arc Project has the
potential to improve the quality of
life of people living in the Northern
Arc area. Electricity supply systems are isolated from each other
and have difficulty providing clean
and reliable energy at competitive
prices. Infrastructure development in the context of this project
would contribute to the sustainable
integration of the Northern Arc
countries and provide the basis for
increasing economic growth and
the social well-being of the region.
The project would increase the
countries energy security and the
reliability of the electricity supply.
The Northern Arc Project is
framed within the IDBs Latin
America and the Caribbean Sustainable Energy for All initiative (LAC
SE4ALL). The objective of the initiative, which is coordinated with the
United Nations (UN) SE4ALL global
initiative, is to end energy poverty
in the Latin American and the Caribbean region by providing universal
access to modern energy, expanding renewable energy generation,
and implementing energy efficiency
measures. During the Rio+20 meetings in June 2012, the energy/
electricity utilities companies of the
Northern Arc countries that were
present acknowledged the Northern
Arc Project as an important contribution to the LAC SE4ALL initiative.
2012, respectively, with a third well spud on the block in January 2013.
In addition, several companies have recently completed, or will soon complete, significant seismic acquisition programs in the basins, which will likely
lead to the identification of additional prospects in the region. Companies
with investments in the region include: Anadarko, Apache, Chevron, CGX
Energy, ExxonMobil, INPEX, Kosmos Energy, Murphy, Repsol, Shell, Statoil,
TOTAL, and Tullow.
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Fig. 2: The Atlantic Mirror theory

WEST AFRICA
Oceanic Transform fault
SIERRA
LEONE
COTE DIVOIRE
GUYANA
LIBERIA
GHANA
Equatorial
Atlantic transform
margins
FRENCH
SURINAME GUIANA
2 1
m fault
Oceanic Transfor
Fields/Discoveries
1 Mahogany, Teak & Akasa
2 Jubilee, Tweneboa, Enyenra & Ntomme
3 Venus, Mercury & Jupiter
4 Zaedyus
SOUTH AMERICA
Notwithstanding the non-commercial outcomes of recent wells,

the industrys interest in the offshore
Guianas Basins remains robust, as
was evidenced by recent new-country
entries by Apache, Chevron, and
Kosmos in Suriname and recent new
country entries by Anadarko and
Pacific Rubiales Energy (through its
investment in CGX Energy, a small
Canadian company) in Guyana. A
bid round to be held later this year
in Suriname, which is its fifth international bidding round, is expected
to generate strong bids on offshore
acreage (Blocks 54, 55, 56 and 57 on
the Demerara Plateau) located within
the countrys maritime borders.
Legal and fiscal regimes

In its World Petroleum Assessment 2000, the US Geological
Survey estimated that the Upper Cretaceous sediment package
of the Guyana-Suriname Basin alone could potentially hold 15.2
billion barrels of oil.
Fig. 3: Drilling in the Guianas Basins

Trinidad
and
Tobago
Pomeroon PPL
Demerara PPL
Venezuela
Guyana
Sou
rce
kitc
hen
Source kitchen
Corentyne PPL
Zaedyus
well
Suriname
CGX properties
100% working interest

Oil & Gas show (P&A)
Shared interest
Gas show (P&A)
Drill locations
Oil show (P&A)
CGX
Shell
INPEX
EXXON
Kosmos
Tullow Oil
Plug and abandon (P&A)

Oil discovery
Proven source kitchen
Total
Statoil
Murphy
French
Guiana
0
Miles
124
Km
200
Although it does not appear that any of the above-referenced wells (other
than the Zaedyus-1 well) will be deemed commercial successes, the wells,
collectively, have provided the industry with encouraging results because they
positively identified certain attributes of a significant petroleum system. In
particular, the presence of a hydrocarbon source and reservoir-quality sands
were identified in a number of the wells. Accordingly, companies operating
in the area have sharpened their efforts with respect to the identification of
sealing, trapping, and migration mechanisms within the basins in an effort to
further substantiate the presence of such a petroleum system.
20
GUYANA
Guyana was originally a Dutch
colony, and later a British colony,
until it achieved independence in
1966. Upon achieving its independence, Guyana became a sovereign
state, and is the only South American
country whose official language is
English. The form of government in
Guyana is a republic, divided into 10
administrative regions, with an executive president and a parliamentary
legislature.
At this time, it appears that Guyana
lacks an ultimate energy authority responsible for overseeing the
petroleum sector. However, in 2012,
a proposal was approved for the creation of a Petroleum Advisory Board,
indicating that a structure for such an
authority will soon be established. In
practice, the petroleum division of the
Guyana Geology & Mines Commission (GGMC) is the governmental
authority for petroleum contracts in
Guyana, as it is granted the responsibility of planning and securing petroleum investments in the country.
The principal legislative instruments for upstream oil and gas in
Guyana are the Petroleum (Exploration & Production) Act No. 3 of
1986, Chapter 65:10 and its implementing regulations (collectively,
the Act). Petroleum contracts are

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typically awarded through direct negotiations with the

GGMC.
The regime for petroleum contracts is established under
the Act, with the terms of petroleum contracts to be based
on a production-sharing contract model. Under such contracts, the state is to receive no less than 50% of profit oil,
and contractors are allowed to recover a maximum of 75%
of gross productionthrough cost oilduring the first
three years of production, following which, such amount
decreases to 65%. The tax rate in Guyana for corporations is
relatively high at 40% for commercial companies.
Pursuant to the Act, the term of a petroleum contract
is to be divided between an exploration stage (through
the issuance of a petroleum prospecting license) and a
development and production stage (through the issuance
of a petroleum production license). The initial term of a
prospecting license is four years, which is renewable twice
for a period of three years each. Production licenses are
issued for a period of 20 years and are renewable in periods
of 10 years.
It should be noted that Guyana is currently involved in
a border dispute with Venezuela regarding the maritime
boundary between the two countries. Consequently, the
Pomeroon Block in offshore Guyana, which is currently
held by CGX Energy, has been placed effectively in force
majeure.
Several companies have recently completed,

or will soon complete, significant seismic acquisition programs in the basinsCompanies with
investments in the region include: Anadarko,
Apache, Chevron, CGX Energy, ExxonMobil,
INPEX, Kosmos Energy, Murphy, Repsol, Shell,
Statoil, TOTAL, and Tullow Oil.
SURINAME
Suriname is a former British colony, and later a Dutch
colony (acquired, interestingly, in a trade in which the British received New Amsterdam, which is present-day New
York) that achieved its independence from the Kingdom
of the Netherlands in 1975. Suriname is the smallest
sovereign state (in size and population) in South America
and, although communications in the petroleum industry
in English are normal, its official language is Dutch. Like
Guyana, the form of government in Suriname is a republic.
Suriname has one legislative house, and its head of state
and government is the president.
The authority to enter into petroleum contracts for
exploration, development, and production rights in Suriname is granted exclusively to state enterprises. The state
enterprise responsible for negotiating and entering into
such contracts is Staatsolie Maatschappij Suriname N.V.,
which is the national oil company of Suriname. Staatso22
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lie holds all mining rightsonshore and offshorein

Suriname and, as such, is responsible for awarding (and
administering) contracts through direct negotiations or
bidding arrangements with other established petroleum
companies. The primary instruments governing petroleum
operations in Suriname are Staatsolies Concession Agreement (Decree E8-B, Official Gazette 1981 no. 59), the
Mining Decree of 1986 (Official Gazette 1986 no. 28),
and the Petroleum Law 1990 (Official Gazette 1991 no. 7,
as amended in 2001).
The contracting regime for recent petroleum contracts in
Suriname is based on a production sharing contract model.
In Surinames upcoming bid round, production sharing
contracts will include an initial first phase of exploration of
four years. Under such contracts, the share of profit oil will
be determined using a sliding-scale R-factor, with royalties
and income tax rates of 6.25% and 36%, respectively. Staatsolie will have a back-in right under such contracts of up
to 20% on each development and production area.
FRENCH GUIANA
French Guiana is an overseas department of France and is
part of the European Union. It is represented at the French
National Assembly and its head of state is the President of
France. A Prefect, who is appointed by the President of
France, is responsible for local administration of the region.
French Guiana relies heavily on financial aid from, and
the political stability of, France and, as such, has recently
rejected offers of broader autonomy from the country. The
official language of French Guiana is French, but several
other local languages exist.
Unfortunately, there is a lack of legislation in French
Guiana regarding offshore petroleum exploration, as existing legislation (the 1810 Mining Code) generally only deals
with onshore and coastal petroleum exploitation. Consequently, it appears that offshore petroleum activities in the
country are primarily governed by the applicable provisions
of the 1810 Mining Code and the contractual terms of the
petroleum licenses granted to companies. The French government has recognized the issue (arising, in large part, as a
result of the Zaedyus-1 discovery) and is currently evaluating whether to replace the existing 1810 Mining Code with
legislation covering offshore petroleum exploration and
production.
Given the lack of applicable legislation, the contractual
terms that are typically offered in French Guiana are not
readily available. Nonetheless, it has been reported that
contracts are governed by a royalty/tax concession model,
with a sliding-scale royalty rate, which is based on production volumes, and a corporate tax rate of 23%. It is worth
noting that the first oil exploration license granted in
French Guiana, the Maritime Guiana Permit, was initially
granted in 2001 for a period of five years, and has been
renewed twice, with a current expiration date occurring in
2016. It appears that licenses for offshore exploration in
French Guiana are awarded on a direct-negotiation basis.
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Concluding remarks
The next several years will prove critically important in
the validation of the Guianas Basins. The region generally
represents a low-risk operating environment for offshore
petroleum investment, as Guyana, Suriname, and French
Guiana are generally politically and fiscally stable and
offer contractual terms for petroleum investment that are
relatively competitive in the region. Therefore, the success
of the basinsas is often the casewill be dependent, in
large part, on (i) the results of near-term drilling programs
and (ii) the identification of an inventory of prospects from
near-term seismic acquisition programs. If the success of
the basins is validated, which would likely also be a validation of the Atlantic Mirror theory, the industry can expect
a frenzy of activity similar to what has been seen offshore
West Africa. OGFJ
About the author(s)
Justin T. Stolte is an attorney in the Houston
office of Latham & Watkins LLP and a member of the firms Global Oil & Gas Industry
Team. His practice focuses on representing and
counseling clients in a broad range of domestic
and international oil and gas transactions
and projects. Stolte recently worked in a commercial/business development role for a large independent
and, prior to law school, worked as a petroleum engineer for a

super-major in the Permian Basin.
Michael P. Darden is a partner in the Houston
office of Latham & Watkins LLP and is the cochair of the Global Oil & Gas Industry Team.
His practice focuses on international and US
oil and gas ventures (including LNG, deepwater, and unconventional resource development
projects), international and US infrastructure
projects, and energy-based financings.
NOTE: This article is not the work-product of Latham & Watkins LLP and, therefore, should not be deemed to represent
the views and/or opinions of the firm. Further, this article
should not serve as a substitute for legal advice or the reading
of the applicable laws, legislation, rules and regulations of the
countries referenced herein. While not cited in this article (due
to editorial constraints), the author would like to acknowledge
the use of several sources of information in its preparation;
in particular, reports prepared by the following companies
were of great assistance: Maplecroft; Tudor, Pickering, Holt &
Co.; and Gustavson Associates. The images included herewith
were prepared (in the order presented herein) by Staatsolie,
Tullow, and CGX Energy.
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FWS plan could have negative

impact on development projects
Lowell M. Rothschild and Kevin A. Ewing, Bracewell & Giuliani LLP, Washington, DC
n February, the US Fish and Wildlife Service (FWS)

published a workplan that is required reading for
anyone seeking to undertake project development in
the United States in the next five years.
Spurred by litigation into acting on its tremendous
backlog of Endangered and Threatened Species determinations and Critical Habitat designations, FWS has
planned out the actions it will take every year for the
next five years for 455 different species. The workplan
is a guidepost to the regulated community of where
and when FWS will be taking action to protect species
and their habitat. These actions will impose new federal
constraints on the siting and operation of development
projects for years to come.
Workload driven by citizens and litigation

For those unfamiliar with the listing and critical habitat designation process, it starts with an underfunded
24
agency beset by litigation. FWS is required under the

Endangered Species Act to publish lists of species endangered or threatened with extinction throughout all or a
significant portion of their range.
FWSs listing decisions must be based solely on the
basis of the best science and commercial data available
and are not limited to species in the United States. FWS
also has to review the status of each listed species every
five years. These tasks identifying species in danger of
extinction throughout the world, identifying the best
available science regarding their status and reviewing
and re-reviewing it every five years make for a very
time-intensive process.
Compounding FWSs workload is the existence of a
citizen petition process, which authorizes the public to
seek the listing of a specific species. FWS has 90 days
after receiving a petition to determine if it has substantial information supporting a listing. If it does, FWS
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then has 12 months to decide whether to list it.

What this all means is that outside parties have the
ability to set a significant portion of FWSs listing
agenda. By submitting enough petitions, they can keep
FWS busy on the species that interest them, rather than
the species on which FWS would like to focus. And that
is precisely what has happened.
Third parties have solicited the listing of species that
they are concerned about, either because they are concerned about the species itself or, more often, concerned
about the collateral harm caused by specific categories
of activities like logging, pipeline development, or oil
and gas extraction and production. In effect, these third
parties are setting the course of the FWS in a direction
intended to forestall specific industrial and commercial
activities. And thats one of the reasons that FWSs February workplan is so important.
A large backlog of species

A second reason to focus on the February workplan
is the nature of the species identified in the plan. The
listing process is essentially a pyramid a large number
of species are suggested for listing by petition or other
process; a fewer number reach the 12-month finding
stage, and even fewer are eventually listed.
Most people dont know, though, that there are
two critical categories at the top of the pyramid. One
is listing, either as threatened or endangered. The
other results from FWSs determination that listing is
warranted but precluded as a result of other, higherpriority species to which FWS believes it must direct its
resources.
In essence, these so-called candidate species are in
a sort of purgatory, meeting the requirements for listing
but waiting for FWS to have the resources to address
them (or, alternatively, waiting for their situation to
become so dire that they rise to the top of the candidate
list). FWS reviews the status of each candidate species
annually to see if it has risen to a level that would warrant their listing.
There is currently a large backlog of candidate species, with over 180 species warranted for, but precluded
from, listing. FWSs February workplan contains actions
for almost all of the candidate species. Since the workplan contains such a high percentage of candidate species, entities familiar with the listing process, who are
used to a high percentage of FWS species determinations
resulting in a finding that the species is ineligible for
listing, are likely to see very different results from this
workplan. In short, the workplan is focused at the top of
the listing pyramid, not the bottom.
Given that there are currently about 2,100 listed species and that a large number of the workplan actions are
frontloaded over the next two years 171 species this
year, and 84 next year there could be a 10% increase in
ESA listings by 2015.
More species listed than

critical habitat identified
The last reason to focus on the February workplan is
FWSs focus in the workplan on critical habitat determinations, not just listing decisions. The ESA requires
FWS not only to list threatened and endangered species,
but also to identify habitat that is critical to the species
recovery.
Critical habitat designation takes the form of actual
maps, published with lines drawn to indicate the areas
most important to a species recovery. Federal agencies
are required to consult with FWS to ensure that their
activities (including authorizations and funding decisions)
dont destroy or adversely modify critical habitat.
There is some disagreement about whether the identification of critical habitat provides any additional benefit
to a listed species, since individual members are already
protected from harm and harassment, which includes certain destruction of habitat. For this reason, and because
of the significant workload required in identifying critical
habitat, FWS has long resisted designating critical habitat for all listed species. Thus, there are currently many
more species listed than species for which critical habitat
is defined.
The workplan is both a wakeup call and a

blueprint for action. Those hoping to avoid the
listing of a particular species will not only need
to be creative as the oil and gas industry was
last year in keeping the Sand Dunes Lizard off
the list but now have a timeline for when they
need to complete their innovative solutions.
While there are two sides to the question of whether

critical habitat designation affords additional benefit to
the species, by putting a line on a map, the identification
of critical habitat makes it much easier to identify when
the line has been crossed. Thus, critical habitat designation makes it easier for project opponents to identify
and win litigation regarding potential projects that may
impact listed species.
The workplan reflects a great deal of FWS effort
directed at CHD, with over 95% of the actions involving
some sort of critical habitat designation 259 final CHD
decisions to be made and 179 proposed CHD designations planned. This is also a significant change from
FWSs past practice.
The workplan
In short, the February workplan sets out the actions FWS
plans to take with regard to 455 species over the next five
years. Those of you familiar with the listing process will
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find the results of this workplan surprising. There will be a

much higher percentage of species listed and a large amount
of critical habitat designated. Much of this activity will be in
geographic areas likely to hinder the development efforts of
specific industries or categories of activities.
The workplan is both a wakeup call and a blueprint for
action. Those hoping to avoid the listing of a particular
species will not only need to be creative as the oil and gas
industry was last year in keeping the Sand Dunes Lizard off
the list but now have a timeline for when they need to complete their innovative solutions. For example, FWS will act on
the Lesser Prairie Chicken, which also threatens oil and gas
activities, next year.
Specific entities should also carefully examine the workplan
to better understand the potential impacts from critical habitat designations. Unlike the listing decision, which is divorced
from economic considerations, FWS critical habitat designations are specifically required to take into consideration the
economic impacts of critical habitat designation. Now is the
time to begin to compile the economic data necessary to
identify habitat too costly to be identified as critical habitat.
Finally, it is worth noting the species that arent on the list.
Given that FWS has front-loaded its activities, addressing 255
species over the next two years, the service will have little, if
any, time for actions on any other species. FWSs announcement regarding the workplan states that it anticipates initiating other listing actions within this planning horizon, particularly in fiscal years 2017 and 2018. Reading between the
lines, its clear that FWS will be quite busy during the early
part of the next five years with the workplan.
Those of you with any eggs in the ESA basket are welladvised to give it a thorough review.
The workplan can be found at: http://www.fws.gov/
endangered/improving_ESA/FY13-18_ESA_Listing_work___________________________________________
plan.pdf
______ and in sortable Excel format at http://www.fws.
gov/endangered/improving_ESA/FY13-18_ESA_Listing_
__________________________________________
workplan.xlsx
_________
For more information on the listing process or on creative
ways to avoid the impacts of listing, please contact Lowell
Rothschild at lowell.rothschild@bgllp.com or (202) 8285817. OGFJ
About the authors
Lowell M. Rothschild is a senior counsel in the
Environmental Strategies Group of Bracewell
& Giuliani LLP in Washington, D.C. His
environmental practice focuses on guiding
project proponents through the maze of Natural
Resource laws.
Kevin A. Ewing is a partner in the Environmental Strategies Group of Bracewell &
Giuliani LLP.
26

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Lighting over Albuquerque, NM

(Roch Hart/Barcroft Media)
Protecting against
catastrophic lightning strikes
Avram Saunders, Lightning Eliminators & Consultants, Boulder, CO
xploration for oil and gas is leaning more on science

and automation every day. Rigs are drilling deeper,
platforms are stationed farther out into international
waters, and sophisticated electronics dominate the machinery that runs it all. From upstream exploration to downstream refineries, pumping stations and pipelines, bigger and
more expensive is the norm and growing.
With hundreds of millions of dollars in assets on the line,
shouldnt companies plan to protect those massive investments from every risk possible? The fact is, most of the time
the cost-benefit analysis does not take into account intrinsic
risks around oil and gas production. Some risks are obvious.
However, those in the C-suite do not always focus on the
need for certain precautions. More precisely, executives may
not even be aware of one of the most dangerous issues and
how easily and cost-effectively they can protect their assets.
Take the risk of lightning. The cost differential for protection is staggering when compared to what could be lost. Key
questions to keep in mind:
What is the cost of a direct strike on a rig/platform, refinery, or downstream station?
How does secondary surge hinder a facilitys ability to
stay online versus how much will it cost to keep a facility
online?
What factors add to the facilitys vulnerability when a
direct or even nearby hit occurs?
Is a plan in place to deal with the consequences of direct
or indirect strikes?
How can the lightning risk be mitigated or eliminated
completely?
Some decision-makers have thought about these questions, but lightning prevention is just not on most execu-
27
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tives radar screens. It should be. According to National

