VOLUME 15, ISSUE 2 FEBRUARY 2017 President’s Letter AAPL Member Benefits 3 New Members 4 Questions from the Field 5 Industry Affairs 6-9 Getting to Know 10-11 a Member Legislative Affairs 12 President Night Pics 13,14 Jan. Meeting Pics 15 Infant Crisis & Youth 16 AAPL Events 17 We are officially one month into the New Year. Who else’s New Year’s resolutions have already gone out the window? It’s safe to say the Girl Scouts use the month of February for the greatest marketing barrage in America to sell their cookies. They prey on millions of people who have been trying to diet for a solid month and are ready to throw in the towel. Well done, Girl Scouts! February is also the month the oil and gas industry congregates in Houston for NAPE Summit, which is also an indication of the state of our business. It seems to be shaping up nicely for a good crowd with plenty of deals to be had. According to the NAPE website, there will be over 1,000 exhibitors this year. Our February Educational Luncheon featured Ben Brown presenting “Current Issues at the Oklahoma Corporation Commission”. This is always a hot topic and as expected, it drew a large crowd. I was unable to attend, but I’m told it was a very informative meeting. If you also had to miss the meeting, remember the presentation is available on the OCAPL website under the Events/ Past Events tab. Speaking of the Corporation Commission, mark your calendars for the April 3rd Education Luncheon, as we have Dana Murphy scheduled to speak. The Monday night meeting was President’s Night and featured current AAPL President Pamela D. Feist as the speaker. Mrs. Feist spoke about how the challenges AAPL currently faces require a transition from the status quo to a new, innovative standard. She mentioned AAPL’s new Contract Center, an upgrade from the old Forms on a Disk that allows AAPL members to negotiate and collaborate on AAPL model forms including the 2015 and 1989 JOAs, Gas Balancing agreements, MLSA, and Confidentiality Agreements. Mrs. Feist also pointed out that many of AAPL’s educational seminars are now webcast, providing a much more accessible and cost efficient experience for AAPL members. I was surprised to learn that Mrs. Feist is the first female president of AAPL in its 61 year history! For those wondering, OCAPL’s first female president was Gail Cope in 1999. Gail and many other past presidents were in attendance Monday night, along with two of the three past OCAPL presidents who also served as AAPL President; Jack Richards, Scott Stone and Jack Sweeney. It was a great night to honor all those who have served OCAPL. I hope everyone enjoys the rest of the month. Good luck avoiding the barrage of Girl Scouts and their parents trying to sabotage all of our New Year’s resolutions. Also, remember to renew your OCAPL memberships! Should you ever have suggestions, questions or concerns regarding OCAPL, please don’t hesitate to contact me. Sincerely, Robert Rice, CPL 2017 OCAPL President Points of Interest
Transcript
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VOLUME 15, ISSUE 2 FEBRUARY 2017
President’s Letter
AAPL Member Benefits 3
New Members 4
Questions from the Field 5
Industry Affairs 6-9
Getting to Know 10-11
a Member
Legislative Affairs 12
President Night Pics 13,14
Jan. Meeting Pics 15
Infant Crisis & Youth 16
AAPL Events 17
We are officially one month into the New Year. Who else’s New Year’s resolutions have already gone out the window? It’s safe to say the Girl Scouts use the month of February for the greatest marketing barrage in America to sell their cookies. They prey on millions of people who have been trying to diet for a solid month and are ready to throw in the towel. Well done, Girl Scouts!
February is also the month the oil and gas industry congregates in Houston for NAPE Summit, which is also an indication of the state of our business. It seems to be shaping up nicely for a good crowd with plenty of deals to be had. According to the NAPE website, there will be over 1,000 exhibitors this year.
Our February Educational Luncheon featured Ben Brown presenting “Current Issues at the Oklahoma Corporation Commission”. This is always a hot topic and as expected, it drew a large crowd. I was unable to attend, but I’m told it was a very informative meeting. If you also had to miss the meeting, remember the presentation is available on the OCAPL website under the Events/Past Events tab. Speaking of the Corporation Commission, mark your calendars for the April 3rd Education Luncheon, as we have Dana Murphy scheduled to speak.
