Oil & Gas Is Better In Texas - Video

The Heat might have beaten our Spurs, but the oil & gas industry is still better in Texas. I hope these facts help everyone in the oilfield get over the loss last night:

  • Texas has counties that produce more oil than Florida
  • Texas produces more than 2 Million barrels of oil per day and Florida produces a measly 6,000 barrels per day
  • Texas has 846 oil & gas rigs running and Florida has 1.....just one

If you're not a basketball fan, you'll still enjoy this video from the EIA showing how much oil production has grown in the past 30 years:

North American average annual production, which dipped to 10.4 million bbl/d in 2008, climbed to 12.2 million bbl/d by 2012. The rise in production was largely the result of rising production in tight oil formations like the Eagle Ford.

Worldwide oil production set a record in 2012 at 75.6 million b/d.

Eagle Ford Billionaires List | Led by Harrison & Hildebrand

Jeff Hildebrand - Hilcorp
Jeff Hildebrand - Hilcorp

The economic impact of the Eagle Ford Shale was more than $61 billion in 2012, but the play has also put billions in the hands of a few land owners and investors.

EagleFordShale.com's Eagle Ford billionaires list is topped by the founder of Hilcorp Resources and a land owner who controlled a 100,000+ acre ranch. One sold acreage worth billions and one leased acreage for more than one billion dollars in lease bonus money.

Jeff Hildebrand and Dan Harrison are estimated to have made $2.5 billion and $1 billion, respectively, from direct holdings in the Eagle Ford. Other members of the list either manage or have ownership in companies active in the Eagle Ford.

  1. Jeff Hildebrand - Net worth $5.5 billion - Estimated to have made $2.5 billion in the Eagle Ford
  2. Dan Harrison - Net worth $1.1 billion - Estimated to have made $1 billion leasing his ranch in the Eagle Ford
  3. Rod Lewis - Net worth $2.6 billion - Lewis Energy operates over $5 billion worth of Eagle Ford acreage
  4. Richard Kinder - Net worth $9.8 billion - Kinder Morgan has invested billion in midstream infrastructure in the Eagle Ford
  5. Scott Duncan - Net worth $5.2 billion - Owns interest in Enterprise Product Partners who has invested over $4 billion in the Eagle Ford
  6. Aubrey McClendon - His net worth isn't known, but he invested heavily in the Eagle Ford while at the helm of Chesapeake
  7. Mark Papa - His net worth isn't in the billions, but the company he directs estimates it will recover more than 2 billion boe

Eagle Ford Billionaires

Jeff Hildebrand - $5.5 Billion

Marathon Oil Eagle Ford Shale Map
Marathon Oil Eagle Ford Shale Map

Hildebrand is believed to own 100% of the equity in Hilcorp Resources. He was a billionaire before the Eagle Ford, but his wealth is estimated to have doubled as a result of his Eagle Ford dealings.

Hilcorp sold a 40% interest in its Eagle Ford holdings to KKR for $400 million in 2010. A year later KKR and Hilcorp sold Eagle Ford assets to Marathon Oil for $3.5 billion. That's $400 million from KKR plus 60% of $3.5 billion ($2.1 billion) from Marathon to add $2.5 billion to Hildebrand's wealth.

He was already on the Forbes' billionaires list (#219) and he comes in as the leader in wealth made in the Eagle Ford. His billionaire profile is also available at forbes.com

Next on the list is a man that wasn't a billionaire until the Eagle Ford boom.

Dan Harrison - $1.1 Billion

Dan Harrison was independently wealthy before the Eagle Ford boom, but the play catapulted the rancher up to number 1,268 on Forbes' billionaire list. Mr. Harrison controls the 106,000 acre Piloncillo Ranch in South Texas. The ranch is the largest single leasehold in the Eagle Ford Shale. It is rumored that Harrison signed a lease with Shell that paid him ~$10,000 per acre as a signing bonus. That is more than $1 billion for a signature to lease oil & gas rights to the ranch.