Weather Service officials, lightning strikes around the globe
an average of 80 to 100 times per second. Mitigation is the
first step to eliminating the risk.
What it comes down to largely is risk tolerance. For
example, in 2008 a storage tank holding 1.2 million gallons of unleaded gasoline was struck by lightning in Kansas
City. The tank, either unprotected or ineffectively protected,
caught fire, resulting in hard cost losses estimated at $12
million once accounting for the lost product in the tank, the
tank itself, extinguishing the fire, and facility downtime. No
one had thought, or their risk tolerance wasnt low enough,
Closer to home, refineries New Jersey and Oklahoma suffered significant financial losses from lightning strikes within
months of each other in 2008.
Some costs are not always directly connected to lightning,
but they need to be acknowledged when determining risk
tolerance. Some soft costs to be mindful of during risk
tolerance planning include:
Mean-time-between-failure (MTBF)
Lawsuits following accidents
Loss of government contracts
Loss of suppliers/buyers confidence
Increased governmental scrutiny
In the Kansas City example,
the estimate doesnt take
into consideration that the
fire caused a plume of smoke
throughout the metro area that
Losses from an oil storage
was breathed by people downtank explosion caused by
wind, potentially causing health
lightning can be far reaching.
issues. Those two words health
Photo courtesy of Lightning
Eliminators & Consultants
issues immediately get the
lawyers involved, resulting in
astoundingly costly lawsuits.
While the confidence of the
public is tested, so is that of the
facilitys partners. As a result
of the prolonged downtime,
managers moving product from
refinery to pipeline to distribution center are likely to think
twice about sending all their
product through the facility
again. Kansas City is just one
small example; the risk is everywhere.
Meantime-between-failures
(MTBF) is a prominent piece
of the risk tolerance puzzle that
often is overlooked. According
to research published by the
to completely protect the tank from lightning, a solution
University of Florida, a lightning strike is five times hotter
that would have cost less than $30,000 in total on a onethan the suns surface and can continuously power a 100time basis.
watt light bulb for more than three months. As an indirect
Think in terms of something more familiar on an individ- hit, that type of energy can still siphon off a secondary surge
ual level. When renting a car, purchasing insurance is always that may not initially knock out an electronic system, but
an option. For a typical $60-per-day rental, insurance cover- will substantially degrade it. Instead of a useful expected life
age may cost about $20. If the Kansas City storage tank
of say 10 years, a costly piece of electronic equipment may
were the rental car in this example, the insurance to protect
now fail in four or five years.
it from lightning would have cost a mere $0.18.
In 2012, the Insurance Information Institute noted that
Other examples can be found with little investigation. A
while private home insurance claims for lightning strikes
Petronas subsidiary, MISC Berhard, lost at least $40 milwere down 33% between 2004 and 2011, the total paid out
lion when one of its oil tankers was struck by lightning and
by the insurance industry had almost doubled. Why? Homes
caught fire in 2012 in East Malaysia. Three months earlier, a are filled with more sensitive electronic devices that cannot
Mitsui petrochemical complex exploded thanks to a lightabsorb direct strikes or secondary surges. Lightning is lowerning strike. The total loss for Mitsui was likely much greater ing the MTBF (and not in a good way) as the voltage to
than the $40 million estimate after factoring in liability costs. power electronics is decreased with each new iteration.
28

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An extra $1 billion in insurance losses was attributed to

Nintendos Wii and Microsofts X-Box gaming systems,
Apples iPhones, and other ubiquitous electronics. What will
it cost to replace the dynamic positioning system (DP) on a
vessel? What about the drilling instrumentation? Or a floating roof tank? How about the downtime while production is
halted or affected while the sensitive electronics are replaced?
Nearly every facet of the oil and gas industry is affected by
lighting on a scale incomparable to an individual.
Lightnings effect is far reaching, potentially in ways many
may not expect. In Singapore, an expansion of a massive
ExxonMobil facility was being affected by mandatory shutdowns from the regions lightning alarm going off almost
every day. Before installing lightning protection, the construction company lost nearly one full work day each week
because of lightning strikes that forced crew members to a
safety zone, shutting down operations.
A mining company in the Dominican Republic had
a similar problem, losing the equivalent of 40 hours per
worker per month due to lightning strikes. Similar to the
math in our rental car insurance equation, lightning protection was a fraction of the soft cost from downtime. The
mine had about 10,000 workers, so even at $1 per hour
(an obviously low amount), the cost in lost production was
nearly $400,000 per month when letting lightning run its
course unmitigated.
Some decision-makers have thought about these

questions, but lightning prevention is just not on
most executives radar screens. It should be. . .Mitigation is the first step to eliminating the risk.
Now is the time that all decision-makers should begin to

look at the lightning issue in the oil and gas sector. Choose
whatever protection system works best. Every structure
is unique and requires a different level of protection. But
failing to think about it or plan for it could mean getting
caught unprotected one day. And the cost-benefit analysis
will not be just a number to look past. OGFJ
About the author

Avram Saunders is president and CEO of
Lightning Eliminators & Consultants, a
41-year-old company that specializes in lightning protection, prevention products, and risk
mitigation services. LEC protects investments in
more than 70 countries across multiple industries, including oil, gas, mining, and energy
production.
Close only counts in horseshoes and

hand grenades.
Knowing whats happening before its too late is the name of the game when making
investment decisions. Thats why Oil & Gas Financial Journal works closely with industry
experts to provide timely reports on oil and gas activity.
From shale plays to mergers and acquisitions, OGFJ offers vital information to keep you
in the know rather than reading about missed opportunities after the fact. As an OGFJ
subscriber, youll be the first to know and the first to act.
OGFJthe difference between those who come close and those who close deals.
www.ogfj.com
29
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PTIs Athabasca Beaver Lodge

north of Fort McMurray, Alberta
Photos courtesy of PTI Group
EDITORS NOTE: Certain petroleum-producing regions of the

US and Canada are enjoying an economic boom due to drilling and development activities in shale, oil sands, and other
unconventional resource plays. In some rural communities and
remote areas, housing accommodations must be constructed
for workers due to lack of available places for them to live.
In this article, Christina Lyons, an attorney who has served as
a liaison between housing developers and local officials in several of these areas, discusses some of the considerations that
must be taken into account.
30

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Oil States opens new

oil sands lodge
ouston-based Oil States International Inc. (NYSE:

OIS), through its Canadian subsidiary PTI Group Inc.,
has opened a new Canadian Lodge, Anzac Lodge, located
south of Fort McMurray in the Athabasca oil sands region
of Alberta, Canada. PTI designed, built, owns, and manages the new lodge, which has an initial capacity of 338
rooms.The lodge began operations in January of 2013.
Construction of Anzac Lodge is backed by an initial
one-year contract for the majority of the initial capacity in
support of in-situ operations. Longer term, Anzac Lodge
will support in-situ operations in the southern oil sands
play along with pipeline infrastructure expansions.
Anzac provides PTIs full suite of first-class accommodations and services
including catering, ancillary
and convenience services,
internet service, conference
rooms, and leisure facilities
for fitness, entertainment, and
relaxation.
[The new lodge] supports our customers growing
accommodation needs, said
Cindy B.Taylor, president
and CEO of Oil States. Anzac
is our seventh major lodge
in the oil sands region and
provides us with greater exposure to in-situ development
and pipeline infrastructure expansions in a growing area of
concentrated customer activity.
Oil States International is a diversified oilfield services
company and a provider of remote site accommodations
with prominent market positions in the Canadian oil sands
and the Australian mining regions. Oil States also manufactures products for deepwater production facilities and
subsea pipelines, and is also a provider of completionrelated rental tools, oil country tubular goods distribution,
and land drilling services to the oil and gas industry.
In an attempt to preserve the tranquility and safety of the

communities, other ordinances require that man camps be
located at a specified distance from residential and commercial areas. Furthermore, some go so far as to regulate
the distance between the individual man camps themselves.
This again is an attempt to minimize safety and sanitation
concerns.
Because man camps are a result of housing shortages at
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drilling sites, many officials are requiring that the oil companies actually demonstrate a severe housing shortage with a
lack of alternatives such as motels and rental homes. This is
to ensure that the man camp is essential and the company is
supporting the community financially when possible.
Sanitation can be a big concern. Without water and sewage treatment facilities, many camps must transport sewage
for disposal to larger cities which may be miles away. Because
of the distance, time, and money, transport for disposal is
typically a scheduled event. This can lead to rodent and
pest problems not normally seen in the areas. Officials hope
to change this sanitation issue by requiring, among other
things, waste treatment facilities onsite, portable toilets, and
water testing.
The construction and running of man camps are not
the only issues. Once drilling in the area has stopped, some
camps have simply been abandoned by the oil companies
leaving a metal ghost town in its wake. In an attempt to
thwart such abandonment, regulations are being proposed
that require companies to
deposit a bond to cover any
cleanup costs should the camp
close unexpectedly or be
abandoned. Additionally, fines
can be imposed for violating
the ordinance. The goal is to
ensure that the boom does not
turn into a bust and the land
can be reclaimed.
Many locals view the oil
companies and employees as
guests of the community.
Local ordinances are an attempt
to make sure the companies
and employees remain in favor
of their host towns so that they will be invited back.
The ordinances can also be viewed positively by the oil
companies. Without such ordinances, the companies may
face moratoriums in certain areas in which the community
has been maxed out on services. That being said, others
remain resistant to the regulation of an industry which
historically has been uncensored and unregulated. Only time
will tell as to what extent, and to what degree, the drilling
boom and its unique issues will be regulated. OGFJ
About the author

This article was prepared by Christina Lyons, a
partner in the law firm of Vorys, Sater, Seymour and Pease LLP. A recent transplant to
the Houston office from the firms home office
in Columbus, Ohio, she has been assisting both
Ohio and Texas clients in establishing the recent
phenomenon of man camps. As a transactional
attorney, her practice is concentrated on corporate and finance
law.
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Optimizing the
economics of mature
fields worldwide
Sponsored by:
Supplement to:
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Optimizing the economics of mature

If you were familiar with Key Energy Services
10 years ago and not since, you might not
recognize the company today. Not only has it
achieved a dramatic financial turnaround, but it
also has transformed itself into a major player in
the global oil-and-gas service business.
The
turnaround
of Key Energy
Services
When Dick Alario became

our chief executive officer in
2004, everything changed, said
Wilson. We decided to become
one company with one culture,
one brand and one name.
More than that, the company
Todays Key Energy Services is
initiated inside-out programs
the product of a consolidation
for consistency in:
effort that started in the
Safety performance
1990s. Key made more than
Service quality
100 acquisitions of small and
Branding
medium-sized service companies
Equipment standardization
and thereby became the leader
and upgrades
in the U.S. well-service market,

said Executive Vice President
We insisted on a consistent,
and Chief Operating Officer
high level of performance,
Trey Wilson.
said Wilson. In our business,
The growth was dramatic but,
that means operational
for years, many of these 100-plus
excellence and, within
companies maintained their own
that, safe operations
identities. Cultures and operating
and consistent service
practices differed from company
quality. We wanted our
to company and area to area.
customers in California,
Many customers didnt really
for example, to know
know who Key was.
what to expect in
KEY ENERGY SERVICES, INC.
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fields worldwide
RI G S E RV I C E S
Lafayette, Louisiana, or Casper,
that we know how to provide,
Wyoming, as well. And thats
said Wilson.
basically a piece of equipment in
Our initial focus was in
good operating condition, a well-
Mexico beginning in 2007, he
trained crew, efficiency and safety.
continued. Today, weve become
Of course thats easier said
a major service provider working
than done. Achieving these
for PEMEX and other companies
goals meant working very hard:
there, and our Mexican operation
investing in new equipment,
is a large and important part of
training people to operate
our business.
consistently and safely in every
These days, Key is working
situation and location, and
in Colombia, Russia, Canada,
creating a single corporate
Bahrain and Oman as well. Our
culture that everyone within Key
international business is now
understood and supported.
growing at a rate that is creating

real momentum, he continues.
Expanding rapidly into global

oil-and-gas well services
Our business in Mexico was up
Following closely on the heels
year we expect our international
of those initiatives was a
business to grow, on a
commitment to expand globally.
percentage basis, more than our
A significant component of
domestic business.
significantly in 2012, and this
our business model is focused
Currently, international
on providing services to large,
operations account for about 20
multinational and national oil
percent of Keys revenue, and
companies that operate globally
the company is shooting for 30
and whose wells require service
to 35 percent. If you take our
locations
worldwide
220
860+
intelligent rigs
already deployed
F LU I D - M A N AG E M E N T
S E RV I C E S
Fluid transportation
Fluid disposal
Storage-tank rental
Total field-fluid-logistics
management
Fresh and brine
water supplies
C O I L E D -T U B I N G
S E RV I C E S
Wellbore cleanout
Multistage frac-plug milling
Plug setting and retrieval
Logging- and perforatingtool deployment
Remedial repair and
maintenance
FISHING AND
RE N TA L S E RV I C E S
KE Y, BY THE NUMBERS
168
Heavy workover
Horizontal well completions
Recompletions
Specialty drilling
Repair and maintenance
Plugging and
abandonment
rigs
worldwide
Drill-pipe and tubing rental

Pressure and flowcontrol equipment rental
Edge frac stacks
and well testing
Pipe and downholetool retrieval
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Argentinian revenues (before we

sold that business in 2012) and
add them to our 2012 totals, were
already at 25 to 30 percent. So, in
a couple of years, we believe we
will be there, Wilson noted.
Bringing top talent to the table

Key is unusual in its commitment
to keeping a professional
recruiting staff at its Houston
headquarters and regional
offices. Were very systematic
in our recruiting efforts. We
use social networks, we recruit
heavily from the military, and we
share information about recruits
internally, said Senior Vice
President of Administration and
Chief People Officer Kim Clarke.
Many Key executives and
managers have joined the
company within the past 10
years, bringing up-to-date ideas
and a great deal of enthusiasm.
A search firm called me in
2009, and I made the decision
to come to Key, said Guillermo
I N T E G R AT E D S O LU T I O N S
Capacho, senior vice president
Key addresses its customers production challenges

with custom workflows that integrate its geoscience and
engineering expertise with technologies and productivity
enhancements.
for international operations,
These solutions are deployed as single or multiple services

performed in a well-defined, joint strategy between Key and
its customer.
Ive ever made, Capacho
Fully integrated projects require deep interaction and

collaboration:
technology.
It was one of the best decisions
continued. Im excited about the
future of this company. Were
investing in the right things,
and were bringing in highly
experienced talent. Were bringing
Subsurface and reservoir-engineering studies
together our technology, equipment
Workover and well-services design and execution
and resources in a more strategic
Evaluation, monitoring and control of productivity results
global business development and
manner, and the fit is good.
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Training makes good

employees great
supply chain, legal and finance.
We do a tremendous amount of
to 12 folks at a time who go
sure that everyone thoroughly
internal and external training for
through the program together,
understands the companys
employees at both the managerial
explained Clarke. They spend
culture: its brand, mission,
and competency (skill) levels,
their last 20 weeks at the district
values and strategy. We call it
said Clarke. One example is our
level, learning how to manage
The Key Way, and it represents
management associate program,
a service facility. In addition to
all that weve done with the
which teaches our business to
extensive training in advanced
company in recent years to build
potential management personnel.
management skills throughout
a single, unifying culture of high
With this program, were gearing
the two-year program, they spend
standards and the behavior to
up to support our customers in
96 hours in classroom training,
achieve them, she said.
the future as well as today.
learning skills in communication,
The extensive, 24-month
We identify groups of 10
such as communication and

leadership. And Clarke makes
Our training programs attract
leadership, change management,
good people to Key, Clarke
program offers training in
policy, compliance and managing
remarked. We also offer an
health, safety and environmental
employee performance. Its all
environment thats people-friendly
responsibility; operations;
very intense. At the end of the
and safety driven, and young
technology; manufacturing;
program, we slot them into a
people in particular are looking
business development and all the
career opportunity.
for that. In fact, the median age
departments within functional

support, such as human resources,
Internal managers also

receive training in essentials
of Key employees is a solid decade

lower than the industry average.
I feel very fortunate to

be working at Key
and I wouldnt trade it for
anything.
BROOKS KELM
5
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THE LE AN RIG
The Lean Rig package
is designed to improve
rig-up efficiency and
safety, with a hydraulic
walkway, hydraulic
work floor, adjustable
operator platform, basebeam guying, and the
KeyView System with an
optional rig-mounted BOP
accumulator system.
Class 4-550 Series
workover rig
400 to 500 HP;
275,000-lb. derrick
104- or 116-foot derrick
Adjustable work floor,
up to 18 feet high
The hydraulically
activated walkway permits
faster, safer rig-up. The
hydraulic rig floor allows
adjustments up to 18 feet
in height for greater safety
and to accommodate
taller BOP stacks. Basebeam guying facilitates
consistent rig-up of guy
wires, eliminates ground
penetration and the
need for two-year anchor
testing, and results in
a smaller footprint.
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Groundbreaking
KeyView
technology
for wellservice rigs
using the KeyView data to
One of the KeyView system
analyze workflows with a goal
benefits is the ability to acquire
of greater efficiency. This adds
data across a large scope of work,
real value to Keys services,
allowing us and our customers

to benchmark rigs, crews, fields
Skelly said.
In addition to the KeyView
With this information, we can
hydraulic work floors and
calculate how long an average
catwalks, minimizing the danger
job should take, which allows us
The standard well-service
of lifting, pinching and crushing
to be more efficient in planning
rig is one of the most mature
injuries to those working onsite.
workflows, rigs and people.
technologies in the oil patchvery
These allow hands-free operation
similar to what it was 30 years
for pipe handling, he noted. And
KeyView process capabilities

include monitoring hook load,
ago. But Keys new-generation rigs
our SmartTong rod connection
engine RPM, block position, block
are greatly advanced, said Senior
system closely monitors makeup,
velocity, hydraulic pressure
Vice President of Rig Services
torque and breakout for quality-
and H2S alarms. The data is
Jeff Skelly.
control purposes, eliminating the
not only based on operational
need for cardingand extending
parameters, but also on rig-
the life of the pipe.
operator activities, such as
The biggest reason for that

System of advanced sensors and
Our rigs operate with OEM-
circulating, third-party services,
processors that is installed on all
certified blowout preventers.
rig up/down, pull out/run in the
new-built Key rigs and is being
In fact, Key does not use any
hole, and crew break. Particular
retrofitted to the existing fleet.
nonstandard equipment,
The intelligent system analyzes
Skelly noted. Furthermore, our
the functions of the rig to improve
crews are trained and certified
operating efficiency and reduce
competent in well control by a
nonproductive time. It also takes
third-party, global well-control
control of the rig if it senses
company.
unsafe conditions, essentially