The Monday night meeting was President’s Night and featured current AAPL President Pamela D. Feist as the speaker. Mrs. Feist spoke about how the challenges AAPL currently faces require a transition from the status quo to a new, innovative standard. She mentioned AAPL’s new Contract
Center, an upgrade from the old Forms on a Disk that allows AAPL members to negotiate and collaborate on AAPL model forms including the 2015 and 1989 JOAs, Gas Balancing agreements, MLSA, and Confidentiality Agreements. Mrs. Feist also pointed out that many of AAPL’s educational seminars are now webcast, providing a much more accessible and cost efficient experience for AAPL members.
I was surprised to learn that Mrs. Feist is the first female president of AAPL in its 61 year history! For those wondering, OCAPL’s first female president was Gail Cope in 1999. Gail and many other past presidents were in attendance Monday night, along with two of the three past OCAPL presidents who also served as AAPL President; Jack Richards, Scott Stone and Jack Sweeney. It was a great night to honor all those who have served OCAPL.
I hope everyone enjoys the rest of the month. Good luck avoiding the barrage of Girl Scouts and their parents trying to sabotage all of our New Year’s resolutions. Also, remember to renew your OCAPL memberships!
Should you ever have suggestions, questions or concerns regarding OCAPL, please don’t hesitate to contact me.
OU/EM Food Bank Volunteer Opportunity - OKC Food Bank
Educational Luncheon – Speaker – Jason L. Nestelroad, FBI Topic – “Cyber Security” Monday Night Meeting – Speaker – Steven C. Agee, PH.D, Dean & Professor of Economics, OCU
Educational Luncheon – Speaker – Dana Murphy – Oklahoma Corporation Commissioner – Topic – TBAMonday Night Meeting – Speaker - Frank J. Patterson, Ex Vice President, E&P Chesapeake Energy Corporation
Educational Luncheon – Speaker TBAMonday Night Meeting – Social Meeting – No Speaker
Weekend Take Off – Beavers Bend State Park, Broken Bow, OK
Educational Luncheon – Speaker TBAMonday Night Meeting – Speaker TBA
Educational Luncheon – Speaker TBAMonday Night Meeting – Awards Night
Christmas Party
*IF YOU WOULD LIKE TO BE A LUNCHEON SPONSOR, PLEASE CONTACT RYAN CLOER AT [email protected]
*GO TO WWW.OCAPL.ORG TO REGISTER FOR EVENTS*
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Professional and Industry Information$435,000 annually ($23 per member)
v Landman Magazine (printed and electronic)v Landline Electronic Newsletterv Landman’s Directory (printed and electronic)v AAPL Connect - Landnews (post jobs and
resumes and connect with members)
Government Relations, Advocacy, Monitoring and Reporting
$180,000 annually ($10 per member)v Sponsor Legislation (independent contractor
and judicial issues)v Emerging Tax Issues (monitor gross receipts issues)v Unauthorized Practice of Law (protect the right to work)v BLM Rule Making (research & provide input & comment)v Local Association Connections (keep apprised of state
& federal issues)
Professional Development and Stewardship$823,000 annually ($45 per member)
v Independent Contractor Tax Toolkitv Ambassador Toolkit v Educational resources/publications
(O&G Comparative Law Book)v Institutes and Seminars
(live, web-cast and video courses)v RPL/CPL Reviewsv Tuition Assistancev Annual Meeting (industry networking
and professional development)
Enhancing the Land Professional’s Stature$443,000 annually ($24 per member)
v Code of Ethics and Standards of Practicev Membership & Certification Programs (CPL, RPL, RL)v Industry Forms (JOA, Land Services, Confidentiality
& Production Handling)v Educational Foundation - Grants to support educations
programs for members
Investing in the Future Landman$150,000 annually ($8 per member)
v Landman Scholarship Trust - Student Scholarships since inception total close to $2 million distributed in support of the next generation of landmen
Service to the Industry - Managing Partner of NAPE Expo$3,000,000 in net annual income ($154 per member)Potential $4,000,000 value to members* ($240 per member)
v Largest marketplace in the world for buying and selling prospectsv Industry and land professionals’ premier networking eventv NAPE Charities Fund - over $3 million provided to veterans charitiesv Members qualify for $80 discount for NAPE with paid membership by June 30, 2016, and
NAPE registration by July 29th*
Access to Group Insurancev GeoCare Insurance Program (dental, medical, disability, long-term care, home, auto)v Professional Errors & Omissions Insurance Program
Editor’s Note: Each month this column will be de-voted to answering oil and gas title questions.