Better yet, industry analysts report the lease was for a prescribed interval that includes the Eagle Ford. If Shell finds other targets that are more shallow or deeper, there's a chance more lease bonus money could head his way. That's before considering any royalties.......

Harrison's wealth is tied to his grandfather who was an oilman and helped discover the Old Ocean field in Brazoria County. The first Dan Harrison used his oil wealth to build a ranching empire. Harrison inherited the ranch and is now reaping more from the land than his grandfather or father ever imagined.

With the bulk of his wealth coming straight from the Eagle Ford, it's safe to say Harrison belongs near the top of the Eagle Ford billionaires list. Harrison has a cool $1 billion plus in his pocket.

His billionaire profile is also available at forbes.com

Rod Lewis - $2.6 Billion

Rod Lewis - Lewis Energy
Rod Lewis - Lewis Energy

Mr. Lewis controls Lewis Energy and has been drilling wells in South Texas for decades. The company isn't given credit for discovering what led to the modern day Eagle Ford boom, but they did test the Eagle Ford as early as 2002. Lewis leveraged early experience in the play to what is now considered a leading position. Industry experts estimate the company holds more than 400,000 acres prospective for the Eagle Ford. Forbes mentions the company holds 500,000 acres around the Eagle Ford, so it's safe to say it's a multi-billion dollar portfolio.

Acreage in the Eagle Ford has sold for anywhere from $10,000 to $25,000 per acre. At just $15,000 per acre, Lewis Energy operates over $6 billion worth of Eagle Ford acreage. That's just the land and doesn't account for the various services and contractors the company controls. Lewis operates the acreage and BP is a partner in the Eagle Ford. Details of the Lewis-BP joint venture were never released.

According to Lewis, “We (Lewis Energy) control our own destiny—by owning our own rigs, completions, and continually expanding our operations.”

Lewis has been in headlines recently due to a pending divorce. It could be one of the largest breakups in history, but it has been largely overshadowed by Harold Hamm's (Continental Resources founder and Bakken billionaire) pending divorce.

Lewis ranks #554 on Forbes' billionaire list. He is the second richest man in San Antonio. He is second to HEB founder Charles Butt ($7.4 billion). His billionaire profile is available at forbes.com

Richard Kinder - $9.8 Billion

Mr. Kinder is one of the founders and the CEO of Kinder Morgan. He was a billionaire before the Eagle Ford oil boom, but his company has invested billions in processing, pipelines, and related midstream infrastructure. In one of the biggest transactions of the year, Kinder Morgan acquired Copano Energy. Complimentary assets in the Eagle Ford were part of the motivation for the acquisition.

Kinder ranks #112 on Forbes' billionaire list. His billionaire profile is available at forbes.com

Scott Duncan - $5.2 Billion

He's an heir to Dan Duncan, who founded Enterprise Product Partners. Yes, he was already a billionaire, but Enterprise has invested more than $4 billion to expand and add midstream infrastructure in the Eagle Ford. When it is all said and done, Duncan and his siblings will likely add billions to their wealth because of investments in the Eagle Ford.

Duncan ranks #239 on Forbes' billionaire list. His billionaire profile is available at forbes.com

Aubrey McClendon - ?

Chesapeake Eagle Ford Acreage Map
Chesapeake Eagle Ford Acreage Map

He's not on the Forbes billionaire list this year, but its hard to argue that much of his wealth wasn't the result of his dealings in the Eagle Ford. If it wasn't for oil properties like the Eagle Ford, Chesapeake would have had an even harder time trying to get through the low gas price environment we've experienced over the past few years. Chesapeake signed a $2+ billion Eagle Ford JV agreement with CNOOC in 2010. Since that time, Chesapeake's production has grown from near zero to more than 166,000 boe/d gross.