For example, the crown-out/floor-
KeyView data yields intelligence

for wellsite interventions
out feature prevents the traveling
The KeyView satellite-based
block from hitting the crown or
data-collection system offers
floor accidentally. The system
global access and connectivity to
literally puts on the brakes.
rig data at all times.
eliminating possible human error.
and types of work, he continued.
System, new rigs feature
difference is the KeyView
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Customers, as well as Key s
Weve been developing the
engineering-support team, can
technology for about six years
track all the data from each rig
now, and were operating the
in real time from any computing
third version, KeyView 3, now,
device, including PDAs. We
said Skelly. Its also expandable
also work with our customers
to take on additional sensors and
continuous-improvement teams,
devices.
THE KE Y V IE W
SYSTEM
This proprietary technology
produces sensor-verified data
to enhance operational IQ.
A patented system that monitors,
controls and records job activity:
Reducing safety incidents
by as much as 56 percent
Improving job quality by
as much as 63 percent
Improving efficiency by as
much as 50 percent
A growing database of more
than 50,000 jobs permits
historical and peer comparison.
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conditions or activities may
W E L L- S E RV I C E
LE ADER
can benchmark and monitor
initiate safety interventions or
fleet performance across
trigger alarms, enabling rig
Comprehensive service
all vendorsnot just Key,
operators to respond quickly
Global footprint
Skelly noted.
and appropriately. Alarms
Employer of choice
and conditions can be texted

or emailed automatically to
concerned parties via their
PDAs. In addition, the data is
The largest land-based

well-service fleet
Optimal technology
Innovation
Key is the leader in U.S. land-
Operational excellence
based well services and
time stamped and transmitted
workovers. The fleet includes
via satellite to a server. This
mobile, self-propelled rigs from
permits both remote observation
third-party service rigs that
100 to 1,100 horsepower and
of rig conditions and later
allows Keys customers to
offers services that range from
access to data for reporting,
monitor the efficiency of other
swabbing to grassroots drilling
analysis and the evaluation of
service companies beyond
of wells.
rig performance.
Key. When our customers
Key even offers a KeyView

Lite technology option for
Key operates in every active
have similar technology on
hydrocarbon basin of the United
all of their service rigs, they
States, as well as in six other
The KeyView system uses

computer intelligence to improve
operating efficiency and reduce
nonproductive time.
9
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K E Y V I E W SYS T E M
M O N ITO RS M U LTI P L E
PA R A M E T E RS
countries. Much of what we do
The common theme with
in the industry is cookie-cutter
international oil companies and
or repetitive work, said Capacho.
national oil companies overseas is
These are the major ones:
So the obvious next step is to
that they want safe, fast, efficient,
Engine-oil pressure
take a franchise approach to
reliable operations, said Capacho.
Engine RPM
our business, using all of that
Thats why our franchise
knowledge to lead our global
approach works so well: Our
expansion. We know this work
customers understand that theyre
better than anyone else.
getting new-generation rigs as
Engine throttle solenoid

Block position
Clutch solenoid
Clutch air pressure
Brake-air controller
Hook load
In addition, Key maintains
standard equipmentand with very
a staff of dedicated reservoir,
strong technical support. This is not
geological and geophysical
a commodity business anymore.
professionals, who take on
Weight (left and right)
manage project teams or consult
From 30,000 to 75,000 barrels

per day in just one basin
Tong pressure
with operators on long- or short-
Keys recent and continuing
H2S sensors
term assignments globally.
success in Mexicos Chicontepec
specific projects in the field,
Hydraulic work floors and catwalks

minimize the danger of lifting, pinching and
crushing injuries to those working onsite.
10
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The obvious next step is to take a franchise

approach to our business, using all of that knowledge
to lead our global expansion. We know this work
better than anyone else.
Johnson notes that the

rules for quality control are
exceptionally strict in deepwater
operations. Our customers rigs
and marine equipment are very
expensive. So our people and
equipment have to be the best of
(ATG) basin demonstrates how
further improve the productivity,
the best, too. Thats why we build
Keys combination of formation
bringing a lot of value to Pemex,
our downhole tools exactly to our
evaluation and production-
said Capacho. Key has 42 rigs
customers requirements. But we
enhancement engineering can
working the fieldcompared with
offer more than great equipment.
produce dramatic results.
three when it began operations in
Our customers choose us for our
Mexico in 2007.
experience, our expertise, and
The basin is geologically

challenging, with isolated
our excellent communication
pockets throughout the reservoir.
Deepwater Gulf of Mexico
So maintaining production
Keys fishing and downhole-
is tough, noted Capacho.
recovery operations in the Gulf
Making the most of mature fields
Pemex has been improving its
of Mexico are acknowledged as
Our global geographic success
understanding of the reservoir,
some of the best in the business,
proves that our approach works
and we have been supporting
according to Dwayne Johnson,
well anywhere in the world,
them in that process. Now the
Keys vice president for offshore
Capacho concludes. So we
results are coming in, and they
fishing-tools operations.
believe that our growth will
practices.
Key is a leader in oilfield
continue, both domestically
see a straight correlation from
fishing operations offshore, he
and internationally, as more
the well interventions weve
said. We are involved in well
and more production managers
undertaken in the field to
planning early in the processso
and asset managers recognize
the production enhancements
we can predict what equipment
that Key is a very strong,
theyre enjoying.
our customers might need
reliable technical partner for
tomorrow. If something goes
optimizing the economics of
basin was producing about
wrong, were right there with
their mature fields.
30,000 barrels a day. Today, its
the solution so they can get back
We know how to do it,
pumping out 75,000 barrels a
to their business of finding and
were doing it worldwide, and
day and rising. We expect to
producing oil and gas.
we can prove it.
are very impressive. We can
Just three years ago, the
SPONSORED BY:
Key Energy Services

1301 McKinney
Suite 1800
Houston, Texas 77010
Telephone: 713.651.4300
Facsimile: 713.652.4005
www.keyenergy.com
PennWell Corporate
Headquarters
1421 S. Sheridan Rd.,
Tulsa, OK 74112
Writer
Denise Allen Zwicker
Denise@DeniseAllenZwicker.com
VP, Custom Publishing

Roy Markum
roym@pennwell.com
Manager of Editorial
John Honeycutt
jhoneycutt@keyenergy.com
Art Director
Meg Fuschetti
Production Manager,
Shirley Gamboa
Circulation Manager,
Tommie Grigg
tommieg@pennwell.com
11
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Performance is Key
Get the most from your wells with

Keys Coiled Tubing Services.
Key offers comprehensive Coiled Tubing Services to help maintain
efficiency in your downhole operations. Keys fleet of Coiled Tubing
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New NGL hub for Utica and Marcellus
he Utica shale formation spans an area from Ohio

to Pennsylvania, into New York, across the Canadian border, and into two Great Lakes (Erie and
Ontario). The Utica shale takes its name from the city of
Utica, NY, where it outcrops and appears on the surface.
It was first identified along Starch Factory creek near the
town of Utica.
In Canada, the play is found along the St. Lawrence
River and the adjacent lowlands. The Utica shale lays
thousands of feet below the Marcellus shale and is proving to hold impressive quantities of oil, natural gas, and
natural gas liquids. Some geologists believe the Utica
shale could rival the massive Marcellus shale in terms of
oil and gas potential.
Currently, the biggest issues in the Utica are related to
midstream and transportation infrastructure.
Utica and Marcellus get new NGL hub

Over the next couple of years, almost 500 MB/d of new
fractionation capacity will be built in the region encompassing the Utica and Marcellus shale plays. Sometime in
2016 or sooner, Houville will blast past Conway as the
second largest Y-grade hub in the country, exceeded only
by Mont Belvieu in Texas.
By the end of 2014, the northeastern US will go from
about 100 MB/d of NGL fractionation capacity to nearly
600 MB/d. Thats because wet gas production is growing
by leaps and bounds in both the Marcellus and Utica, and
the processing, transportation, and fractionation infrastructure is trying desperately to keep up with production.
RBN Energy reports that, Producers are aggressive
and willing to partner with midstream companies to
ensure their production is interrupted as little as possible.
The vast majority of these midstream deals are supported
by long-, fee-based agreements.
There are lots of producers waiting anxiously to
maximize netbacks on their production of NGLs, some
of which is ethane now being rejected, or other products being transported long distances for fractionation,
storage, or simply to find a market. RBN Energy notes,
NGLs arent of much value until they are fractionated
(i.e., split) into purity products: ethane, propane, normal
butane, isobutane, and natural gasoline. There is a very
long history of processing and fractionation in the region,
but nothing like the scale of what is happening now.
ing services in the Utica Shale.

MarkWest Utica EMG expects to begin gathering
and processing PDCs liquids-rich gas production from
Guernsey County, Ohio by the end of the second quarter
of 2013. Initial production from PDCs Utica operations
will be processed at the Cadiz complex located in Harrison County, Ohio. In the second half of 2013, PDCs gas
will be transported via MarkWest Utica EMGs high-pressure rich-gas header system to the Seneca complex located
in Noble County, Ohio for processing.
Early in 2014, MarkWest Utica EMG, and MarkWest
are expected to complete their 100,000 barrels per day of
C2+ fractionation capacity in Harrison County, Ohio that
will include extensive marketing access by truck, rail, and
pipeline. When completed, MarkWest Utica EMG and
MarkWest will have the largest processing and fractionation capacity in the Utica Shale. The fractionation facility
will also be connected by an NGL pipeline to MarkWests
extensive NGL infrastructure in the Marcellus Shale and
to its Houston, Pennsylvania complex, the largest fractionation and marketing facility in the Northeast. OGFJ
WHERE DO YOU FIND
YOUR ENERGY?
ENERGY TRANSACTIONS. OPINIONS. ADVICE.
+ Exploration
+ Production
+ Exploitation
+ Development
+ Acquisitions
+ Divestitures
+ Disputes
THE ENERGY OF
PEOPLE AND KNOWLEDGE.
MarkWest Utica EMG, PDC

sign long-term agreements
MarkWest Utica EMG LLC, a joint venture between
MarkWest Energy Partners LP and The Energy and
Minerals Group (EMG), has agreed with PDC Energy to
provide gathering, processing, fractionation, and market-
HOUSTON
I PITTSBURGH I FORT WORTH
866.784.8012
www.sadlerlaw.com
33
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Deal Monitor
Deal pace picking up as companies

shuffle portfolios in pursuit of growth
Brian Lidsky, PLS Inc., Houston
LS reports that, from February 17th to March 16th,

global upstream deal activity totaled $13.1 billion
bringing the first quarter 2013 tally (through March
16th) up to $20.2 billion. Helping drive deal flow are relatively robust commodity prices which at press time (market
close on March 25) saw front months for WTI at $94.56/
bbl and for Brent at $108.17/bbl compared to $92.27/
bbl and $111.11/bbl at December 31, 2012, respectively.
In the US, natural gas prices have improved with front
month Henry Hub at $3.87/MMbtu and the 12-month
strip at $4.06/MMbtu up 15% and 13%, respectively
from December 31, 2012. In addition, the US equity
markets have risen nicely thus far in 2013 with the S&P
500 up 8.8% and the Dow up 10.3%. With the backdrop
of improving commodity and equity prices, companies are
picking up the pace of deal activity.
In the US, the most notable deal is the $4.3 billion
PLS Inc., Monthly Deal Monitor Select transactions
stock-for-stock acquisition of Berry Petroleum by LinnCo

LLC, which in turn will be followed by the acquisition of
the Berry assets by Linn Energy LLC. By utilizing LinnCo
equity (which IPOd in October 2012) to initiate the transaction, the deal is the first ever acquisition of a C-Corp by an
upstream LLC or MLP and clearly adds another arrow in the
quiver for value seeking upstream MLPs and a new market
dynamic.
The Linn/Berry transaction is expected to be immediately accretive to Linns distributable cash flow per unit by
~$0.40 (not including operational synergies) and improves
Linn credit metrics. Berrys assets have a long reserve life
(>18 years) and a low decline rate and boosts Linns proved
reserves 34% and production by 30%. For Berry shareholders,
the deal represents a 20% premium to the prior-day closing
share price and a 23% premium to the prior 30-day average.
PLS analysis values the deal at $93,000 per flowing BOE
02/17/13 - 03/16/13
US Transactions
Date Announced
Buyer
Seller
Asset Location
15-Mar-13
Rosetta Resources
Comstock
Permian (Unconventional)
1-Mar-13
Aurora Oil & Gas
Cinco Natural Resources
Eagle Ford
26-Feb-13
Vanguard Natural Resources
Range
Permian (Unconventional)
Mississippian Lime
25-Feb-13
Sinopec
Chesapeake
21-Feb-13
Linn Energy
Berry Petroleum
Multiple
Total Transaction value

Number of Transactions
International Transactions
Date Announced
Buyer
Seller
Asset Location
14-Mar-13
CNPC (China)
ENI
Mozambique
11-Mar-13
Andes Energia Plc
Kilwer SA
Argentina
4-Mar-13
Strategic Oil & Gas Ltd
Paramount Resources
Canada
1-Mar-13
Ithaca Energy
Valiant Petroleum
United Kingdom
26-Feb-13
Toscana Energy Income
Undisclosed
Canada
25-Feb-13
Cequence Energy
Donnybrook Energy
Canada
25-Feb-13
Donnybrook Energy
Cequence Energy
Canada
19-Feb-13
Undisclosed
Lone Pine Resources Canada
Canada
Total Transaction value

Number of Transactions
PLS Inc. Validity of data is not guaranteed and is based on information available at time of publication.
Prepared by PLS Inc. For more information, email memberservices@plsx.com.
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(80% oil) and $13.50 per proved BOE (74% oil) and allocates
$630 million to undeveloped land ($3,125 per acre). Berrys
assets are in California (Linn will become the states 5th largest producer), Permian Basin (Linn doubles Wolfberry inventory), East Texas and Uinta Basin (new core area for Linn).
The Permian Basin continues to be a hot area for M&A
activity with Rosetta Resources buying out all of Comstocks
assets in Reeves and Gaines counties for $768 million. In
Reeves County, Rosetta gets 40,000 net acres in the core
of the vertical Wolfbone play currently on 40-acre spacing
with further down-spacing possible. PLS values the deal at
$145,000 per flowing BOE (73% oil) and $18.00 per proved
BOE (76% oil). PLS also values the acreage at $7,300 in
Reeves County (38,000 net acres) and $1,000 in Gaines
County (13,000 net acres).
In another Permian deal, MLP Vanguard Natural
Resources picked up 2,800 boepd (59% oil/liquids) and 22.8
MMboe (59% oil/liquids, 78% PDP) for $275 million from
Range Resources. PLS values this deal at $97,000 per flowing
BOE and $12.00 per proved BOE.
Outside of the Permian, in another high profile US deal,
Sinopec paid $1.02 billion to buy outright an undivided 50%
interest in ~850,000 net acres in the Mississippian Lime play
of Oklahoma from Chesapeake, who will remain operator.
The upfront cash payment is a departure from the traditional
cash and carry JVs Chesapeake has struck historically. After
attributing $85 million to the existing production, PLS estimates Sinopec acquired the acreage at an attractive $200 per
Proved Reserve
Value ($MM)
Non Proved
Reserve Value
($MM)
Reserves
(MMBoe)
$478.0
$290.0
$117.5
$275.0
acre.
In Canada, deal activity remains slow with just $430
million announced from January 1 to March 16 setting up
perhaps the slowest quarter of activity since 2007. The activity that is taking place is largely smaller bolt-ons as the overall
market environment remains impacted by natural gas prices
and higher than normal oil differentials. There are numerous
packages and companies on the market and contrarian buyers
may well look to Canada as a strong value play.
Internationally, China once again stepped up as CNPC
paid $4.2 billion to acquire a 20% interest in Area 4, offshore
Mozambique from Italys ENI. Post transaction, other owners include ENI (50% and operator), Galp Energia (10%),
Kogas (10%) and ENH (10%). According to ENI, CNPCs
entrance into Area 4 is strategically important for the project thanks to the worldwide relevance of the new partner
in the upstream and downstream sectors. Area 4 contains
the Mamba gas discovery. There are no proved reserves, but
according to Galp Energia disclosure, there is ~24 Tcf of
contingent resource, implying a value of $0.87 per Mcf contingent reserves. Production is expected by 2018 with two
trains, at 5 Mpta each, planned for LNG export.
The markets remain well-supplied with deal inventory.
Recent large new deals-in-play include packages from Laredo
Petroleum (selling Anadarko basin assets), Cenovus (selling Saskatchewan oil assets), Talisman (selling its North Sea
assets) and RWE (putting its entire global E&P portfolio on
the market). OGFJ
Production
(Boe/D)
Reserves
($/Boe)
Production
($/Boe/d)
Reserves
($/Mcfe)
Production
($/Mcfe/d)
26.8
3,300
$17.81
$144,848
$2.97
$24,141
6.7
1,620
$17.54
$72,531
$2.92
$12,088
22.8
2,833
$12.04
$97,070
$2.01
$16,178
$935.0
$85.0
70.0
17,000
$13.36
$55,000
$2.23
$9,167
$3,705.7
$633.3
275.1
40,000
$13.47
$92,642
$2.24
$15,440
$5,511.2
5
$1,008.3
$13.47
$14.84
$92,642
$92,418
$2.24
$2.47
$14,133
$15,403
2P Reserve Value
($MM)
Non 2P Reserve
Value ($MM)
2P Reserves
($/Boe)
Production
($/Boe/d)
2P Reserves
($/Mcfe)
Production
($/Mcfe/d)
Median
Mean
2P Reserves
(MMBoe)
Production
(Boe/D)
$4,210.0
NA
NA
$12.0
$44.1
10.0
$10.00
$1.67
$3,654
$8.8
0.9
400
$9.97
$21,925
$1.66
$459.0
24.2
9,500
$24.16
$48,316
$4.03
$8,053
$11.7
NA
160
$73,250
$12,208
$11.8
$10.8
1.1
96
$10.44
$122,396
$1.74
$20,399
$8.9
1.0
176
$8.65
$50,625
$1.44
$8,438
$14.0
1.0
226
$13.46
$61,837
$2.24
$10,306
$526.2
8
$4,264.8
$10.22
$12.78
$56,231
$63,058
$1.70
$2.13
$9,372
$10,510
Median
Mean
Note: Canada transactions assume 20% royalty, unless disclosed.
35
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OGFJ100P
OGFJ100P company update
ndependent research firm IHS Herold Inc. has provided