Q: Does the Statutory Pugh Clause apply to waterfloods or secondary recovery units formed under 52 O.S. § 287.1 – G.M.
A: No. The Statutory Pugh Clause recites “In case of a spacing unit of one hundred and sixty (160) acres or more, no oil and/or gas leasehold interest outside the spacing unit involved may be held by production from the spacing unit more than ninety (90) days be-yond expiration of the primary term of the lease.”
In a recent Court of Civil Appeals case styled Stephens Production Company v. TripCo., Inc., the Court of Appeals concluded that the Statu-
Questions from the FieldTimothy C. Dowd
ELIAS BOOKS BROWN & NELSON
Editor’s Note: Each month this column will be devoted to answering oil and gas title questions.
Q: I examined an Oil and Gas Lease dated July 1, 1984, covering tracts in Sections 1, 2, 3, 4, 5 and 6. I have also examined copies of Oklahoma Corporation Commission Completion Reports (Form 1002) for the Smith 1-1 Well drilled in the SE/4 and the Smith No. 2 Well located in the NE/4 of Section 1.
During the primary term of the lease, two wells were drilled on the lands in Section 1. The first well, which is denoted as the Smith 1-1 Well, was commenced on October 13, 1984 and drilled in the S/2 SE/4 (which is not part of the leased tract). The Smith 1-1 was completed in a formation, which was established as a 160-acre drilling and spacing unit for the SE/4.
A second well, denoted as the Smith No. 2 Well, was drilled in the NE/4 of Section 1 (part of the leased tract) on April 24, 1986, and completed in the Hartshorne formation. The Hartshorne formation has not been established as a drilling and spacing unit for the NE/4 of Section 1.
Does the drilling of the Smith 1-1 Well in a drilling and spacing unit of 160-acres cause the lease to terminate outside the SE/4? What is the impact of the Smith No. 2 Well Well on the extension of the Smith 1-1 lease?
A: Title 52 O.S. 87.1(b) recites: "In case of a spacing unit of one hundred and sixty (160) acres or more, no oil and/or gas leasehold interest outside the spacing unit involved may be held by production from the spacing unit not more than ninety (90) days beyond expiration of the primary term of the lease." (This statute is frequently described as the “Statutory Pugh Clause”).
Unfortunately, there is no case law and only one law review article that construes this statute and its impact on wells drilled. The only guidance is the wording of the statute. In this situation the oil and gas lease would not have been extended solely by virtue of production from the spacing unit and the well drilled in the SE/4, but the lease was
tory Pugh Clause under § 87.1(b) does not ap-ply to secondary recovery units.
The court determined that the phrase “spacing unit” appeared three times in the Pugh Clause inserted into 52 O.S. § 87.1(b), and the phrase was used an additional twenty times in the remaining subsections of § 87.1. However, the words “spacing” or “spacing unit” do not appear in the Unitization Act.
The court concluded that the legislature pro-vided two distinct statutory schemes which address oil and gas situations. The trial court concluded that § 87.1 deals with preproduc-tion of oil and gas wells during the primary term of a lease, while § 287.1 deals with en-hanced recovery operations after wells in a field have produced for a length of time.
Note: If you have any title questions you want answered, email your questions to [email protected].
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Wall Street bets on oil comebackPosted by Bloomberg February 09, 2017
Wall Street is throwing the most money at U.S. energy companies since at least 2000 amid growing confidence that the industry is emerging from the worst downturn in a generation.
Energy firms raised $6.64 billion in 13 equity offerings in January, drawn in by a rich combination of oil prices consistently above $50 a barrel and a rush to drill that’s doubled the rigs in use in the U.S. and Canada since May. The biggest change from last year: oilfield servicers that provide the rigs, fracking equipment and sand used by drillers.