He's no longer at the helm of Chesapeake, but he's out raising capital for his next venture. McClendon owns a 20% stake in the Oklahoma City Thunder and has an interest in thousands of oil and gas wells that were acquired through his "founder well incentive" at Chesapeake.

Mark Papa - $200 million +

EOG Eagle Ford Shale Acreage Map
EOG Eagle Ford Shale Acreage Map

It's hard to talk about the Eagle Ford and not talk about EOG Resources. The company's CEO isn't on Forbes' list, but I'd guess he might have a chance of making it before he retires. It's hard to find any up to date estimates on his net worth, but he was estimated to be worth more than $130 million in 2009. I'd go out on a limb and estimate that between compensation and stock appreciation he is worth more than $200 million today.

EOG operates approximately 639,000 acres and estimates potential reserves net to the company at 2.2 billion boe in the Eagle Ford.

Please share your throughts in the comments below. Is there anyone we should have included?

Employment Growth Continues In The South Texas Eagle Ford - Dallas Fed

Federal Reserve Districts
Federal Reserve Districts

The Federal Reserve Bank of Dallas released its most recent beige book and Eagle Ford job growth was noted as part of the steady labor market.

The report states "Financial firms added employees to comply with regulatory stress testing and wealth management, and noted employment growth in Austin and the Eagle Ford Shale area. Several contacts reported difficulty finding qualified people to fill vacancies.... A construction-related manufacturer noted truck drivers were in short supply."

Notes on the energy sector included:

Energy activity improved since the last report. The Texas rig count increased, and contacts noted strong global demand. Respondents expect further improvement in the second half of the year, especially due to anticipated increases in rig activity and production from the Gulf of Mexico.

Other highlights include:

  • Manufacturing activity increased overall, and many contacts were more optimistic in their outlooks.
  • Drought conditions worsened across the Eleventh District.
  • Refiners said operating rates and margins were up over the reporting period.
  • Automobile sales were steady over the reporting period, and demand remains above year-ago levels.
  • Transportation service firms said overall cargo and container volumes increased over the reporting period. Railroad contacts reported notable increases in motor vehicles, petroleum, lumber......
  • ..commercial real estate sector said leasing activity for office and industrial warehouse space continued at a steady pace.

The Dallas Beige Book summarizes recent economic conditions in the Eleventh District. Read the full report at dallasfed.com

Riding the Hours of Service “Merry Go Round”

Running Clock
Running Clock

In December of 2011, the Federal Motor Carrier Safety Administration published a final rule for hours of service (HOS) that is scheduled to go into effect on July 1st 2013 regardless of a pending lawsuit that was submitted by American Trucking Associations.

This is not the first time the FMCSA has changed HOS regulations and it’s not likely to be the last. How long drivers should work before taking a break is a bone of contention among several parties. Safety activists want shorter work periods and longer, more frequent rest breaks while those in the industry want to make the most of their time on the road. In an effort to arrive at the best solution, regulations have been changed only to be changed back.

The HOS “Merry Go Round” has been a thorn in trucking’s side for years and has cost the industry millions of dollars to update paperwork, policies and conduct training workshops so employees will be in compliance. As publishers of training materials, we at Mike Byrnes and Associates, Inc., scramble to bring our publications current.

Opinions will vary about the latest HOS changes but in the end we all have to comply with the regulations in force.

Here’s a summary of the changes that go into effect July 1st, 2013:

Limitations on minimum "34-hour restarts"

  • Current rule states:
    • there are no limits on how many 34-hour restarts you can use in a 7 day work week.
    • The new rule states:
      • Must include two periods between 1 a.m. - 5 a.m. home terminal time.
      • May only be used once per week.