OGFJ with updated production data for our periodic
ranking of US-based private E&P companies. The rankings are based on operated production only within the
United States.
Here, we take a look at some of the transactions in the
private company space since the January 2013 issue and the
last installment of the OGFJ100P.
Top 10
While the rankings for the overall Top 10 based on BOE
production didnt change much, there were notable changes
to the list of Top 10 private gas producers. In the January
issue, the short list was rounded out by Walter Oil & Gas
Corp. and Bass Companies, coming in at No. 9 and No.
10, respectively. However, in this issue, both Walter and
Bass dropped off the list of Top 10 private gas producers are
were replaced by Chief Oil & Gas LLC (No. 9) and Citrus
Energy Corp. (No. 10). Castle Rock, CO-based Citrus
Energy enters the list of Top 10 private gas producers in this
issue after also increasing its overall ranking to No. 21 from
Januarys No. 29 in the overall 2012 year-to-date production ranking. Even more dramatic is Dallas, TX-based Chief
Oil & Gas LLCs jump from No. 54 overall in Januarys
year-to-date ranking by BOE to No. 20 in this issue.
Top 10 private gas producers
Capital
Equity commitments are still flowing in the private oil
and gas company space.
One company new to the arena is Titan River Energy
LLC. The private companys management team received
a private equity commitment of $100 million from Ridgemont Equity Partners and Post Oak Energy Capital. The
Fort Worth, TX-based oil and gas company, with an additional office in The Woodlands, will initially focus on the
drilling and development of oil-prone shale plays in Texas.
The companys management team includes Chip Simmons, CEO; Lee Matthews, president and COO; Don
Pearce, EVP of drilling operations; Kent Bowker, EVP
of Geology; and Brennan Potts, VP of land and business
development. The management team has extensive experience in the geologic assessment, drilling and completion
of over 400 horizontal wells in several major shale plays,
with a recent focus on the Eagle Ford Shale.
Ridgemont Equity Partners is a Charlotte-based private
equity firm that specializes in middle market buyout and
growth equity investments.
In the case of Capstone Natural Resources Partners, a
private equity commitment was quickly turned into assets.
On March 11, the Tulsa, OK-based oil and gas producing company announced that it had acquired $50 million
Top 10 private liquids producers
100P
Rank
Company
Gas (Mcf)
Rank
Samson Investment Co.
227,781,287
Merit Energy Co.
Hilcorp Energy Co.
Yates Petroleum Corp.
Mewbourne Oil Co.
GeoSouthern Energy Corp.
16
12
20
Chief Oil & Gas LLC
10
21
Citrus Energy Corp.
Rank
100P
Rank
Company
Liquid (bbl)
16,942,003
182,619,552
Hilcorp Energy Co.
13,327,884
120,923,674
Merit Energy Co.
12,266,744
98,447,621
Citation Oil & Gas Corp.
11,155,198
74,673,328
Petro-Hunt Group
10,584,924
74,582,307
Endeavor Energy Resources LP
9,788,493
J-W Operating Co.
52,128,683
13
Slawson Exploration Co. Inc.
9,767,119
Dynamic Offshore Resources LLC
44,931,521
11
LLOG Exploration Co. LLC
7,100,355
39,324,958
10
Walter Oil & Gas Corp.
6,793,528
38,991,345
10
Mewbourne Oil Co.
6,650,091
Source: IHS Herold
Source: IHS Herold
Software for Oil & Gas

Commercial Operations
www.qbsol.com
software / consulting services for the oil & gas industry

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OGFJ100P
in oil properties in Andrews and Gaines Counties in West
Texas. The acquisition of producing assets and associated
acreage is being primarily financed with growth equity
from Lime Rock Partners as part of its $100 million commitment to Capstone.
At the time of the announcement, Phil Terry, CEO of
Capstone, noted, Today is an important day in Capstones young history. We believe that the newly acquired
properties complement our existing asset base perfectly,
adding production, cash flow, and low-risk drilling opportunities. The acquisition also provides Capstone with
greater scale to assist us in our continuing plan to create
value in every part of our strategy: high-density drilling,
operational optimization, new acreage leasing, and property acquisitions.
Capstone is an exploration and production company
focused on the Central Basin Platform of West Texas and
Southeast New Mexico. Formed in early 2012, Capstone is led by Phil Terry, CEO (former CEO of Arena
Resources), and David Ricks, president and COO (former

VP of operations at Arena Resources Inc).
Management
On the subject of leadership, at least one private company, Eclipse Resources Operating LLC, has added to
its senior management team in recent months. The State
College, PA-based company has added Oleg Tolmachev
to its management team in the role of vice president,
drilling and completions. Tolmachev joins Eclipse from
Chesapeake Energy Corp., where most recently served as
the senior asset manager, Utica Shale. Tolmachev received
a bachelors degree from The University of Oklahoma.
Eclipse Resources is focused on the acquisition, exploration, and development of unconventional oil and natural
gas properties in the Appalachian Basin, including the
Marcellus Shale, Utica Shale and Upper Devonian Shales.
The company was founded in 2011 in partnership with
EnCap Investments. OGFJ
2012 Year-to-date production ranked by BOE

Rank
Company
BOE
Total wells
Largest field
44,075,209
4,038
Ignacio-Blanco
Merit Energy Co.
42,703,336
6,212
Painter Reservior East
Hilcorp Energy Co.
33,481,830
1,843
Judge Digby
29,372,388
279
De Witt
20,535,437
3,591
Powder River Basin Coal Bed
Mewbourne Oil Co.
19,095,646
1,488
Lipscomb
15,449,367
5,409
Sprayberry
Petro-Hunt Group
13,522,544
467
Charlson
13,258,171
2,600
Sho-Vel-Tum
10
13,201,595
74
West Delta Block 0112
11
12,795,255
39
Mississippi Canyon Block 0503
12
Dynamic Offshore Resources LLC
12,575,748
257
Green Canyon Block 0065
13
11,055,658
321
Van Hook
14
Bass Companies
10,883,134
977
Quahada Ridge Southeast
15
Hunt Oil Co.
10,450,753
586
Eagleville
16
J-W Operating Co.
8,799,861
772
Elm Grove
17
Sheridan Production Co. LLC
8,615,971
1,531
Howard-Glasscock
Quorum Production &

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Rank
Company
BOE
Total wells
Largest field
18
Fasken Oil and Ranch Ltd.
8,352,093
881
Sprayberry
19
WildHorse Resources LLC
6,687,019
722
Terryville
20
Chief Oil & Gas LLC
6,554,610
54
Asylum
21
Citrus Energy Corp.
6,502,471
26
Mehoopany
22
Red Willow Production Co.
6,484,243
400
Ignacio-Blanco
23
Texas Petroleum Investment Co.
6,305,417
1,399
Luling-Branyon
24
Kaiser-Francis Oil Co.
6,270,589
1,337
Ashland
25
Valence Operating Co.
5,961,990
559
Carthage
26
Ankor Energy LLC
5,408,725
114
South Marsh Island Block 0073
27
J. Cleo Thompson & James Cleo Thompson, Jr.
5,218,086
967
Wolfbone
28
Ballard Exploration Co. Inc.
5,161,919
64
Yellow Rose
29
Indigo Minerals LLC
5,160,982
312
Caspiana
30
Black Elk Energy LLC
5,039,403
200
Galveston Block 0389
31
Stephens Production Co.
4,705,537
798
Gragg
32
Jones Energy Holdings LLC
4,682,117
288
Lipscomb
33
Zenergy Inc.
4,434,068
225
Banks
34
BASA Resources Inc.
4,324,107
2,978
East Texas
35
Sanguine Gas Exploration LLC
4,007,340
126
Mills Ranch
36
Laredo Energy IV
3,718,016
90
Owen
37
Reliance Energy Inc.
3,708,727
134
Sprayberry
38
Alta Mesa Holdings LP
3,706,078
193
Weeks Island
39
FIML Natural Resources LLC
3,692,421
901
Sprayberry
40
Pruet Production Co.
3,689,043
217
Little Cedar Creek
41
Killam Oil Co. Ltd.
3,656,141
456
Cuba Libre
42
CrownQuest Operating LLC
3,587,294
207
Sprayberry
43
Castex Energy Inc.
3,538,338
49
Atchafalaya Bay
44
Pisces Holding Co.
3,505,241
34
West Cameron Block 0076
45
Burnett Oil Co. Inc.
3,464,667
320
Loco Hills
46
Murex Petroleum Corp.
3,448,372
180
Sanish
47
CML Exploration LLC
3,437,135
253
Madisonville West
48
DCOR LLC
3,419,317
256
Dos Cuadras
49
Milagro Oil & Gas Inc.
3,385,578
550
Magnet Withers
50
Midstates Petroleum Co.
3,338,697
139
Pine Prarie
51
Venture Oil & Gas Inc.
3,305,537
95
Winchester South
52
Jetta Operating Co. Inc.
3,172,158
405
Big Mineral Creek
53
Henry Resources LLC
3,156,736
164
Sprayberry
54
Tana Exploration Co.
3,108,993
89
Timbalier Bay
55
New Dominion LLC
3,083,028
322
Oklahoma City
56
Summit Petroleum LLC
3,023,999
271
Sprayberry
Quorum Accounting / ERP

Financial & Cost Accounting
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Rank
Company
BOE
Total wells
Largest field
57
Antero Resources LLC
2,846,334
134
Reams Southeast
58
Vantage Energy LLC
2,735,379
240
Newark East
59
Tellus Operating Group LLC
2,673,817
400
Baxterville
60
Texland Petroleum LP
2,671,570
633
Fullerton
61
Berexco Inc.
2,608,863
1,647
Cushing
62
Deep Gulf Energy LP
2,529,161
Green Canyon Block 0448
63
MacPherson Oil Co.
2,467,613
395
Round Mountain
64
Battalion Resources Holdings LLC
2,433,419
1,572
Powder River Basin Coal Bed
65
Stephens & Johnson Operating Co.
2,415,744
751
Oklahoma City
66
Tidelands Oil Production Co.
2,379,600
475
Wilmington
67
Border To Border Exploration LLC
2,378,931
41
Double A Wells North
68
Parsley Energy Co.
2,376,717
203
Sprayberry
69
West Bay Exploration Co.
2,376,084
93
Napoleon
70
Le Norman Operating LLC
2,361,574
68
Lipscomb Southeast
71
Square Mile Energy
2,350,164
34
Leleux
72
Vernon E. Faulconer Inc.
2,349,936
578
Watonga-Chickasha Trend
73
Manti Resources Inc.
2,325,698
47
Hospital Bayou
74
Finley Resources Inc.
2,185,438
635
Ford West
75
Eagle Oil & Gas Co.
2,181,914
78
Converse
76
Davis Petroleum Corp.
2,155,174
82
Lac Blanc
77
Gary, Samuel Jr & Associates Inc.
2,134,812
142
Marceaux Island
78
Choice Exploration Inc.
2,102,973
23
Cottonwood North
79
Vess Oil Corp.
2,052,793
1,312
Kurten
80
Wolverine Gas and Oil Corp.
2,040,689
23
Covenant
81
Cobra Oil & Gas Corp.
1,997,750
163
Sprayberry
82
Wagner Oil Co.
1,989,592
243
La Sal Vieja Dist 4
83
Petro Harvester Oil & Gas LLC
1,967,541
365
Laurel
84
R. Lacy Inc.
1,938,669
257
Carthage
85
White Oak Energy LP
1,935,880
413
Belle Isle Southwest
86
Patara Oil & Gas LLC
1,920,883
218
Carthage
87
Sklar Exploration Co. LLC
1,839,974
69
Brooklyn
88
Ward Petroleum Corp.
1,814,569
212
Talihina Northwest
89
Ricochet Energy Inc.
1,780,297
104
Roleta
90
Rosewood Resources Inc.
1,776,221
1,105
Waverly
91
Sanchez Oil & Gas Corp.
1,750,622
182
Hargill
92
Augustus Energy Partners
1,742,598
981
Vernon
93
Ute Energy LLC
1,711,256
167
Randlett
94
Rice Energy LLC
1,695,834
18
Amity
95
E&B Natural Resources Management Corp.
1,628,235
1,037
Poso Creek
Quorum Land Management / GIS

www.qbsol.com
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Rank
Company
BOE
Total wells
Largest field
1,626,244
328
Lipscomb
JM Cox Resources LP
1,625,904
817
Sprayberry
McGowan Working Partners
1,566,891
315
Shuler
99
Crawley Petroleum Corp.
1,565,719
457
Sooner Trend
100
Mull Drilling Co. Inc.
1,485,807
332
Arapahoe
96
Strat Land Exploration Co.
97
98
Source: IHS Herold; For more information about IHS Herolds Private Company Database, visit herold.com/research.herold.contact_us
Production totals based on latest figures as reported to and recorded by individual state agencies and tabulated by IHS at time of publication. Some agencies are delayed by as many as several months in
releasing data which may impact rankings.
2012 Year-to-date production alphabetical listing

Rank
BOE
City
State
38
Alta Mesa Holdings LP
Company
3,706,078
Houston
TX
Top executive officials
26
Ankor Energy LLC
5,408,725
New Orleans
LA
Denton Copeland, pres, CEO; Michael Anderson, exp mgr; W. Folsom, ops mgr
Michael McCabe, VP, CFO; Mike Ellis, chair, COO; Hal Chappelle, pres, CEO
57
Antero Resources LLC
2,846,334
Denver
CO
Paul Rady, chair, CEO; Glen Warren, pres, CFO; Kevin Kilstrom, VP prod; Steven
Woodward, VP bus dev
92
Augustus Energy Partners
1,742,598
Billings
MT
Steve Durrett, pres, CEO; Robert Fisher, VP exp; Duane Zimmerman, VP ops
28
Ballard Exploration Co. Inc.
5,161,919
Houston
TX
Dana Roy, exp geologist; A. Ballard, pres, CEO, owner
34
BASA Resources Inc.
4,324,107
Dallas
TX
Robert Marshall, VP ops; Sandra Wallace, CFO; Lary Knowlton, co-founder, exec VP;
Michael Foster, pres, co-founder
14
Bass Companies
10,883,134
Fort Worth
TX
Mitchell Roper, pres; W. McCreight, VP land; H. Muncy, VP exp; John Smitherman, VP

prod
64
Battalion Resources Holdings

LLC
2,433,419
Denver
CO
Keith Knapstad, pres, COO
61
Berexco Inc.
2,608,863
Wichita
KS
Adam Beren, pres, chair
30
Black Elk Energy LLC
5,039,403
New Orleans
LA
John Hoffman, pres, CEO; James Hagemeier, CFO
67
Border To Border exp LLC
2,378,931
Austin
TX
John Gaines, CFO; Sam Allen, exp mgr; Matthew Telfer, CEO
45
Burnett Oil Co. Inc.
3,464,667
Fort Worth
TX
Philip Boschetti, VP, CFO; Andrew Grubb, drilling, prod; Anne Marion, chair, owner;
William Pollaru, pres
43
Castex Energy Inc.
3,538,338
Houston
TX
Kevin Ikel, bus dev mgr; John Stoika, pres
20
Chief Oil & Gas LLC
6,554,610
Dallas
TX
John Hinton, sr VP, CFO; Sam Fragale, sr VP ops; Logan Magruder, pres, CEO; Trevor
Rees-Jones, founder, chair
78
Choice exp Inc.
2,102,973
Arlington
TX
Jon Martin, pres; David Brooks, founder, COO, VP ops; Darryl Smith, exp mgr
13,258,171
Houston
TX
Curtis Harrell, pres, CEO; Robert Kennedy, sr VP bus dev, land; Christopher Phelps, sr VP,
CFO; Steven Pearson, sr VP ops
21
Citrus Energy Corp.
6,502,471
Castle Rock
CO
David Oberbrockling, VP; Lance Peterson, pres
47
CML Exploration LLC
3,437,135
Kingwood
TX
Lee Staiger, ops mgr
81
Cobra Oil & Gas Corp.
1,997,750
Wichita Falls
TX
Charlie Gibson, ops mgr; Rory Edwards, drilling, prod mgr; Jeff Dillard, pres; Robert
Osborne, VP, co-owner; Richard Haskin, CFO
99
Crawley Petroleum Corp.
1,565,719
Oklahoma
City
OK
Stephen Hatfield, pres; James Crawley, chair, founder; James Drennen, VP
Quorum Division of Interest
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BOE
City
State
42
CrownQuest Operating LLC
Company
3,587,294
Midland
TX
Robert Floyd, pres; David Crass, VP exp, dev; Timothy Dunn, principal, CEO
76
Davis Petroleum Corp.
2,155,174
Houston
TX
Thomas Hardisty, VP land, bus dev; Daniel Hawk, exec VP, CFO; Michael Reddin, pres,
CEO
48
DCOR LLC
3,419,317
Ventura
CA
Jeffrey Warren, VP; William Templeton, pres, managing member, principal
62
Deep Gulf Energy LP
2,529,161
Houston
TX
Dave Huber, co-founder; Tom Young, VP of bus dev
12
Dynamic Offshore Resources

LLC
12,575,748
Houston
TX
Howard Tate, sr VP, CFO; Carey Naquin, VP well ops; John Smith, VP land, bus dev;
John Jo, sr VP eng; Matt McCarroll, pres, CEO; Gary Janik, VP exploitation, dev; James
Brokmeyer, VP prod ops
95
E&B Natural Resources

Management Corp.
1,628,235
Bakersfield
CA
Francesco Galesi, chair; James Tague, VP finance, planning; Stephen Layton, pres
75
Eagle Oil & Gas Co.
2,181,914
Dallas
TX
Warren Ayres, exec VP, CFO, dir; Pat Bolin, chair, CEO; Darrell Lohoefer, pres, COO; Bill
Fairhurst, VP of exp, land
15,449,367
Midland
TX
Autry Stephens, CEO, founder, partner
18
Fasken Oil and Ranch Ltd.
8,352,093
Midland
TX
Norbert Dickman, VP, gen mgr; Dexter Harmon, exp mgr; Jimmy Davis, ops mgr; Mark
Merritt, oil & gas mgr
39
FIML Natural Resources LLC
3,692,421
Denver
CO
Mark Bingham, director
74
Finley Resources Inc.
2,185,438
Fort Worth
TX
Clinton Koerth, VP acq, land; James Finley, CEO, owner; Stephen Clark, CFO; Brent Talbot,
pres
77
Gary, Samuel Jr, Associates

Inc.
2,134,812
Denver
CO
Samuel Gary, pres, treas, founder; Jeff Lang, VP ops; Craig Ambler, COO, partner; Lonnie
Brock, CFO
29,372,388
The
Woodlands
TX
John Perrella, CFO, controller; George Bishop, pres, owner
53
Henry Resources LLC
3,156,736
Midland
TX
Jim Henry, CEO
Hilcorp Energy Co.
33,481,830
Houston
TX
Jeffery Hildebrand, CEO, chair; Greg Lalicker, pres; Jason Rebrook, exec VP, A&D; Lee
Beckelman, exec VP, CFO
15
Hunt Oil Co.
10,450,753
Dallas
TX
Steve Suellentrop, pres
29
Indigo Minerals LLC
5,160,982
Houston
TX
Becky Bayless, CFO, exec VP; Keith Jordan, pres; William Pritchard, chair, CEO
27
J. Cleo Thompson, James Cleo

Thompson, Jr.
5,218,086
Dallas
TX
James Thompson, pres, CEO, managing partner
52
Jetta Operating Co. Inc.
3,172,158
Fort Worth
TX
Greg Bird, pres, pres, owner; Jeanette Clark, VP controller, treas; Rick Cornelius, VP
contracts; John Jarrett, CFO, VP; Shannon Nichols, VP land; Mike Richardson, exec VP;
Gordon Roberts ,VP bus dev
97
JM Cox Resources LP
1,625,904
Midland
TX
Ben Stickling, ops mgr; John Cox, pres, CEO
32
Jones Energy Holdings LLC
4,682,117
Austin
TX
Hal Hawthorne, VP exp; Mike McConnell, pres, COO; Craig Fleming, exec VP, CFO; Jonny
Jones, CEO, chair
16
J-W Operating Co.
8,799,861
Addison
TX
Tony Meyer, pres
24
Kaiser-Francis Oil Co.
6,270,589
Tulsa
OK
Henry Kleemeier, exec VP, COO; Don Millican, CFO, VP; George Kaiser, pres, CEO
41
Killam Oil Co. Ltd.
3,656,141
Laredo
TX
David Killam, Partner, mgr; Radcliffe Killam, CEO
36
Laredo Energy IV
3,718,016
Houston
TX
Glenn Hart, pres, CEO; Jim Flowers, VP drilling, completion; Ken Cravens, VP land; Paul
Thompson, chief geologist; Scott Stevenson, VP acq; Jerry Holditch, VP geology; Jaime
Casas, CFO
Quorum TIPS
Processing / Gathering Management
www.qbsol.com