The most beaten-down sector during a two-year price rout, servicers made up 22 percent of the equity totals in January, compared with 5 percent all last year. “The mood is absolutely different,” Trey Stolz, an analyst in New Orleans at the investment banking firm Coker & Palmer Inc., said by phone. “Go back to a year ago and
the knife was still falling. But today, it feels much, much better.”
Already, companies such as Weatherford International Plc are able to charge more for the use of their equipment and services as explorers race to open the spigots in the fertile Permian Basin of West Texas and other U.S. shale fields, according to Krishna Shivram, Weatherford’s interim chief executive officer. “We’re seeing signs of improved pricing of roughly 25 percent on average, versus December levels,” Shivram said last week on a conference call. “There is considerable optimism.”
Energy companies in the U.S. far outpaced the rest of the world, raising more than two-thirds of the $9.41 billion in new or additional stock last month, according to data compiled by Bloomberg. New investments emerged around the globe, from the share sale of Thorney Technologies Ltd. in Australia to SD Standard Drilling Plc in Cyprus. U.S. benchmark West Texas Intermediate crude traded above $52.50 a barrel on Thursday, up more
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than 20 percent from last year’s average.
The services sector was among the hardest hit during the downturn, slashing prices by more than a third and contributing the greatest chunk of the 440,000 jobs cut globally in that time. Now a new dynamic is at play, evidenced by the emergence of Keane Group, a Houston-based provider of fracking services, as one of the first initial public offerings for the U.S. in 2017.
Keane raised $508.4 million on Jan. 20. Though it may be surprising that an industry as volatile as hydraulic fracking produced an IPO in such a manner, consider that trading began on the day of President Donald Trump’s inauguration. The incoming president made energy independence a plank of his election platform and has promised to roll back regulations on the drilling industry.
“We have potentially an exponential increase in demand for our services with the rig count that’s
increased over the last couple of quarters,” Keane Group Chief Executive Officer James Stewart said in a Jan. 20 telephone interview. “The public equity markets are looking to invest in pure-play completion companies with a footprint and a growth story.”Other U.S. service companies that sold shares last month were Helix Energy Solutions Group Inc., Atwood Oceanics Inc. and Patterson-UTI Energy Inc., for a combined $899 million. Services companies, though, weren’t alone in drawing investment. The Williams Companies, Inc., a pipeline owner, raised $2.17 billion while oil explorers Parsley Energy Inc. and Jagged Peak Energy Inc. raked in $885.5 million and $474 million, respectively.
There’s no sign that companies are done raising money. Parsley dipped back into the market Tuesday to raise $1.12 billion from 36 million new shares that will help fund its $2.8 billion acquisition of drilling rights in the Permian. The improved drilling efficiency and more monstrous frack jobs will inevitably lead to larger output from the shale wells, Coker & Palmer’s Stolz said. “But it seems
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like the international headlines, whatever’s happening with OPEC or Saudi Arabia, that seems to be a lot more impactful than marginal improvement in wells in North American shale plays,” Stolz said. “Let’s not go out in the street and dance quite yet. It feels a lot better and there’s still a long way to go.”The revival of drilling and acquisitions in the Permian Basin of West Texas made it a hot spot for equity offerings last year as well. The $14.6 billion of stock offerings by independent Permian drillers made up more than a third of the energy industry’s total, according to data compiled by Bloomberg.
“The world looks a lot better to the service company now than it did six months ago,” David Oelman, co-head of capital markets at Vinson & Elkins in Houston, said in a phone interview. “It looks like we’re in a place where the momentum is making energy investments pretty attractive.”