Rest breaks

  • Current rule states:
    • there are none except as limited by other rule provisions
    • The new rule states:
      • May drive only if 8 hours or less have passed since end of driver's last off-duty period of at least 30 minutes. [HM 397.5 mandatory "in attendance" time may be included in break if no other duties performed]

Here’s also a summary of the changes that went into effect February 27th, 2012:

On-duty time

  • Current rule states:
    • anytime a driver is in Commercial Motor Vehicle, except sleeper-berth.
    • The new rule states:
      • Does not include any time resting in a parked vehicle (also applies to passenger-carrying drivers). In a moving property-carrying CMV, does not include up to 2 hours in passenger seat immediately before or after 8 consecutive hours in sleeper-berth.

Penalties

  • Current rule states:
    • "Egregious" hours of service violations not specifically defined.
    • The new rule states:
      • Driving (or allowing a driver to drive) more than 3 hours beyond the driving-time limit may be considered an egregious violation and subject to the maximum civil penalties. Also applies to passenger-carrying drivers.

Oilfield exemption

  • Current rule states:
    • "Waiting time" for certain drivers at oilfields (which is off-duty but does extend 14-hour duty period) must be recorded and available to FMCSA, but no method or details are specified for the record keeping.
    • The new rule states:
      • "Waiting time" for certain drivers at oilfields must be shown on logbook or electronic equivalent as off duty and identified by annotations in "remarks" or a separate line added to "grid."

Making It Work

Next month, in Part Two, we’ll take a look at how to manage the new hours of service regulations.

Quick Reference HOS Regulations

HOURS-OF-SERVICE RULES

Property-Carrying CMV Drivers (Valid Until July 1, 2013)

Passenger-Carrying CMV Drivers

11-Hour Driving Limit

May drive a maximum of 11 hours after 10 consecutive hours off duty.

10-Hour Driving Limit

May drive a maximum of 10 hours after 8 consecutive hours off duty.

14-Hour Limit

May not drive beyond the 14th consecutive hour after coming on duty,   following 10 consecutive hours off duty. Off-duty time does not extend the   14-hour period.

15-Hour On-Duty Limit

May not drive after having been on duty for 15 hours, following 8 consecutive   hours off duty. Off-duty time is not included in the 15-hour period.

60/70-Hour On-Duty Limit

May not drive after 60/70 hours on duty in 7/8 consecutive days. A driver may   restart a 7/8 consecutive day period after taking 34 or more consecutive hours   off duty.

60/70-Hour On-Duty Limit

May not drive after 60/70 hours on duty in 7/8 consecutive days.

Sleeper Berth Provision

Drivers using the

sleeper berth provision

must take at least 8 consecutive hours in the sleeper   berth, plus a separate 2 consecutive hours either in the sleeper berth, off   duty, or any combination of the two.

Sleeper Berth Provision

Drivers using a

sleeper berth

  must take at least 8 hours in the sleeper berth, and may split the   sleeper-berth time into two periods provided neither is less than 2 hours.

BP Review of World Energy Trends - Highlights Video

BP has published its annual statistical review of world energy trends for over 60 years. This year's report is as interesting as ever. A short video presentation and our takeaways are included below.

  • Global energy consumption growth slowed to just 1.8% in 2012
  • Energy efficiency improved at rates not seen in 30 years
  • Energy consumption in developed countries has fallen for 5 straight years
  • Saudi Arabia, UAE, and Qatar produced record levels of oil in 2012
  • US saw the largest increase in oil production in the country's history
  • China consumed the majority of the world's coal for the first time
  • Nuclear power declined by more than 6% in 2012 (largest drop ever)
  • China increased hydroelectric power generation by more than 22%
  • Biofuels output declined globally
  • Solar output grew by more than 50%, but renewables only county for 2% of energy

P.S. The Eagle Ford played a big part in helping grow U.S. oil production. Oil production reported to the Texas Railroad Commission has increased from ~200,000 b/d at the beginning of 2012 to estimates of almost 600,000 b/d in June of 2013.

If you are a stats junky, you might enjoy the "in depth" interview. It is a little longer - 9 minutes.