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Company
BOE
City
State
OK
David Le Norman, pres, owner
70
Le Norman Operating LLC
2,361,574
Oklahoma
City
11
12,795,255
Houston
TX
Scott Gutterman, pres, CEO; Mitch Ackal, VP bus dev; Tim Lindsey, sr VP, prod/ops; John
Newman, CFO, treas; Randy Pick, managing dir, A&D
63
MacPherson Oil Co.
2,467,613
Santa
Monica
TX
Donald MacPherson, pres, CEO ; Scott MacPherson, sr VP, COO; Bradford Williams, CFO
73
Manti Resources Inc.
2,325,698
Corpus
Christi
TX
Lee Barberito, pres; Robert Helm, CFO
98
McGowan Working Partners
1,566,891
Jackson
MS
Joseph McGowan, VP; James Phyler, VP; David McGowan, partner; John McGowan,
managing gen partner; David Russell, pres, CEO
Merit Energy Co.
42,703,336
Dallas
TX
Meghan Cuddihy, dir, IR; Kevin Ryan, sr VP, CFO; William Gayden, chair, founder
Mewbourne Oil Co.
19,095,646
Tyler
TX
Monty Whetstone, VP prod; Kenneth Waits, COO, exec VP; J. Roe Buckley, CFO, exec VP;
Bruce Insalaco, VP exp; Curtis Mewbourne, pres, CEO, owner
50
Midstates Petroleum Co.
3,338,697
Houston
TX
Stephen McDaniel, chair; John Crum, pres, CEO; Stephen Pugh, exec VP, COO
49
Milagro Oil & Gas Inc.
3,385,578
Houston
TX
Gary Mabie, COO; Marshall Munsell, sr VP bus dev; James Ivey, pres, CEO; Robert
LaRocque, VP finance, treas
100
Mull Drilling Co. Inc.
1,485,807
Wichita
KS
Lewis Mull, chair, CEO; Mark Shreve, pres, COO; Steven Anderson, sr VP; Jennifer Mull,
exec VP
46
Murex Petroleum Corp.
3,448,372
Houston
TX
Waldo Ackerman, pres; Donald Kessel, VP
55
New Dominion LLC
3,083,028
Tulsa
OK
Jean Antonides, VP, exp; Susan Keary, CFO; Kevin Easley, pres, CEO
68
Parsley Energy Co.
2,376,717
Midland
TX
Bryan Sheffield, pres
86
Patara Oil & Gas LLC
1,920,883
Houston
TX
Pat McGarey, CFO; Lloyd DeLano, CAO; Bill Berilgen, CEO
83
Petro Harvester Oil & Gas LLC
1,967,541
Plano
TX
Dennis Justus, CFO; Gareth Roberts, chair; Scott King, VP exp, dev; Randy Holt, VP ops;
William Griffin, pres, CEO
Petro-Hunt Group
13,522,544
Denver
CO
Tom Nelson, VP finance; Douglas Hunt, dir of acq; Charles Rigdon, VP ops; Bruce Hunt,
pres
44
Pisces Holding Co.
3,505,241
Metairie
LA
Bill Gray, co-founder, principal; John Barrett, co-founder, principal
40
Pruet Production Co.
3,689,043
Jackson
MS
J. Hilton, VP prod; Randy James, pres; Rick Calhoon, VP, sec
84
R. Lacy Inc.
1,938,669
Longview
TX
Bluford Crain, VP; Rogers Crain, VP; Ann Crain, pres
22
Red Willow Production Co.
6,484,243
Ignacio
CO
Robert Voorhees, pres, COO; Bill McFie, VP ops; Stephen Goff, CFO
37
Reliance Energy Inc.
3,708,727
Midland
TX
B. Jack Reed, CFO; Gary McKinney, pres, CEO, owner; Julie Edgerton, controller
94
Rice Energy LLC
1,695,834
Cannonsburg
PA
Daniel Rice, Founder, owner; Daniel Rice, CFO; Toby Rice, COO
89
Ricochet Energy Inc.
1,780,297
San Antonio
TX
Jerry Hamblin, pres
90
Rosewood Resources Inc.
1,776,221
Dallas
TX
Linda Tucker, VP admin, finance; Gary Conrad, pres; Geoff Ice, VP exp
44,075,209
Tulsa
OK
David Adams, COO; Stacy Schusterman, chair, CEO
91
Sanchez Oil & Gas Corp.
1,750,622
Houston
TX
Joseph DeDominic, sr VP, COO; Glenn Adcock, VP ops; Michael Long, sr VP, CFO, sec;
Antonio Sanchez, chair, pres, CEO
35
Sanguine Gas Exploration LLC
4,007,340
Tulsa
OK
Randolph Nelson, pres; Thomas Fuller, VP finance, treas
17
Sheridan Production Co. LLC
8,615,971
Houston
TX
Matt Assiff, exec VP, CFO; Jim Bass, exec VP, COO; Lisa Stewart, CEO
87
Sklar Exporation Co. LLC
1,839,974
Shreveport
LA
Howard Sklar, owner, CEO; David Barlow, VP, COO; Chris Farrell, VP, CFO; Cory Ezelle, VP
exp
Quorum PGAS
Gas & Liquids Flow Measurement
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Rank
BOE
City
State
11,055,658
Wichita
KS
Donald Slawson, pres, CEO
71
Square Mile Energy
2,350,164
Houston
TX
Gary Loveless, chair, CEO
65
Stephens and Johnson

Operating Co.
2,415,744
Wichita Falls
TX
Fred Stephens, pres
31
Stephens Production Co.
4,705,537
Fort Smith
AR
W.R. Stephens, pres, CEO
96
Strat Land Exploration Co.
1,626,244
Tulsa
OK
Larry Darden, pres, CEO, owner; Russell McGhee, CFO
56
Summit Petroleum LLC
3,023,999
Midland
TX
Matthew Johnson, exec VP ops, finance; Dennis Johnson, pres, CEO; Thomas Fago, VP
exp
54
Tana Exploration Co.
3,108,993
The
Woodlands
TX
Madison Woodward, VP exp, new ventures; Daniel Markey, VP exp, tech; Kevin Talley,
pres; Carl Comstock, VP land, bus dev
59
Tellus Operating Group LLC
2,673,817
Ridgeland
MS
Richard Mills, pres, mgr; Thomas Wofford, CFO
23
Texas Petroleum Investment

Co.
6,305,417
Houston
TX
H Sallee, pres, co-founder; Wiliam Crawford, co-owner, principal
60
Texland Petroleum LP
2,671,570
Fort Worth
TX
Frank Kyle, CFO; Gregory Mendenhall, VP ops; Jerry Namy, co-owner; James Wilkes,
pres, co-owner; Bryan Lee, VP exp
66
Tidelands Oil Production Co.
2,379,600
Long Beach
CA
Don Foster, controller; Michael Domanski, pres, CEO, gen mgr; Mark Kapelke, VP ops, eng
UT
Joe Jaggers, pres, CEO
13
Company
93
Ute Energy LLC
1,711,256
Fort
Duchesne
25
Valence Operating Co.
5,961,990
Kingwood
TX
Steve Manning, pres; Douglas Scherr, CFO, sec; Walter Scherr, CEO
58
Vantage Energy LLC
2,735,379
Englewood
CO
Roger Biemans, co-founder, chair, CEO; Thomas Tyree, co-founder, pres, CFO; Mike
Kennedy, exec VP, COO
51
Venture Oil & Gas Inc.
3,305,537
Laurel
MS
Jay Fenton, pres; Jarvis Hensley, VP ops
72
Vernon E. Faulconer Inc.
2,349,936
Tyler
TX
Tom Markel, VP, acct, CFO; Vernon Faulconer, CEO; Jean Crawley, VP, land, admin; David
Enright, pres
79
Vess Oil Corp.
2,052,793
Wichita
KS
Barry Hill, CEO; Ronnie Nutt, sr VP, ops, eng, bus dev; J. Michael Vess, chair; Brian
Gaudreau, VP, land, acq
82
Wagner Oil Co.
1,989,592
Fort Worth
TX
Bryan Wagner, pres, owner; William Lesikar, VP, CFO; HE Patterson, COO, sr VP
10
13,201,595
Houston
TX
Joseph Walter, pres, chair, CEO
88
Ward Petroleum Corp.
1,814,569
Enid
OK
David Rippee, exp mgr; Richard Tozzi, exec VP, CFO; Lew Ward, chair; Gilbert Tompson,
VP land ; William Ward, pres, CEO
69
West Bay Exploration Co.
2,376,084
Traverse City
MI
Harry Graham, VP exp; Robert Tucker, pres, owner; David Rataj, VP finance, treas
85
White Oak Energy LP
1,935,880
Houston
TX
Scott Nonhof, VP bus dev; Mark Etheredge, VP exploitation; Mike Rayburn, exec VP;
Thomas Isler, pres
19
WildHorse Resources LLC
6,687,019
Houston
TX
Jay Graham, pres; Anthony Bahr, CEO
80
Wolverine Gas & Oil Corp.
2,040,689
Grand Rapids
MI
Gary Bleeker, VP; Sidney Jansma, pres, CEO
20,535,437
Artesia
NM
John Yates, Jr., pres; John Yates, chair; Scott Yates VP; James Brown, COO; John Perini,
CFO, Jorge Mendoza, CAO
33
Zenergy Inc.
4,434,068
Tulsa
OK
Robert Zinke, pres, chair
Source: IHS Herold; For more information about IHS Herolds Private Company Database, visit herold.com/research.herold.contact_us
Production totals based on latest figures as reported to and recorded by individual state agencies and tabulated by IHS at time of publication. Some agencies are delayed by as many
as several months in releasing data which may impact rankings.
Quorum Marketing
Gas, NGLs, Crude Oil
www.qbsol.com

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Industry Briefs
Aker Solutions buys
drilling company
second half of 2013. Capital expenditures on the West Texas properties

Aker Solutions has acquired Managed for 2013 prior to the closing of the
Pressure Operations International
divestiture are estimated to be $63
Ltd. (MPO). Tudor, Pickering, Holt million to drill 16 wells (11.6 net).
& Co. served as exclusive financial
Evercore Partners acted as exclusive
advisor to MPO, an NGP Energy
financial advisor to Comstock in the
Technology Partners portfolio comtransaction.
pany. MPO currently employs 100
people in operating subsidiaries in
Freepoint completes first oil
Singapore, Dubai, Jakarta and Hous- and gas property acquisition
ton. Its revenue in 2012 was estimat- Freepoint Commodities LLC,
ed at approximately US$30 million.
through its subsidiary Freepoint ReMPO provides technologies within
sources LLC, has completed the acthe emerging managed pressure drill- quisition of 66 natural gas producing
ing segment. In addition, MPO has
wells from a subsidiary of Bucking
developed a new-generation riser-gas Horse Energy Inc. The natural gas
handling system to capture and safely wells, located in the Pinedale field in
handle gas in the riser.
Southwest Wyoming, are Freepoint
Resources first property acquisition.
Rosetta Resources
Freepoint Resources is Freepoint
buys properties from
Commodities recently established
Comstock for $768M
platform for acquiring and operatComstock Resources Inc. has agreed ing natural gas producing properto sell its oil and gas properties in
ties. Evercore Group LLC acted
Reeves and Gaines counties in West
as Freepoints exclusive financial
Texas to Rosetta Resources Inc. for
advisor in the transaction. Fulbright
& Jaworski LLP acted as Freepoints
$768 million. The sale is expected
legal advisor on the acquisition of
to close on or about May 15, 2013.
Comstock has revised its capital bud- the Pinedale properties and Stroock
get for 2013 to reflect the divestiture & Stroock & Lavan LLP acted as
Freepoints legal advisor on the
of the West Texas properties and
financing. Management and private
an increase in drilling activity in its
Eagle Ford shale in South Texas. The equity funds managed by Stone Point
Capital provided the initial equity
company is now projecting to spend
capital for Freepoint Commodities
$410 million in 2013 on drilling activities and $12 million on explorato- LLC and its subsidiaries, including
Freepoint Resources LLC.
ry leasehold for total capital expenditures of $422 million. Comstock
CenterPoint Energy,
plans to spend $347 million to drill
OGE Energy, ArcLight
82 wells (50.5 net) on its on-going
Capital to form MLP
operations in South Texas and East
CenterPoint Energy Inc., OGE
Texas/North Louisiana. The Eagle
Ford shale will account for $312 mil- Energy Corp., and ArcLight Capital
Partners LLC have agreed to form
lion of the budget where Comstock
plans to drill 72 wells (46.9 net) with a master limited partnership that
will include CenterPoint Energys
the remainder related to the compainterstate pipelines and field services
nys natural gas properties primarily
businesses and the midstream busiin East Texas and North Louisiana.
Comstock plans to increase the num- ness of Enogex LLC, owned jointly
by subsidiaries of OGE and Arclight.
ber of operated rigs in South Texas
The partnership will be managed by
from the three that are currently
a general partner whose governance
drilling to a total of six during the
44
will be shared by CenterPoint Energy

and OGE on a 50/50 basis. The new
partnership will own and operate
8,400 miles of interstate pipelines
with nearly 9 billion cubic feet of
transport capacity and nearly 2,300
miles of intrastate pipelines. It will
also have more than 11,000 miles
of gathering lines, which in 2012
moved nearly 4 billion cubic feet of
natural gas per day. Additionally, it
will have more than 90 billion cubic
feet of natural gas storage capacity
and 11 major processing plants with
nearly 2 billion cubic feet per day of
inlet capacity. The new partnership
will seek to arrange a new $1.4 billion credit facility as well as a $1.05
billion term loan. Subject to certain
adjustments at closing, CenterPoint
Energy, OGE Energy and ArcLight
will have 59%, 28% and 13% limited
partner interest in the partnership,
respectively. CenterPoint Energy and
OGE Energy will hold 40% and 60%
interests, respectively, in the incentive distribution rights of the general
partner. Pursuant to a registration
rights agreement to be signed upon
the closing of the transaction, OGE
and CenterPoint Energy will agree
to initiate the process for the sale of
equity interests in the partnership
in an initial public offering (IPO).
CenterPoint Energy was advised by
Citigroup Global Markets Inc. and
Baker Botts LLP. OGE was advised
by UBS Investment Bank and Jones
Day. ArcLight was advised by Wells
Fargo Securities LLC and McDermott Will & Emery LLP.
Albrecht & Associates,

Raymond James combine
Albrecht & Associates, an oil and
gas divestment firm specializing in
the property market, and the Raymond James Energy Acquisitions &
Divestitures Advisory Practice have
combined to form Raymond James |
Albrecht. The newly created practice,
which resides within Raymond James
Energy Investment Banking, is fo-

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Industry Briefs
cused on providing advisory services
to energy companies and individuals
that are considering oil and gas asset
sales. Albrecht, Simon and executive
vice president Harrison Williams will
serve as joint co-heads of acquisitions
& divestitures. Previously a Morgan
Keegan subsidiary, Albrecht & Associates joined Raymond James as part
of the firms acquisition of Morgan
Keegan. Raymond James | Albrecht is
located in Houston.
Williams, Boardwalk look

to develop pipeline
to transport mixed NGLs
Williams and Boardwalk Pipeline
Partners LP have executed a letter
of intent to form a joint venture that
would develop a pipeline project to
transport natural gas liquids from
the Marcellus and Utica to the
petrochemical and export complex
on the US Gulf Coast, as well as the
petrochemical market in the Northeast US. The proposed Bluegrass
Pipeline design would provide producers with 200,000 barrels per day
of mixed NGLs take-away capacity in
Ohio, West Virginia and Pennsylvania. The proposed pipeline could be
increased to 400,000 barrels per day,
primarily by adding additional liquids
pumping capacity. It would deliver
mixed NGLs from these producing
areas to proposed new fractionation
and storage facilities, which would
have connectivity to petrochemical
facilities and product pipelines along
the coasts of Louisiana and Texas.
The companies are exploring development of a new export liquefied
petroleum gas terminal and related
facilities on the Gulf Coast to provide
customers access to international
markets. As proposed, the Bluegrass
Pipeline would include the following:
Constructing a new NGL pipeline
from producing areas in West Virginia and Ohio to an interconnect
with Boardwalks Texas Gas Transmission LLC system in Hardinsburg,
KY; converting a portion of Texas
Gas from Hardinsburg to Eunice, LA

(the TGT Loop Line) from natural
gas service to NGL service, including
construction of new pump stations
and related facilities; and constructing a new large-scale fractionation
plant and expanding natural gas
liquids storage facilities in Louisiana
and a new pipeline connecting these
facilities to the converted TGT Loop
Line. The companies expect to sanction the project this year and place
the planned project into service in
the second half of 2015 assuming all
necessary conditions are met.
Black Elk receives