Why Oil Prices Are Going UpRyan Dezember, Barron’s February 6, 2017
OPEC’s decision to dial back oil production is pushing crude prices higher and breathing new life into the U.S. oil patch. U.S. crude ended Friday at $53.83 a barrel on the New York Mercantile Exchange, up 19% since members of the Organization of the Petroleum Exporting Countries agreed on Nov. 30 to cut their combined output by 1.2 million barrels a day to support prices, which have roughly doubled in the past year. A favorite of smaller investors, the United States Oil Fund exchange-traded fund (ticker: USO), is up more than 14% in that time. OPEC’s move marked a new turn in the price war between the cartel and U.S. shale producers that for two years has kept global crude stockpiles brimming and prices low. U.S. shale drillers have responded to rising prices with a flurry of deal-making and drilling aimed at seizing market share as OPEC throttles back. Since OPEC announced its plan, the number of rigs drilling in the U.S. has risen 23% to 729. The rig count is up 80% since bottoming in May. Though the stateside drilling may help keep prices from rising too fast, many forecasters expect oil prices to continue their ascent. In a recent Wall Street Journal survey of 15 investment banks, analysts boosted their price forecasts for the first time in five months, suggesting an average U.S. crude price of about $55 a barrel in 2017. Traders are betting heavily on their being right. Long positions outnumbered bearish bets last month by the widest margin in the 10 years that the Commodity Futures Trading Commission has tracked the data. Bulls believe that rising global demand, big shortfalls in offshore production, and output reductions from OPEC
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and other exporters, including Russia, mean the market will soon face a shortage of supply. “We shouldn’t be scared of the supply that is coming on. These barrels will be needed down the road to rebalance the market,” says Nick Koutsoftas, portfolio co-manager of commodities strategy for asset manager Cohen & Steers. He expects oil to reach $65 a barrel by year end. Oil companies in the Permian Basin have been drilling most aggressively. About 40% of all rigs in the U.S. are drilling in that area of west Texas, and analysts expect the region to remain the industry’s focus, based on spending plans by producers and the fact that many companies have made expensive land purchases there that they must justify by drilling. Another bright spot for U.S.-focused service companies is the backlog of drilled but uncompleted wells. The U.S. Energy Information Administration estimates there are more than 5,300 wells, waiting to be hydraulically fractured and brought online by companies like Halliburton (HAL) and Keane Group (FRAC), which last month listed shares. Bankers and private equity
executives expect a slew of initial public offerings by oilfield-service companies looking to raise capital as they ramp up. Though some worry about a flood of Permian oil swamping supplies, many analysts and investors note the declining production in other shale regions, such as North Dakota and south Texas. Permian growth “won’t be enough to offset declines” elsewhere, says Adam Rozencwajg of Goehring & Rozencwajg Associates, an investment firm focused on natural resources. “There’s going to be a massive supply imbalance for 2017 and 2018, despite increased spending and increased activity.”
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For this month’s edition of getting to know a member, I had the pleasure of interviewing Robert Rice. Robert is our current OCAPL president and is head of business development at Continental Land Resources. If you have not met Robert, please reach out to him at one of our next events.
Q. Robert, I mean Mr. President, congratulations on your successful election. What does being the 71st president of OCAPL mean to you?
A. I’m actually the 69th president as Jack Dalton and Sam Carrol both served as president twice! This organization is amazing, I’ve made lifelong friendships and business connections because of it, so it’s a great honor to be able to serve as President this year!
Q. As President is there anything that you are looking to change or add to what we are currently doing as an organization?
A. AAPL president Pamela Feist had an interesting stat during her presentation Monday night. Only 14% of AAPL’s membership is under the age of 30. I don’t know of OCAPL’s exact numbers, but I expect it to be around the same. That’s been a focus of the last couple of presidents and I want to continue the efforts to get younger landmen
GETTING TO KNOW A MEMBER
involved in OCAPL. We have been working on adding a quarterly Thursday night networking happy hour to the schedule.
Q. What prompted you to get into the Land business?
A. My Dad and Uncle were both landmen in the 80’s. After the bust my Dad went to law school. I grew up thinking I would go to law school and practice with my Dad. When I graduated from OU in 2006, the shale plays were booming and I realized I didn’t like school enough for three more years! I haven’t looked back since!
Q. What is one interesting fact about yourself?
A. I live on the street I grew up on, which is one street over from the street my Dad grew up on.
Q. I know you like to run are there any other
hobbies that you have?
A. Can you consider it a hobby if you aren’t very good? I really enjoy golfing, but I think anyone who has ever played with me will agree; I stink! Or maybe I’m just letting them win………..