$50M commitment
from Platinum Partners
Houston, TX-based Black Elk
Energy Offshore Operations LLC
has received a $50 million preferred
equity commitment from Platinum
Partners Value Arbitrage Fund LP
to fund Black Elks 2013 drilling
program in the Gulf of Mexico. The
2013 drilling program includes a 23
well capital campaign that will begin
monetizing the companies proved
undeveloped reserve inventory.
Platinum Partners Value Arbitrage
Fund LP is a multi-strategy hedge
fund based in New York with firm
assets under management in excess of
$700 million.
Riverstone Holdings
increases commitments
with acquisition, investment
Riverstone Holdings LLC, an energy
and power-focused private equity
firm, and Utex Industries Inc., have
signed a definitive agreement pursuant to which Riverstone Global Energy and Power Fund V LP, in partnership with Utex management, will
acquire Utex from investment funds
affiliated with Rhone Capital LLC.
Financial terms were not disclosed.
Utex is a manufacturer of engineered
sealing and other specialty products
used in a variety of applications and
equipment related to onshore and
offshore oil and gas drilling and

production, power, mining, water
treatment, and other industrial sectors. In addition, Riverstone Global
Energy and Power Fund V LP will
make a strategic investment alongside
Ridgewood Energy Corp. in a series
of deepwater exploration projects
located in the Gulf of Mexico. The
investment brings the total Riverstone sponsored fund commitment
to the venture to over $550 million.
Since its inception in mid-2010,
this venture has participated in four
significant oil discoveries located in
the Mississippi Canyon and Ewing
Bank regions of the deepwater Gulf
of Mexico, all of which are currently
under development and expected to
commence production in 2015 and
early-2016. The venture now has an
additional seven exploration opportunities being progressed, the first of
which will begin drilling in March
2013.
Cowen Group completes

acquisition of Dahlman Rose
Cowen Group Inc. has completed
the previously announced acquisition
of Dahlman Rose & Company LLC,
a privately-held investment bank
specializing in the energy, metals and
mining, transportation, chemicals
and agriculture sectors. Financial
terms of the all-stock transaction
were not disclosed. Cowen Group
Inc. is a diversified financial services
firm and, together with its consolidated subsidiaries, provides alternative investment, investment banking,
research, and sales and trading services through its two business segments:
Ramius and its affiliates make up the
companys alternative investment
segment, while Cowen and Company and its affiliates make up the
companys broker-dealer segment.
Its alternative investment products,
solutions and services include hedge
funds, replication products, managed
futures funds, fund of funds, real
estate and health care royalty funds.
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Energy Players
Cascadia Capital
names Nicoloff to lead
oil and gas effort
operations in January 2011. He has

more than 30 years of industry experience in exploration and production
Investment bank Casoperations. Prior to joining Rosetta,
cadia Capital LLC is
he was COO for BPI Energy Inc.
expanding the focus of
For more than 20 years, he previits sustainable indusously held technical and management
tries practice group
positions with Burlington Resources.
to include energy,
He received a bachelors degree from
the environment, and
Texas A&M University. Clayton
Nicoloff
sustainable technolojoined Rosetta as vice president, asset
gies sectors. The firm
development in March 2008 and was
has appointed William Nicoloff as
named a senior vice president in Janumanaging director within the sustain- ary 2011. He has more than 25 years
able industries group. Nicoloff will
of industry experience in the industry.
concentrate on the oil and gas sector, Prior to joining Rosetta, he held various leadership and managerial posiincluding E&P companies, pipeline
and storage companies, refineries, and tions with Burlington Resources and
ConocoPhillips. He has a bachelors
oil service companies. He joins Cascadia with over 18 years investment
degree from Louisiana State Univerbanking and transactional experience sity.
in the oil and gas sector. Prior to joining Cascadia Capital, he was a manag- Louis Raspino fills
ing director at Bentley Associates LP
Chesapeake board vacancy
in New York where he led the Power left by Hargis resignation
& Energy team, with a heavy empha- V. Burns Hargis has resis in the oil and gas industry.
signed from the board
of directors at ChesaLimbacher resigns as CEO
peake Energy Corp.
of Rosetta Resources
Louis A. Raspino has
Rosetta Resources Inc.
been elected to fill the
has made changes to
vacancy and has been
Raspino
its executive leadership
appointed chairman
including the resignaof the audit committion of its chairman,
tee. He will stand for election at the
CEO and president,
2013 annual meeting of shareholders
Randy L. Limbacher.
in June. Raspinos career has spanned
Limbacher
Limbacher had served
almost 40 years, most recently as
as Rosettas CEO and
president and CEO of Pride Interpresident since 2007. He will be
national Inc. until its merger with
succeeded as chairman, CEO, and
Ensco plc in May 2011. He started
president by James E. Craddock,
his corporate career in 1978 with The
who has served as Rosettas senior
Louisiana Land & Exploration Co.
vice president of drilling and produc- where he rose to the level of SVP/
tion operations. In addition, John D. CFO and member of the Office of
Clayton will be appointed as executhe Chairman. Raspino helped lead
tive vice president and COO. He pre- the companys strategic transformaviously served as Rosettas senior vice tion that ultimately enabled a merger
president of asset development. Crad- in 1997 with Burlington Resources.
dock joined Rosetta as vice president, After serving as vice president of
drilling and production operations in finance for the Halliburton Co., he
April 2008 and was named senior vice then became senior vice president
president, drilling and production
and CFO of Grant Prideco Inc. He
46
was named senior vice president

and CFO of Pride in 2003 and was
promoted to president and CEO in
2005. He began his career in 1973
as a Certified Public Accountant with
Ernst & Young. He serves on the
board of Dresser Rand Corp. where
he is chairman of the compensation
committee and a member of the audit
committee. In 2012 he became an
investor in and board member of
Forum Energy Technologies, where
he serves on the nominating, governance and compensation committee.
Raspino earned a bachelors degree
from Louisiana State University and
a Master of Business Administration
from Loyola University. He has remained a Certified Public Accountant
since 1973.
Person joins Klber

Lubrication North America
Ron Person has joined
Klber Lubrications
North American operations as director of
business development
for oil and gas. Person
has more than 20 years
Person
of experience in the oil
and gas industry. Prior
to joining Klber, he was a global
subsea manager for BP Lubricants.
He holds a bachelors degree from
Texas A&M University, where he was
a member of the Corps of Cadets,
accepting a commission into the US
Army.
Black Elk names

first general counsel
Black Elk Energy Offshore Operations LLC, an independent oil and
gas company, has named its first
general counsel, Marizza Pich. She
joins the company with over 20 years
of legal experience in the oil and gas
industry, most recently as general
counsel with Boa Marine Services
Inc. Pich has a bachelors degree
from the University of Texas and JD
from Texas Southern University. Her

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Energy Players
experience includes formalizing and
negotiating contracts, Time Charters
and Master Service Agreements. Pich has also worked extensively with
outside counsel on virtually every
aspect of the industry as it relates to
the acquisition, exploration, development, production, marketing, divesture and financing of crude oil and
natural gas. She is also experienced
in the formation, operation, liquidation and restructuring of oil and gas
companies.
2H Offshore names
Jewell, Ha as London
office directors
remain COO. W. Matt Ralls will continue to serve as the companys CEO
until his retirement in mid-2014,
when it is anticipated that Dr. Burke
will succeed him as the companys
CEO and Matt Ralls will assume the
role of executive chairman. Burke was
appointed COO of the company in
July 2011. He joined the company
in December 2009 and served as the
president and CEO of LeTourneau.
He holds a DPhil (PhD) from Trinity
College, Oxford and an MBA from
Harvard Business School.
Brenham Oil & Gas appoints

president, COO
2H Offshore Inc., an
Acteon company, has
named Glen Jewell and
Hanh Ha as additional
directors of its London
office. Has primary
activity sector will be
Jewell
flexible riser, flowline
and umbilical engineering, and Jewells
focus will be drilling
and production risers
and conductor systems. Jewell joined
2H Offshore Inc. after
Ha
completing his masters degree at Surrey
University. For the past three years,
Jewell has worked as an engineering
team leader with responsibility for a
number of engineering projects and
contributing to the day-to-day running of the companys London office.
Ha earned a masters degree from
Manchester University. He joined 2H
Offshore Inc. in 2011 with 10 years
of previous subsea engineering experience in the delivery and execution of
field developments with flexible riser,
flowline and umbilical systems.
Brenham Oil & Gas Corp., a subsidiary of American International Industries Inc., has appointed Bryant Mook
as president and COO of Brenham.
He will also service as a company
board member. Mook, a petroleum
engineer and geologist, obtained his
undergraduate degree from Southern
Methodist University and a masters
degree from Colorado School of
Mines.
Burke named president of

Rowan Companies
Saxon Energy Services

names new president, CEO
Rowan Companies plc has named

Thomas P. Burke, the companys
current COO, to president. He will
Saxon Energy Services Inc. has named

Derek Normore to replace M.J.
(Mick) McNulty as president and
SIGMA3 names Deering as

director of software quality
SIGMA3 Integrated Reservoir Solutions Inc. has appointed Todd Deering as director of software quality.
With more than 12 years of experience in developing, deploying, and
operating the systems, Deering will
oversee quality assurance and change
management across all of the companys software technology products.
He joins SIGMA3 from JP Morgan
Chase, where he led the investment
banks Risk Technology Performance
& Automation team. Deering holds
a Bachelor of Science in Integrated
Science & Technology - Energy from
James Madison University.
CEO. McNulty has left the company

to pursue personal interests. Normore
brings extensive international oilfield
service experience developed through
a 32-year career managing several of
Schlumbergers global businesses,
regions and initiatives. Most recently,
Normore served as president of
Pathfinder. Prior to joining Pathfinder
in 2011, Normore was an Integration Project Manager following the
merger between Schlumberger Ltd.
and Smith International Inc. Normore also joins the companys board
of directors. Saxon is privately owned
by Schlumberger, First Reserve, and
certain current and former Saxon
managers.
Oil and gas partner

Harris joins SNR Denton
in Los Angeles
John J. Harris has joined SNR Dentons Los Angeles office as a partner
in the Oil and Gas practice and the
firms Energy, Transport and Infrastructure sector team. Harris has more
than 30 years of experience representing oil and gas producers, working
interest owners, land and mineral
owners, financial institutions and public agencies on oil and gas, energy and
environmental matters. He received
his JD from the University of California, Hastings College of the Law, and
his bachelor's degree from the University of California at Santa Barbara.
HB Rentals promotes
Nagel to VP
HB Rentals, a Superior Energy Services company, has promoted John
Nagel to vice president of product
development. Based in the corporate
headquarters in Broussard, La., Nagel
will be responsible for the design and
development of HB Rentals fleet
including engineering, manufacturing and quality control. Nagel is a
former US Coast Guard Marine Safety
Inspector and has more than 40 years
of experience in specialized equipment
inspection and maintenance.
47
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advertisement
WINDS
CHANGE
WINDS
OF CHANGE
OF
Hydrocarbon
Renaissance
MEXICOSMexicos
HYDROCARBON
RENAISSANCE
Cover Mexican Catrina
This sponsored supplement was produced by Focus Reports. Report Publisher: Ines Nandin. Editor: Eric
Watkins. Project & Editorial Director: James Waddell. Project Coordinators: Chiraz Bensemmane, Zuzana
Kudelova. Editorial Researcher: Cameron Rochette. For exclusive interviews and more info, plus log onto
www.energy.focusreports.net or write to contact@focusreports.net
energy.focusreports.net
49
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n the hands of its new stew-
Being the worlds fourth larg-
ard, Mexico seems to be at the
est oil producer, PEMEX has fallen
brim of a prodigious reincarna-
from grace over the last few years
tion that promises to usher in an
due to a deadly cocktail of declin-
era of wealth and a better life for
ing production, failed exploration
Mexicans. While such pledges are
attempts, mismanagement of funds
ubiquitous in the political rhetoric

of this country, the first five months
of Enrique Pea Nietos presidency
have revealed a decisive leader will-
and assets, and an inability to curb a

local black market of crude oil. For
the past five years the company has been reaping in losses financed by the state. As if by divine
intervention, in October and November 2012 PEMEX announced three new discoveries two in
deepwater and one onshore holding a combined estimated 27.5 billion barrels of oil.
ing to rattle the status quo and initiate changes that could drag the
country out of economic stagna-
Enrique Pea Nieto,President of Mexico
The opportune news is bolstered by the new political wave which could possibly be the
springboard for PEMEX to rise above and beyond all expectations. Indeed, Mexicans are
familiar with celebrating death in order to revere new beginnings, such as through the popular
tion illustrated by its average .7%
dia de los muertos celebrations. These recent changes appear to be chanting: out with the
annual growth over the last decade.
old, in with the new PEMEX. The mythical phoenix rising out of the ashes.
Criticized by some for his manicured playboy charms and a pas-
Defining Change
sion for populist theatrics, the new
Sure, this is easier said than done. Mostly because Mexicos oil belongs to the people of
president and his posse are hardly
Mexico, as established by the constitution, causing labor unions and leftist political factions to
histrionic in recognizing the need
condemn Pea Nietos energy reform as an attempt to privatize PEMEX and sell off that which
to jumpstart Mexicos economy by
belongs to the people. On the other hand, there is great support from the private sector
transforming its state-controlled oil
who understands the immeasurable opportunities that would emerge from an aperture in the
sector that generates one-third of
states control of the oil & gas market.

The energy sector needs a lot of media coverage to be fully understood. I think the energy
the nations income. His presidential

platform focused on constructing a
more competitive Mexico, partly
through a reform of the energy
reform should take place, but at the ministerial level, not at the level of PEMEX. The main
Crude oil production
sector, PEMEX included, by allow-
companies in order to generate efficiencies through competition.
This sponsored supplement was produced by Focus

Reports. Publisher: Ines M Nandin;Project Director:
Leonardo Barquero; Project Coordinator: Maria
Elena Gomez Alvarez. For exclusive interviews and
more info, please visit energy.focusreports.net or
write to contact@focusreports.net
Thousands of barrels per day
ing greater participation of private
3,000
Total
Heavy
Light
Superlight
2,500
2,000
1,500
1,000
500
0
E F M A M J J A S O N D E F M A M J J A S O N D E
2011
2012
2013
50

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Export of crude oil, Jauary 2013
in submarine construction and engineering
Thousands of barrels per day

Olmeca
14%
Europe
19%
Istmo
10%
projects, but offers a portfolio of services

that spans the entire value chain, from assistOthers
2%
ing production to the transportation and distribution of hydrocarbons.

As a key player in the industry, Mr. Vazquez
agrees that a reform is in need, however, he
affirms that any changes should not affect
Maya
76%
America
79%
PEMEXs operational capacity, particularly

in exploration and production. We need
Total
1,289
a good reform in Mexico, starting with the

National Hydrocarbons Commission (CNH).
The Commission should be reinforced to
generate competition in the sector; this
point is that PEMEX should be left alone to do its work, as it has never failed in its mission to
should not be up to PEMEX. It is essential
provide the country with fuel, states Oscar Vazquez, founder and general manager of Grupo
that we allow PEMEX to continue their regu-
Diavaz. With more than 40 years experience, Grupo Diavaz is one of the most prominent
lar work, while companies like ours can be
and respected Mexican service providers to the oil & gas sector. The company specializes
assigned to do the specialized work under
_____________
____________
51
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the supervision of the CNH.
chemicals and Petrochemicals. Indeed, one of the first targets of the
The CNH was established in 2008
energy reform is to streamline this structure by amalgamating the
as an independent and objective
four entities into one giant PEMEX as a means to gain greater control
entity that would advise PEMEX
over decision-making processes.
and the government in the devel-
I believe we are currently experiencing a generational change in
opment of the national oil & gas
the industry, not only here in Mexico but throughout the world, says
sector.
that
Jaime Gallegos, founder and ceo of Share Oil Services. As a Harvard
PEMEX is not perfect, but we must
MBA graduate and innate entrepreneur, Gallegos founded Share Oil
Everyone
knows
still support it in its mission as the
Oscar Vazquez, CEO, Grupo Diavaz
Services in 2011 in direct response to the needs of the Mexican indus-
national oil company. I like to think of PEMEX as an unattractive wife,
try that generally lacks the technology and expertise to tackle chal-
whom we must love and kiss on a daily basis, even if it is not appeal-
lenges such as mature fields and new offshore discoveries.
ing to us, concludes Vazquez.
Share Oil began as a service provider that uses computer and
After all, it makes sense that local giants such as Diavaz welcome
mathematical models to find solutions to their clients operational
the increased participation of private companies as they would surely
problems whether technical or administrative. The group today
be able to fare well in the ensuing competition. Nonetheless, local
has four main divisions: our drilling services unit, another dedicated
newcomers are also embracing the idea that PEMEX delegate more
to the creation of software, another to simulation and modeling that
of its operations, which today are divided amongst four subsidiary
also offers consulting services, and finally our human resources devel-
entities: Exploration & Production, Refining, Gas and Basic Petro-
opment section that serves mostly as a training center, boasts Gal-
_______________________
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legos. As part of his strategy, he has
and Colombia, have achieved with their NOCs, and gather the best
opted not to serve PEMEX directly
practices from those experiences and apply them to the Mexican con-
and only to work for contractors.
text. With the new presidential administration, maybe we will emu-
The proposed energy reform would
late the Brazilian model which will allow PEMEX to focus much more
only mean an increased client base
on core business and on having a reduction in their production and
for him.
extraction costs, and a huge improvement in terms of storage and
The idea of an energy reform
distribution, opines Carlos Sandoval, president of the ORSAN group
is no novelty. Former President
of companies. ORSAN started out a single gas station in the northern
Calderon initiated this trend in 2008
Jaime Gallegos, CEO, Share Oil
city of Monterrey and today comprises several business, including
when his administration devised a system of incentivized contracts for
the storage and transportation of diesel and a chain of convenience
third parties to assist PEMEX in E&P. These contracts were created to
stores for their 110 gas stations throughout the country. Sandoval is
attract private investment with the promise of greater payouts when
certain his company could assist PEMEX in becoming more efficient
production objectives were surpassed by the contractor hence the
by taking over some of their distribution activities. We dont want
incentive to produce as much as possible. Global players, such as
PEMEX to lose control of the oil but we know that they can sell it in
Petrofac, sprung at the first glimpse of a more open and competitive
a slightly different way. This would involve the private sector to help
Mexico. The model is largely hailed as a success, but is perceived only
PEMEX with the storage and distribution of their oil, he concludes.
as a small step in a long journey to fully transforming the industry.

Todays trend is to look at what regional counterparts, such as Brazil
It is evident that hopes are high for a reform to take place, and
as of early March Pea Nieto was greasing the cogs of change by
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having his political party vote to eliminate its ban on modifying the
New Discoveries Beget New Challenges
countrys constitution to allow for fundamental changes to PEMEXs
Mexicos rise to fame as a global
structure. This consensus is impressive as it defies heavy resistance
oil producer began with its dis-
from labor unions. Ultimately, the unions must have been swayed to
covery of the enormous Cantarell
think that more investment, whether private or public, means more
Field in 1976, which produced 3.4
jobs for everyone.
million barrels per day at its climax
The President has also made a bold move by replacing the head of
in 2004. Ever since then, PEMEXs
PEMEX with a young business-minded economist, Emilio Lozoya Aus-
production has been in a continual
tin, whose experience includes founding a number of international
decline as most of its assets are
investment funds and serving as senior director for Latin America at
maturing and the oil left is harder
the World Economic Forum. The new Secretary of Energy, Pedro Joa-
and more expensive to extract.
Fernando Lozano, General Manager,

Forza Steel
quin Coldwell, also boasts an impressive resume including his stint
Back in 2008, it became evident to us that the oil and gas industry
as Secretary of Tourism where he successfully marketed Mexico as a
has a lot of monitoring needs, especially in oil fields where there is
desirable vacation destination. Paradoxically, the recent oil discover-
a great prevalence of salts, water, sands and viscous oil, which have
ies could prove to be unwanted obstacles as conservative interests
to be addressed with specific engineering solutions. Nowadays, the
will question the need for drastic change given these successes to
hydrocarbon is not just extracted and sold in its raw form, but rather
boast about.
it must be conditioned to meet certain requirements before it can be

used, explains Fernando Balderas, director general of Grupo SSC.
The company evolved from being a distributor of Ansys software in
the 90s to becoming one of the leading monitoring and simulation
companies in Mexico. Based on our simulations and monitoring services, we work together with the industry to provide operational solutions. This is why we have been growing the way we have because
we have been able to provide better results for our clients and their
projects, he asserts. Our advantage is that we count with stateof-the-art technologies in order to meet the engineering requirements to be able to condition hydrocarbons of different qualities and
compositions.
However, with new deepwater discoveries, at Trion-1 and Supremus-1 wells, there is a steep learning curve for the local industry to
be able to obtain the level of expertise that is required of deepwater operations. Extracting the crude from these sites will not be as
simple as Cantarell where the oil lay so shallow that it was originally
discovered by a fisherman. Estimates predict that investments up to
USD$35 billion may be necessary to extract the newfound resources
an amount that PEMEX cannot fork over by itself. In March, PEMEX
announced its most ambitious investment plan yet, which includes
approximately US$20 billion for upstream activities. The reality is
_________________
54
that Mexico lacks the technology and capital to drill and extract in

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deepwater, which only reinforces the need for foreign assistance and
to become a true global oil & gas
investment.
powerhouse. Petrolink is an oilfield
Slowly this expertise has been seeping into the country by way of
support company dedicated to
entrepreneurial outfits mostly run by expats, but this will hardly be
managing data in order to optimize
enough for what lies ahead. DTK Group, for example, emerged from
the performance of production
a group of engineers, geologists and businessmen with extensive
wells. By aggregating data from
experience in the hydrocarbon sector. We developed our company
multiple sources and IT platforms,
with 3 main business lines; initially we were just material suppliers
Petrolink can seamlessly deliver
to the drilling business; then, in 2010, we started to do mud log-
the information to any location in
ging and, finally, in 2011, we got back into the lab services business,
the world so that decisions can be
recounts Englishman John Lawrence, ceo of DTK-Group. We are not
made remotely.
Pablo Perez, Country Manager