Q. Favorite movie?
A. I love the entire Star Wars collection, even the ones with Jar Jar Binks.
Q. Favorite restaurant?
A. I hate to give Stillwater any love, but Tokyo Pot is fantastic and a cool dining experience!
Q. Prediction for the Thunder Warrior game this weekend?
A. A lot of jeers for Durant, an angry Westbrook triple double and unfortunately a Thunder loss.
Page 11
hobbies that you have?
A. Can you consider it a hobby if you aren’t very good? I really enjoy golfing, but I think anyone who has ever played with me will agree; I stink! Or maybe I’m just letting them win………..
Q. Favorite movie?
A. I love the entire Star Wars collection, even the ones with Jar Jar Binks.
Q. Favorite restaurant?
A. I hate to give Stillwater any love, but Tokyo Pot is fantastic and a cool dining experience!
Q. Prediction for the Thunder Warrior game this weekend?
A. A lot of jeers for Durant, an angry Westbrook triple double and unfortunately a Thunder loss.
Page 12
Aaron Meek & Dave HamptonHampton and Milligan
Some members have inquired about the Governor’s proposed sales tax expansion. NewsOK has a good article discussing the proposal (“Fallin’s tax plan would net cities, counties $769M,” NewsOK.com). The article includes a spreadsheet showing the 164 new services that would be taxed under the proposal, including many services that are integral to oil & gas development. Land services are not explicitly listed, but it is unclear at this time if land services would fall under one of the broader categories of services listed. We have made inquiries to our state representatives and other oil & gas industry associations in an effort to determine in particular if brokers and land services companies would be required to start collecting sales tax under the proposal.
There are numerous shell bills that have been filed pertaining to the oil & gas industry. Because these are shell bills, it is not possible to evaluate them until the text of the bills is added at a later date. However, there are many shell bills this year with broad-ranging titles, such as the Second Century Oil and Gas Act, the State Oil and Gas Act of 2017, the Oklahoma Oil and Gas Act of 2017, Oil and Gas Enhancements Act of 2017, State Oil and Gas Enhancements Act of 2017, Oil and Gas Regulatory Reform Act of 2017, Oil and Gas Development Act of 2017. The titles of these bills suggest grand plans, so we will continue to monitor these bills for updates.
HB1366 would make numerous significant changes to the laws relating to notaries public. The bill would permit documents to be notarized electronically using “audio-video communication.” It would also increase the notary bond from $1,000.00 to $10,000.00 and increase the allowable fee for each notarial act.
HB1902 states that when municipal regulations of oil and gas development substantially impair the development of minerals it is considered a taking, which could result in payment to the mineral owners.
HB2303 would remove the requirement that an Oklahoma attorney examine an abstract in order to obtain title insurance and allow title insurance companies to decide what title evidence they deem adequate for issuing title insurance. This bill would appear to have a larger impact on surface transactions, but it is significant to the oil & gas industry due to the impact it could have on the business model of abstracters.
SB284 would make several changes to the 2011 Shale Reservoir Development Act that generally would expand the possible use of extended lateral horizontal units beyond just shale reservoirs to any reservoir deemed by the Corporation Commission to be suitable for development by an extended lateral horizontal.
HB1356 makes changes to the statute governing acceptable distances between wells and structures.
HB2215 would dramatically alter county governments by extending the terms in office of county sheriffs, county clerks, county treasurers, county assessors, county commissioners, district attorneys, and court clerks—so essentially all county officers—from 4 years to 24 years.
If you know of legislative or regulatory activity that you would like the Legislative Affairs Committee to analyze and discuss, please let us know by contacting Aaron Meek [email protected] or (405) 235-5620.
“Thank you to the generous sponsors of the Christmas Party Raffle and to everyone who purchased tickets! OCAPL donated $20,000 each to Youth Services of Oklahoma County and the Infant Crisis Center. Both organizations were extremely grateful and accepted the checks in person at the Presidents’ Night Meeting in February.”
The people presenting the checks were: Jordan McGee, Heather Cotter, and Robert Rice. The recipients were: Melanie Anthony (Youth Services) and Miki Farris (Infant Crisis)
Page 17
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