Mexico, Petrolink
a drilling company, we support those companies by monitoring the
We like to think of Mexico as the opportunity of endless opportu-
drilling operations and providing technology to support drilling ser-
nities, because technologies such as ours are only in their early stages
vices in terms of evaluating the conditions of rocks or fluids in the
here and generally this is a massive market. Especially now at this
rocks, all of which is meant to increase the overall efficiency. We have
time that PEMEX is initiating a transformation, we look forward to
done many projects related to the offshore wells. As we speak, we
becoming a strategic ally to newcomers in the industry, states Pablo
hold the contract for the core analysis of several offshore wells and
Perez, Mexico country manager for Petrolink. As PEMEX develops
that gives us the opportunity to be part of amazing on-site discoveries and to be the first to provide fresh information coming out of
these wells.
It is technology such as this that has assisted PEMEX in more successful exploration efforts such as in the new deepwater discoveries. DTK-Group is now betting on their experimental technology
E-Core, that allows for modeling of rock formations from tiny
samples. Lawrence describes it as the microscopic imaging of the
internal structure of the rock after which these images are converted
into mathematical models. The internal structure and the models are
scaled up to represent a full sized piece of rock and the analysis is
done on the model instead of being done on the original piece of
rock. Such innovation will certainly
push exploration efforts to new
bounds, but the needed technologies for production will only come
once the sector has been opened
up to major investors.
In the meantime, medium-sized
international service providers are
already flocking to Mexico to capiJohn D. Lawrence, CEO, DTK-Group
talize on the countrys potential
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WHO IS EMILIO LOZOYA AUSTIN?
ith a mere 37 years of age, Emilio Lozoya Austin,

has been charged with the arduous task of leading
PEMEX into its new incarnation. While the newcomer has little
experience within Mexicos political ranks, he is his familys
third generation to embrace public office and assert himself a
part of the milieu.
Emilio Lozoya
Austin, Director
General, PEMEX
Having achieved a Bachelors degree in Economics and a

law degree from Mexican academic institutions, Lozoya Austin later went on to
obtain a Masters in International Development and Public Administration from
Harvard. Notable work experiences include being an analyst for the Central
Bank of Mexico and serving as the Director for Latin America at the World
Economic Forum (WEF). It was in his role at the WEF that he was able to work
closely with now President Enrique Pea Nieto, to collaborate in bringing investors to the State of Mexico while Pea Nieto served as its governor.
More recently, Lozoya Austin founded Luxemburg-based investment fund, JH
Holding, where he was able to swell his portfolio from 50 million Euros to 1.2
billion Euros in little over a year. With a deep understanding of global macroeconomics, great things are expected of PEMEXs new general director, who will
certainly aim at streamlining Mexicos oil & gas sector to make it as profitable
as possible. If his investment track record is any indication, PEMEX should soon
become a central piece of the worlds oil and gas arena.
new methods of operating, such as for deepwater and horizontal drilling, our added value will
become more evident. Ultimately, our products and services exist to prevent any preventable
eventuality that could affect operations and cost our clients millions of dollars. With operations in over 40 markets across the globe, we have the advantage of our experiences in all
possible conditions and terrains. This knowledge is something that we would like to bring to
PEMEX in order for them to attain their full potential.
Not surprisingly, some of the first multinational companies to bet on the resurgence of
Mexicos oil & gas industry are coming from cash-flush China. China Oilfield Services Limited
(COSL) first entered the Mexican market in 2007 when speak of an energy reform was already
beginning to brew and PEMEX was heightening its offshore exploration. As the leading integrated oilfield service provider in Chinas offshore segment, COSLs expertise is precisely the
kind of collaboration that PEMEX needs to succeed in unchartered deep waters.
Since the beginning, our strategy has been to bring the best equipment to Mexico
because this is where COSL can add value to local exploration. We have steadily been making ourselves known and currently have four offshore modular and two self-elevating rigs
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operating in Mexican waters. We
and overbearing. With greater international collaboration, I have no
also expect to bring our semi-sub-
doubt that most of PEMEXs challenges could be leveled over time.
mersible rigs to Mexico in the near
Indeed, global majors are sitting at the edge of their seats lingering
future, says MingChuan Deng,
on Mexicos next move to boost its oil & gas industry.
president of COSL Mexico. COSL

is very pleased to assist PEMEX in
Patching Up a Broken Network
its search for new oil reserves and
Setting E&P aside, PEMEXs other weakness lies in its inadequate
to share our knowledge and exper-
refining and distribution infrastructure. Mexico currently exports part
tise with them. Now that the com-
of its oil production to the US for refinement only to then import
pany has announced the impressive
the finished product. Over 52% of the countrys reserves are consid-
new discoveries, we are looking forward to be a partner in their deep-
ered to be heavy oil, which only exacerbates the need to install new
water ventures.
refineries and pipelines and revamp ageing infrastructure as produc-
MingChuan Deng, President of COSL

Mexico
Even though Deng is generally optimistic about COSLs future in
tion is set to increase. PEMEXs problem was that they didnt know
Mexico, he also concedes that the country needs to open itself up
anything about their own assets. Nevertheless, I believe that nowa-
to greater foreign participation and investment. We understand that
days PEMEX recognizes its mistakes and already knows what has
this is not a simple process and will not happen overnight, but it is
to be done, opines Victor Mackissack, president of Enduro Pipe-
something that most companies around the world are anticipating.
lines Mexico. Last year PEMEX increased its investments in refining
Currently, some of the regulations of the industry can be confusing
infrastructure by 24% - a clear indication that they are now trying
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THE SHALE GAS CARROT STICK

ed by the American example of a shale gas boom, Mexico is
collaborate with foreign companies under its incentivized contract
restless to exploit its own shale gas deposits that promise to
scheme, as they are the only ones that can provide the necessary
reverse its status as a net importer of energy. In late October 2012,
technology within a short timeframe. Beyond technology sharing,
the country announced its discovery of vast shale gas reserves in the
the country will also have to inject considerable amounts of capital
northeastern part of the country, which could double Mexicos cur-
into its shale gas endeavors former Secretary of Energy Herrera
rent gas production. Conservative estimates on behalf of the govern-
estimated an average of US$10 billion annually. As of March 2013,
ment have declared that the country counts with 297 trillion cubic
there were plans to drill between 20-25 new shale gas wells this year
feet of shale gas reserves. It is presumed that shale deposits span
alone, but PEMEX will also require partners to invest in these new
through the states of Chihuahua, Coahuila, Nuevo Leon, Tamaulipas,
sites.
Veracruz and San Luis Potosi.
Ultimately, the shale gas storm is also betting on Pea Nietos
Similar to the recent deepwater discoveries, PEMEX is only at its
energy reforms to allow for quicker and greater participation of for-
infancy in acquiring the knowledge and expertise to drill shale gas
eign capital in shale gas exploration. With the recent trend of gas
wells. So far the company has successfully drilled four wells in the
prices increasing, the pressure to tap into these resources is mount-
Burro-Picachos field that presumably taps into the same reserves
ing as the gas import bills pile up. Higher gas prices, however, also
found at Eagle Ford in Texas.
mean that the costly drilling of new shale gas wells are justified and
In order to hasten its exploration of shale gas, PEMEX will have to
welcome investments as they will bring greater returns.
to catch up with lost time. PEMEXs
has to do with environment security, which has a big impact, and also
new general director, Lozoya Aus-
with city security, because many of the pipelines run through the cit-
tin, has also stated that increasing
ies and it is evident that inspection is a high risk job. After analyzing
distribution and refining capacity
PEMEX needs and some of our competitors, I should emphasize that
is a major priority for the company.
we can cover a 15% of the mechanic inspection market, which means
Whether these projects will be car-
that the market is sufficient in Mexico, especially when you count with
ried out entirely by PEMEX or if
new technologies such as ours. Enduro uses Magnetic Flux Leakage
some of them will be handed over
(MFL) inspection tools and we are also implementing ultrasonic test-
to the private sector is something

that many are anxious to discover.
Victor Mackissack, Director, Enduro

Mexico
Mackissack founded Enduro Pipe-
ing (UT) inspection tools. Nowadays, PEMEX has around 65.000 km

of pipelines and 60% of these, according to for PEMEX head Reyes
Heroles, should be replaced within approximately 5 to 6 years.
lines, a pipeline inspection company, in 2011 after realizing that
The offshore discoveries will also require new pipelines to be built
PEMEXs pipeline infrastructure had been neglected for years, and
in order to transport the crude oil to refining facilities. Recubrimien-
that many new hydrocarbon transportation projects were soon to be
tos Integrales del Norte SA (RINSA), a pipe coating and welding spe-
developed. Most notable is the Los Ramones gas pipeline stretching
cialist, has identified this as their target niche that they are looking
over 1,100 kilometers from the border of the US all the way to the
to conquer by partnering up with a Canadian company that will pro-
state of Aguascalientes. In total, PEMEX is planning an investment of
vide them with innovative technologies. In 2005 when the company
US$8 billion in extending its pipelines network over the next years.
was created, the coating market was entirely dominated by interna-
We are an inspection company, who sees a big opportunity in the
tional players because Mexican companies didnt have the appro-
market that exists in Mexico, mainly with PEMEX. Pipeline inspection
priate technology. In just 7 years we have been able to take 80%
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of the coating market share due to

our competitive pricing, recounts
Lazaro Martinez, production and
sales manager of RINSA. We are
aware that times will soon change
and that we will be facing increased
competition once the market has
been opened up to foreign participation. This is precisely why we are
Lazaro Martinez, Production and
Sales Manager, Rinsa
looking to forge international part-
nerships at this time, so that we can be prepared once the energy

reform follows through. It is essential for us to be at the cutting edge
Ciudad Pemex, Tabasco, courtesy of Pemex
of coating technology to offer PEMEX the best products with the

highest safety and performance benchmarks.
that involves thousands of clandestine tapping points across PEMEXs
It has only been until recently that concerns for safety standards
pipeline network. This black market is so entrenched into daily oper-
and adequate maintenance of pipelines have taken center-stage.
ations that even companies such as Shell and ConocoPhillips have
This is particularly true in light of a pervasive black market for fuel
been charged with being involved in the trade of stolen fuel in one
way or another.
Aside from the estimated US$1 billion in lost revenues this represents, the illegal tapping of pipes is mostly detrimental in the safety
hazards they pose causing fires and explosions that have claimed
lives, as well as leaks that contaminate land and water sources. In
some cases, environmental remediation costs are likely to be higher
than the price of the stolen fuel. Overall, PEMEXs safety record is
far from admirable and has recently been placed on the spotlight
after an explosion that rocked the companys headquarters in Mexico City on January 31st leaving 38 dead.
What has been discovered throughout the years is that much
of the clandestine sale of fuel was happening with assistance from
within PEMEX at different levels of the organization, explains Share
Oils Gallegos. One innovative project that we came up with for
PEMEX is a remote monitoring network that serves to alert whether
there are any disruptions in the flow of hydrocarbons. We devised
software that collects and compiles all the monitoring data from
all the sensors throughout their network. This software connects to
PEMEXs IT network in order to have 24-hour supervision of the
pipelines. As soon as there is any disruption, the system automatically alerts the necessary people via email or other methods, so that
the problem can be solved immediately. This also assists in increasing transparency throughout the company.
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Companies such as Enduro and Share Oil illustrate that Mexican
tors to oversee the management
entrepreneurs are not only embracing a reform of the sector, but
of pipes during construction and
are in many ways the vehicles of change themselves. Everything
operation. At the site of instal-
that allows for the best and most profitable exploitation of natural
lation, we test for areas to repair
resources in the country is welcome. If the government determines
damage caused during the trans-
that the participation of foreign companies is needed in some areas,
port or handling of the pipes. We
then this should be under clearly defined rules. For RAM-100 the
also offer comprehensive coating
most important element is that pipeline expansion plans and the
of welding points making the coat-
maintenance and rehabilitation of the national pipeline network is

unhindered, states Teodoro Gutierrez, general manager of RAM-
ing uniform so that area does not

Teodoro Gutierrez, Director, Ram 100
del Sureste
100 del Sureste.
become a point of corrosion or

leakage in the future.
RAM-100 is specialized in everything related to pipes, from anti-
Undoubtedly, an added benefit of the proposed energy reforms
corrosive coatings and welding to the installation of over and under-
is the development of a national industry that until now has been
ground pipelines. In line with current conditions, we have devel-
somewhat shy to express its full potential, not only locally but also
oped an aggressive marketing plan to demonstrate to engineering
on an international scale. Being a part of the OECD and the 13th
firms and end users that RAM-100 offers the most comprehensive
largest economy in the world, it would only seem natural that Mexi-
warranty in the market and we have the service of qualified inspec-
can companies would be more visible and vibrant in the global
_________________
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arena. I would like to see Mexican companies compete with the giants. I believe one prob-
ket growth and economic development, while
lem we as Mexicans have is fear. We should have more vision to provide quality jobs for our
at the same time raising the standards under
people and accept more challenges as business men, because we certainly have the potential to
which companies will operate, especially in the
be a global power, declares Enduros Mackissack. If any single sector of Mexicos economy has
aspect of quality, safety and environmental pro-
the capacity to make this leap, it would be that of the oil & gas industry.
tection, explains Telesforo Segura, founder
The government's strategy is to leverage private investment in PEMEX to achieve greater
and ceo of Consultoria en Obras SA (COBSA).
development and to enhance the ability of the Mexican state. These investments will foster mar-
As an engineering and construction firm dedicated to the oil & gas sector, COBSA is betting
on the surge of new infrastructure projects for
its future growth. They also embrace an energy
reform as the defining moment for Mexicos
hydrocarbon development. This is the turning point, and it will require not only intensive
capital but also the will of all those involved in
this industry. Otherwise we would be living just
one more false episode like many that continually happen in our country, concludes Segura.
Beyond the financial opportunities that will
come with a greater openness of the market,
Pea Nietos reform is serving as a catalyst to
shape up and improve Mexican businesses
so that they may compete at an international
level. From environmental awareness to quality standards and human resources practices,
there is a tangible renovation of the local
industry that will also attract investment in the
form of international partnerships and joint
ventures. Segura believes that it is very important to lead by example. As a company active
in the Mexican Chamber of the Construction
Industry, we continually express the benefits of
being a human-minded company that is also
concerned about our environment. We transmit these values by actively participating in
seminars and congresses across the country.
This ensures a permeability of this culture in the
industry not only in the construction industry
___________
but also in all other sectors and in society in

general.
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SMES LEADING A MEXICAN REVOLUTION
ased out of colonial San Miguel de Allende, Grupo SSC is a

pioneer in modeling and monitoring technologies that can
be applied to foresee potential operational challenges before they

even emerge. While the companys origins date back 23 years, it
has only been in the last five years that they emerged a champion
in the Mexican oil & gas industry, bringing to the sector world-class
expertise that highlights the capabilities of local entrepreneurs.
Fernando Balderas, General

Manager, Grupo
SSC
Fernando Balderas, director general of Grupo SSC, speaks of his

journey to success:.
How did you adapt to specialize on providing services to the oil & gas industry?
We tried to attract PEMEX as a client for many years, but our approach was incorrect. We
discovered that PEMEX does not have an engineering department; it is an operational
company, so what we had to do, was to provide solutions rather than simply try to sell
them a product for them to implement. Therefore what we offer today is a package
development of state-of-the-art thermodynamic, rheological and numerical technology,
in order to give PEMEX added value. We also provide solutions that demonstrate performance through numerical profiling. With this technology, not only is equipment performance enhanced but also operational conditions.
With such unique technology there is no doubt that there will be heightened interest in your company, even in the form of M&As. What are your thoughts on such
opportunities?
Grupo SSC is not for sale. We dont want to change the direction of our work and we
would hate to see all these years of effort disappear. All along we have desired to build a
sustainable project that continuously evolves. We want to make little big steps.
We are a small company with huge ambitions and we are really excited with all the business opportunities and technology that are developed in-house, including the evolution
and training of our people. Some of the things that we have learnt and that define Grupo
SSC are that we love big challenges and we still believe that this is the right way. We will
take these on.
We also have to be thankful for PEMEX, because they are the ones that require these
types of solutions, therefore opening doors for us. There is no question that much of
Mexicos wealth comes from the oil and gas industry. Obviously, PEMEX is not our only
client but it is our main and key one, therefore we have to look for solutions to help this
good and beautiful company that has always contributed to the welfare of our country.
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New beginnings
take the extra step to design my own pumps that will be made in Mex-
Now more than ever, Mexicans are embracing their full capabilities and
ico. I will prove that they work just as well as the European counterparts
building the necessary confidence to take greater risks that will acceler-
and they will cost a fraction of the price.
ate economic and industrial development. Entrepreneurs are becoming

more bold and visible.
Even though BIMSA is already a trusted supplier to PEMEX, Meneces

wants to keep focusing on the Mexican market rather than taking his
We have to position ourselves at the highest level by understanding
innovations abroad. I have a very particular way of thinking, because
what are the needs that our country has, says Marcial Meneces, founder
I know most businessmen want to make as much money as possible
and general director of Bombas Industriales Mexicanas SA (BIMSA).
and take their companies abroad, but
Meneces created BIMSA and starting designing and manufacturing
this is not my objective. I am of the opin-
pumps on his own after realizing that foreign companies were over-
ion that we should keep doing more
charging PEMEX for something that could easily be made in Mexico.
things locally so that the money stays in
We must take to the field and get off our desks to really feel what we
the country and we can therefore cre-
can do for PEMEX and Mexico as a whole. Many of our oilfields have
ate more jobs. As businessmen is our
matured and therefore the process to extract this oil is different than
responsibility to give back to our coun-
before. This will require new technologies, new pumps that perhaps the
try before we think of filling our pockets
Germans or the French are very good at manufacturing, but I must then
with cash.
Marcial Meneces, Director, Bimsa
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________________________
Floating Production Storage and Offloading, FPSO, courtesy of Pemex
In contrast, Fernando Saldivar, general manager of helicoidal steel pipe-maker Forza Steel, tells
of his success in turning around his company that suffered greatly during the financial crisis of
2008. We were originally in the business of selling steel slabs to the automotive industry, but
then when the crisis hit our sales dwindled. At that time I realized that perhaps the only industry
that will always grow despite economic hardships is the energy sector, and so we shifted our
entire business model to sell steel pipes to this market. They first began importing the pipes to
then distribute them locally, but business was so good that they decided to manufacture their
own pipes.
So far business has been steadily growing and they set up an office in Houston 2 years ago to
launch their international expansion. They are soon looking to target South American markets and
demonstrate that Mexico can be an important player in the production of steel pipes. Saldivars
vision is ambitious but not nave. As the next step of our expansion, we are planning to build a
plant for coating our pipes so that we can sell a fully finished product that will be ready to install.
Currently we must depend on other companies to apply these coatings. The new state-of-theart plant is being built under international standards in order to prepare for their international
exports.
Another segment of the oil & gas sector that is resurging due to international influence is that
of environmental standards and technologies. Mexico right now is in the spotlight of the world
due to its healthy economy and higher expected growth rates in the coming years, similar to what
happened to Brazil 8 or 9 years ago. All this expected growth will be translated in an increasing
and stronger demand for responsible environmental services of all types, as well as the development of new or emerging sectors in Mexico like used-oil re-refining, battery recycling, industrial waste water treatment among other. The combination of the current solid foundations for a
strong development of the environmental industry and the good moment of Mexico represent
a big business opportunity for international players if they are able to identify good local partners, elucidates Javier Campos, founder and general manager of SITRASA. Sitrasa offers a wide
array of services to the oil & gas industry, including the handling of their hazardous and industrial
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non hazardous waste streams for recy-
We perceive that the oil & gas market has a lot of potential for us, and
cling, revalorization or stabilization and
that's because of the new environmental regulations created by the gov-
treatment for ultimate disposal. They
ernment. Generally, we are witnessing a shift away from older methods
also offer customized on-site services of
of operating, which are harsher to the environment, says Juan Carlos
sludge and waste water treatment.
Hernandez of Industrias Energeticas. His company provides service solu-
At the core of the companys strategy
tions in the technological application of integrated power generation
is to bring European technology to Mex-
and electricity through the use of microturbines that are manufactured
ico, including for the recycling of batteries and fluorescent lamps. They are the
by US-based Capstone Turbine Corportation. We are considered to

Juan Carlos Hernandez, General
Manager, Industrias Energeticas
be a clean company; the percentage of carbon dioxide emitted by our
first company in Latin America approved
microturbines is really low. This is because our products don't use any
under international standards to recycle these materials safely. From
oils or lubricants whatsoever, nor any liquid for that matter; their system
my own perspective, the development of the environmental industry in
is based on air bearing technology, with frictionless motion and, pro-
Mexico has taken more time, than what probably took in other countries,
viding very low noise levels, zero vibration and very low maintenance
but today I believe we are finally at a point where we have solid founda-
costs.
tions for a strong development, like good laws, fairly good enforcement,
The only downside to bringing innovative products like this is that
more ethical competition, increasing corporate responsibility, amongst
many people are not willing to investment in them initially since they are
others, concludes Campos.
more expensive than the regular technologies. It's something in the way
_______________
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people think that needs to change towards a cleaner and more envi-
that offer complete solutions for oil &
ronmental friendly method. Over time, we are confident that the big
gas companies to enter this market,
companies and the people in charge of the machinery will be convinced
explains Jalil Alva, general director of
that the quality of the energy, the maintenance, and the technologies
the group.
are worth the extra investment. Industrias Energeticas is also betting
Many
international
companies
on PEMEXs need to fulfill recent environmental requirements in order to
complain that PEMEX is an incom-
have their microturbines become staples on offshore platforms.
prehensible behemoth that can be
Beyond bringing new technology and products to Mexico, other
extremely daunting to approach. Any
companies thrive on enticing foreign companies to come to this market
seasoned businessman will be quick
and set up local operations. Grupo ALBA is a unique marketing agency
Jalil G. Alva, CEO, Grupo Comunicador

Alba
that is entirely devoted to the oil & gas sector. Our concept today is
business with PEMEX as a foreigner is to find yourself a Mexican partner
to serve as a bridge between international companies and PEMEX, by
that has close ties to the company. Alva alleges that he has access to all
providing all kinds of communication and marketing services to them.
the right people at PEMEX and this is precisely what our foreign clients
From organizing meetings to discuss business opportunities, to design-
need to be successful in this market, at least at the initial stages. No one
ing and building stands for conferences and events, today we are capa-
can assure the kind of access to the Mexican market that Grupo Alba
ble of fulfilling all the communication needs of a company interested
does, and this is the edge that we have compared to any other event
in Mexico. Ultimately, we think of ourselves as networking specialists
organizer, whether foreign or local. In this way, we informally became the
to tell you that the only way to do
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local representatives for those foreign companies as we would link them
seriously in Mexico. Many foreign-
together with the right people in the industry, especially at PEMEX.
ers are unaware of the problems, in
With promises of a new PEMEX and an incursion of foreign investors,

several Mexican companies are devoting themselves entirely to the
terms of human resources, that they

will encounter when coming here.
business of easing this transition. This is particularly so regarding the
Rather than acting as a passive
availability of experienced and well-trained human resources that can
outsourcing firm, Grupo PAE likes to
take on the new challenges of deepwater, shale gas and modern hydro-
think of themselves as active partners
carbon infrastructure. In fact, most companies express human resources
and collaborators to their clients.
scarcity as one of the industrys greatest obstacles for development.
The idea is that we grow hand-in-
Compounded with an insufficiency of adequate technologies, the lack
hand with our clients and anticipate
of capable engineers has forced some companies to take on the educa-
their needs so that they can focus
tion of their own people.
entirely on their core business. This is in fact how our catering services
Ulises Muiz, Vice President of North

America of Grupo PAE
Balderas of Grupo SSC claims that one of our big advantages is that
emerged, because we realized that one of our clients could not cope
we train our own people and that we count with research and devel-
with the logistics of feeding its people on the field on a daily basis. We
opment teams in order to keep
took on the burden and now have
the position that we have right

now. We have actually set up a
technological
these types of services. As a next
called
step, we are looking to find and
Instituto Tecnolgico Sanmiguel-
offer continental services, allow-
ense
Superiores,
ing us to explore international
where we train and educate most
markets. This will happen when
of our recruited employees. After
one of our clients here in Mexico
the studies, 100% of our students
is satisfied enough with our per-
already have a job position assured
formance that they request us to
in Grupo SSC and sometimes our
provide the same services to their
de
university,
a subsidiary that only provides

SCADA,
courtesy of
Pemex
Estudios
clients want to take them to their companies. We are firm believers that
international operations. Many customers have told us that our services
we grow through our people.
are more expensive than our competitors, but they are glad to pay them
On the other hand, other companies have made it their core business
to recruit and retain the right employees for the oil & gas industry. Grupo
because they solve all their problems. Based on these examples I can
safely say that we have achieved our goal and vision.
PAE, is a human resource expert that offers a wide range of services,
Clearly, efforts such as those of Grupo Alba and Grupo PAE are only
from headhunting and payroll management to catering services. The
small steps to attracting relevant foreign investors to Mexicos oil & gas
company began providing outsourcing services to a number of indus-
sector. The emergence of a business-savvy Mexican industry is certainly
tries, because in Mexico an employers responsibility is very complex.
necessary to assist PEMEX in its transformation to become a globally
When you take into account your payroll, social security, all these sorts of
admired NOC, but it will not be enough unless politics governing the
issue, it can be a discouraging experience for newcomers. All this creates
industry follow through with a radical reform. In a country where prom-
a significant administrative burden for the employer and for the resource
ises are made a dime a dozen, 2013 will prove to be a decisive year
provider, so we try to address that problem through our services, says
for the future of PEMEX and for the leaders of Mexico. All heads are
Ulises Muiz, vice president for North America of Grupo PAE. We like
now turned towards President Pea Nieto, anxious to issue a verdict on
to use our local knowledge to make way for people who come to invest
whether his lofty words are more than just another Mexican letdown.
69
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Look for OGFJ in your

App Store or on Google Play.
Your resource for the latest financial news
in the oil & gas industry
App Features:
- Get the latest & greatest news
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Companies mentioned in this issue of Oil & Gas Financial Journal are listed in
alphabetical order with advertisers in boldface type. The index is provided as a
service. The publisher does not assume any liability for errors or omission.
COMPANY
PAGE
2H Offshore Inc.
AFD
Aker Solutions
Company/Advertiser Index
COMPANY
PAGE
COMPANY
47
ConocoPhillips
8,12,46
19
Cosmos Energy
19
10,44
PAGE
COMPANY
Jones Day
44
Raymond James
44
Kluber Lubrication
46
Regions Financial
15
35
Repsol
Cowen Group Inc.
45
Kogas
Alba Enterprises
63
DTK Group
51
Kosmos Energy
Albrecht & Associates
44
Dahlman Rose & Company LLC
45
Laredo Petroleum
Allegro
Amegy Bank of Texas

Anadarko Petroleum Corp.
Aon
Dresser Rand Corp.
46
Latham & Watkins LLP
21
ENH
35
LeTourneau
5,8,12,19,72
ENI
5,10,17,35
72
5,19
Rhone Capital LLC
45
35
Ridgemont Equity Partners
36
5,18
Ridgewood Energy Corp.
45
Rinsa
66
5,27
Riverstone Holdings LLC
45
47
Lightning Eliminators & Consultants
PAGE
Eclipse Resources Operating LLC
37
Lime Rock Partners
37
Rosetta Resources Inc.
35,44,46
5,19
lectricit de France
19
Linn Energy LLC
34
Rowan Companies plc
47
ArcLight Capital Partners LLC
44
EnCap Investments
37
LinnCo LLC
34
SNR Denton
47
Arena Resources
37
Enduro Mexico
67
Lundin Petroleum
10
SSI Fifteen Limited
10
MISC Berhard
28
Sadler Law Firm
33
44
Saxon Energy Services Inc.
47
Apache
BHP Billiton Petroleum
5,14,17
Enertia Software
IFC
BIMSA
55
Enogex LLC
44
Managed Pressure Operations International Ltd.
BOEM
12
Ensco plc
46
Marathon Oil Company
Ernst & Young
46
Marine Well Containment Co.
12
Shell
BP
5,16,46
Share Oil & Services Consulting Group 52-53
5,13,19
BPI Energy Inc.
46
Evercore Group LLC
44
McDermott Will & Emery LLP
44
SIGMA3 Integrated Reservoir Solutions Inc.
47
Baker Botts LLP
44
Evercore Partners
44
Mitsui
28
Sinopec
35
Baker Hughes
16
ExxonMobil
45
Socit Nationale des Ptroles du Congo
10
Bass Companies
36
Falcon Oil Holding Angola SA
10
Murphy Oil
Bentley Associates LP
46
Forum Energy Technologies
46
NGP Energy Technology Partners
34
Forza Steel
54
NV Energiebedrijven Suriname
Freepoint Commodities LLC
44
Netherland Sewell & Associates Inc. BC
Stone Point Capital
44
46
Fulbright & Jaworski LLP
44
OGE Energy Corp.
44
Stroock & Stroock & Lavan LLP
44
45
Galp Energia
35
Oil & Gas Awards
72
Superior Energy Services
47
Gastronomica Contempo
57
Oil States International Inc.
32
Talisman
35
46
Berry Petroleum
Black Elk Energy Offshore Operations LLC
Boa Marine Services Inc.
Boardwalk Pipeline Partners LP
45,46
5,14,19,29
Morgan Keegan
Sonangol
10
44
Staatsolie Maatschappij Suriname N.V.
22
19
Statoil
5,17,19
Bracewell & Giuliani LLP
5,24
Brenham Oil & Gas Corp.
47
Grant Prideco Inc.
46
Orsan
60
The Louisiana Land & Exploration Co.
Bucking Horse Energy Inc.
44
Grant Thornton LLP
11
PAE
57
Titan River Energy LLC
Burlington Resources
46
Grupo Diavaz
65
PLS Inc.
5,34
Grupo Mex Ambiental
56
Pacific Drilling
12
Transocean
Grupo SSC
62
Pacific Rubiales Energy
20
Tudor, Pickering, Holt & Co.
35
Guyana Energy Agency
19
Pathfinder
47
Tullow Oil
COBSA
58
Guyana Geology & Mines Commission
20
Pemex
COSL
48
HB Rentals
47
Petrobras
CFE
CGX Energy
5,19
CNPC
6
5,17
TOTAL
5,10,17,19
36
5,8,19
16
44
5,19
UBS Investment Bank
44
US Coast Guard
47
Capital One Southcoast
Halliburton Co.
46
Petrolink
64
US Energy Information Administration
Capstone Natural Resources Partners
36
Harwood Capital Inc.
PETRONAS Carigali
10
US Fish and Wildlife Service
Cascadia Capital LLC
46
Helix Well Containment Group
12
Plains Exploration & Production Co.
14
US Geological Survey
Cenovus
35
IDB
19
Platinum Partners Value Arbitrage Fund LP
45
Utex Industries Inc.
45
CenterPoint Energy Inc.
44
IEA
Post Oak Energy Capital
36
Vanguard Natural Resources
35
Centrais Eltricas Brasileiras SA
19
IHS Herold
36
Pride International Inc.
46
Venari Offshore LLC
12
Chesapeake Energy Corp.

Chevron Corp.
35,37,46,72
5,8,12,19
INPEX
5,19
PTI Group Inc.
30
Venari Resources LLC
IPAA
IBC
Qv21 Technologies
Vorys, Sater, Seymour and Pease LLP
5,6,14
5,24
5
8
31
Chief Oil & Gas LLC
36
Industrias Energeticas
68
Quorum Business Solutions
36
Citigroup Global Markets Inc.
44
Insurance Information Institute
28
RBN Energy
14
Wells Fargo Securities LLC
44
Citrus Energy Corp.
36
JP Morgan Chase
47
RWE
35
Williams
45
JX Nippon Oil & Gas Exploration Ltd.
10
Ram100
61
Worys, Sater, Seymour and Pease
Range Resources
35
Ziff Energy
Cobalt International Energy LP

Comstock Resources Inc.
8
35,44
Jefferies & Co. Inc.
36-43
5
17
71
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Beyond the Well
Aon, Chesapeake, Anadarko awarded

for corporate social responsibility initiatives
March 12. There, the award for Corporate Social Responsibility Initiative of
Mikaila Adams
the Year went to Aon Corp., part of Aon
Senior Associate Editor plc, a global provider of risk manageOGFJ
ment, insurance, and reinsurance brokerage, and human resources solutions and
outsourcing services.
n a grand scale, the oil and
The award recognized the Aon Foungas industry is of great impordation, the companys principal vehicle
tance to the North American
for philanthropic programs in the US
economy and plays an instrumental
that focuses on empowering people and
role in national energy security. On the
working with communities at risk. Aon
local level, the oil and gas industry plays
a vital role in the economies in which
companies operate. The mission of the
Oil & Gas Awards launched in 2012
by Daniel Creasey, Oliver Bridgen, and
Marc Bridgenis to recognize the outstanding achievements made within the
upstream and midstream sectors of the
oil and gas industry.
Awards are a presented annually in
seven regions across the US and Canada
and serve as a platform for the industry to demonstrate and celebrate the
Aon employees participated in the 2012
American Heart Association Houston Heart
advances made in environmental stewardship, efficiency, innovation, corporate Walk. Photo courtesy of Aon Corp.
social responsibility and health & safety.
Winners are selected by a panel of judges was honored with the Oil & Gas award
made up of energy industry executives.
for its contributions of more than $4.6
What makes these awards differmillion to local Gulf region charities.
ent from some that we in the industry
The award, said Beth Gallagher, Aons
are privy to is the intent on enabling
Director of Community Involvement,
upstream and midstream companies
is representative of the companys larger
those without the direct to consumer
corporate initiative and overarching
reach of those in the downstream secstrategies.
torto showcase their commitment
Every office has found a way to
in these areas to the general public and
contribute that is unique to the interests
non-industry press with the goal of proof the local client and colleague base. Its
moting the oil and gas industrys drive to simply part of our culture here to get
improve and develop, says Creasey.
involved and support our communities,
While numerous awards are presented she said.
at each event, the Corporate Social
This year alone, in offices around the
Responsibility Initiative of the Year
globe, Aon colleagues supported local
award is in keeping with the focus of this charity partners by volunteering durcolumn.
ing Aons Global Service Day in June at
The Rocky Mountain Awards in Den- hospitals, shelters, and food pantries, as
ver, Colorado kicked off the season on
well as through organizations such as the
72
American Heart Association, Habitat for

Humanity, United Way, and the YMCA.
Days later, at the Northeast Awards
in Pittsburgh, Pennsylvania, Chesapeake
Energy Corp. received recognition for
Corporate Social Responsibility Initiative
of the Year.
In addition to the donations made
by Chesapeake to nationally-recognized
programs, Chesapeake employees are
closely involved in various community
efforts in and around their areas of
operation. In the Northeast, around the
companys Marcellus shale operations,
local employees were actively involved
in various philanthropic efforts this past
year. In addition to spotlighting students
participating in volunteer organizations
and supporting the West Virginia Symphony Orchestra, Chesapeake employees in PA provided holiday gifts to the
Northern Tier Helping Hands organization, while employees in West Virginia
brought and served a home-cooked meal
to the Covenant House.
On March 20, OGFJ was in attendance as Anadarko Petroleum Corp.
won the award for Corporate Social
Responsibility Initiative of the Year at the
Gulf Coast Awards in Houston.
Anadarko grants financial support to
hundreds of North American non-profit
organizations and supports various
university scholarship funds in engineering and science. The company and its
employees support national programs
like the United Way, Junior Achievement, and Habitat for Humanity, and
through its Anadarko in Action
program, 50 US nonprofit organizations
are awarded financial support for the
volunteer efforts demonstrated by the
companys employees.
Congratulations to all the winners and
good luck to those nominated for the
upcoming Mid Continent, West Coast,
Southwest, and Calgary Awards in October and November! OGFJ

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40,000+ ATTENDEES IN 2012!
MEETINGS&EVENTS
Connecting the Upstream Industry Across America
Since 1929, IPAA has brought together Americas upstream independent oil and gas industry
from across the country at our various meetings and events to examine current issues, strategize
for the future and network with the decision makers from E&P and service and supply companies.
Make plans to participate in these 2013 meetings and events.
PCC
CONNECTING EXPLORATION AND PRODUCTION

COMPANIES WITH LEADING FINANCIAL
ADVISORS AND PROVIDERS.
WILDCATTERS
OPEN
CONNECTING INDUSTRY PROFESSIONALS

FROM ACROSS THE INDUSTRY FOR A
CASUAL AND FUN NETWORKING EVENT.
PRIVATE CAPITAL CONFERENCE
WILDCATTERS OPEN
JAN. 21, 2013
MARCH 21, 2013
Westin Houston Memorial City, Houston, TX
Blackhorse Golf Club

Cypress, TX
NAPE
OGIS
CONNECTING PURCHASERS, SELLERS AND TRADERS OF OIL AND GAS PROSPECTS AND PROPERTIES.
IPAA IS A PROUD PARTNER OF THE WORLDS LARGEST E&P EXPO!
NAPE EXPO
NAPE EXPO
NAPE EAST
FEB. 5-8, 2013
AUG. 14-16, 2013
APRIL 10-12, 2013
George R. Brown
Convention Center
Houston, TX
George R. Brown
Convention Center
Houston, TX
David L. Lawrence
Convention Center
Pittsburgh, PA
CONNECTING PUBLIC OIL AND GAS COMPANIES WITH THE INVESTMENT COMMUNITY
AS THEY PRESENT THEIR STRATEGIC CORPORATE PORTFOLIOS.
MEMBERSHIP
MEETINGS
OGIS NEW YORK
OGIS TORONTO
OGIS SAN FRANCISCO
APRIL 15-17, 2013
JUNE 11, 2013
SEPT. 30 - OCT. 2, 2013
Sheraton New York

Hotel & Towers
The Ritz-Carlton
Toronto, Ontario Canada
The Palace Hotel

San Francisco, CA
CONNECTING PRIVATE AND PUBLIC INDUSTRY EXECUTIVES AND SERVICE AND SUPPLY
REPRESENTATIVES FROM ACROSS THE COUNTRY TO NETWORK AND LEARN THE LATEST NEWS
OUT OF WASHINGTON AND ISSUES THAT COULD IMPACT BOTTOM LINES.
MIDYEAR
ANNUAL
JUNE 23-25, 2013
NOV. 7-9, 2013
The Ritz-Carlton
Laguna Niguel
Hyatt Regency Hotel

San Antonio, TX
I N D E P E N D E N T P E T R O L E U M A S S O C I AT I O N O F A M E R I C A
W
W W. I PA A . O R G
_________________
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_____________________
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OGF 20130401 Apr 2013

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