Issue #55 | Water Midstream Gives E&Ps Options

Oilfield Water Weekly

Wednesday April 22, 2020

We checked in with our friends at Lagoon Water Midstream this week to see how things are going up in the STACK/SCOOP water market.

The firm’s Chief Commercial Officer, Caitlyn Jackson, will be a speaker on our “State Of Water Midstream Panel” when our delayed Oilfield Water Market Conference is able to convene.

For now though, you can read her perspective in the following edition of our Downturn Dialogue series. We found her thoughts on the levers that water midstream firms give E&Ps to pull on gathering and disposal economic preferences to be particularly interesting. And we applaud Lagoon’s long-term view on investments, as the firm continues to fund organic as well as M&A growth opportunities.

Before we get to this week’s oilfield water news digest, here’s what Caitlyn had to say:

“Today’s challenging environment is a chance for all oilfield industry participants to double down on their core values and re-focus on serving the most pressing needs of customers. The water midstream sector will play a critical role as the industry weathers the storm, helping E&P customers meet their financial, operational, and ESG goals. For us at Lagoon Water Midstream, this means acting with a servant mindset, our first core value, seeking to partner with our customers for the long term on initiatives that lower the cost per boe. With the recent decline in commodity prices, it’s more important than ever to minimize operating costs, thereby maximizing the value of each barrel of oil.

The water midstream model, which connects wells to permanent water pipeline infrastructure, offers the lowest cost and most reliable takeaway option for managing produced water, removing trucks from our communities’ roads and allowing us to be the best stewards of the environment as possible. Where our system at Lagoon (200+ miles of underground water pipeline, 17 disposal wells, commercial water recycling) allows, we install permanent pipeline infrastructure ahead of a well completion and then source recycled water through that pipeline to our customer. This not only reduces the environmental risk of spills, but it’s the most capital efficient method of water delivery for a well completion. When we approach a customer with a proposal for both sourcing recycled water and the long term gathering and disposal of the produced water, we can pull multiple levers offering a customized solution to meet our customer needs. We’ve found instances where an operator would rather pay a higher capital cost on their water sourcing AFE in return for lower long term gathering and disposal rates and vice versa. This customer first approach and offering flexibility is a value proposition we focus intently on as a proud provider of water midstream.

Despite the reduced activity near term, we continue to look to the future and invest for the long term. We believe the STACK and SCOOP plays in Oklahoma have significant remaining inventory, and we continue to invest in our infrastructure knowing that activity will pick back up in the future. Currently we are constructing a large pipeline project to connect two of our core systems together, furthering our goal of offering a large interconnected system to our customers. This not only offers reliability but allows us to proactively balance the water on our system, optimizing disposal locations and furthering the reach of our recycled water sourcing service. It’s a win-win for both Lagoon and our customers, today and for years to come.

With solid financial footing (backing from Macquarie), steady leadership, and an optimistic and realistic eye towards the future, Lagoon is in the unique position to pay cash for quality assets even in this environment. And we’re actively looking for opportunities to partner with like-minded operators both in Oklahoma and in other basins for the long haul.”

-written by Caitlyn Jackson, Chief Commercial Officer, Lagoon Water Midstream April 2020

And now for this week’s news and analysis…


News Digest

Riding The Wave

Palisade’s EVP of Operations Reagan Kneese said water buyers are coming in all shapes and sizes. “We have a pretty diverse client base at this point—all sizes of operators—and the ability to facilitate other industrial uses as well makes it a unique project in that sense.”...

On The Oilfield’s Second Black Monday This Spring… One Word Comes To Mind: TEMPORARY

The unforeseeable, indeed unintelligible, nature of this week's historic sell-off inspired us to reflect on the simple, tried-and-true logic of the oilfield business cycle...

Texas Railroad Commission Defers Proration Decision Until May 5 Meeting

The Texas Railroad Commission adjourned a webcast public meeting Tuesday without voting on whether to implement prorationing the state's production, instead deferring a decision until next month....

Why Protectionism Will Not Shield The US Oil Industry

The US Energy Department has drafted plans to pay companies to leave oil in the ground, as a kind of strategic reserve, but setting a precedent for government interference is a risky move for the oil industry...

Oil Industry Braces For Devastation

“I’m just living a nightmare,” said Ben Sheppard, president of the Permian Basin Petroleum Association. Executives are working from home, huddling with their colleagues and board members to decide how quickly to shut down production and lay off workers...

Don’t Count The Frac Industry Out Just Yet

These businesses have worked through tumbling oil prices before. If anything, it made them stronger...

Oil May Be In The Gutter, But Gas Is Good! A Look At Bifurcating Rig Fortunes In The Crash

On an historic Monday when the WTI front month contract fell more than 300% into negative territory, natural gas spot prices were up 10%! Here's analysis of how the rig count is bifurcating around the diverging commodity price fortunes...

Permitting Breakthrough For EnergyWaterSolutions Evap Tech

EnergyWaterSolutions announced that it has received formal acceptance of its airborne emissions testing from the Pennsylvania Department of Environmental Protection for its VOX Evaporation Technology....

Veolia Turns To In-House Laboratory To Manufacture Hand Sanitiser For Waste Workers

To beat the supply shortages of biocidal hand sanitiser products during the coronavirus pandemic, Veolia has turned to its own in-house laboratory facilities to manufacture its own....

Top SWDs In Texas Delaware

Tabular ranking of Texas Delaware Basin SWDs from the desk of Chris Weyand...

EPA Knocks Wyo Plan To Bar Public’s Water Pollution Data

Wyoming can’t ignore water pollution data submitted by the public or academic institutions when that’s the only information available to determine whether streams, lakes and rivers are polluted, the U.S. EPA has told state officials.

Minimizing Produced Water’s Impact On The Environment

The role of oil-in-water monitors in production process control and optimization, injection water quality monitoring, and discharge reporting...

In Case You Missed It In Our Feature Last Week: Michael Blankenship and Isaac Griesbaum Discuss Risk Mitigation Strategies for Water Midstream Companies

The midstream water industry was focused on record breaking M&A in 2019, and more recently the industry has refocused its attention on risk mitigation strategies that address exploration and production (E&P) client bankruptcies and fee reductions....

Marathon Oil CEO: Regulators Should Stand Down & Let Free Markets Handle The Oil Price Crash

Opinion: responsible producers don’t need mandatory regulations by the Texas Railroad Commission to balance supply and demand....

A Deep Dive (& Some Fun) With The Historic Hearing On Texas Oil Cuts [Summary Of 9-Hour Testimony]

Last week's historic virtual meeting on proration was watched by 20,000 viewers. A whopping 53 industry stakeholders testified during the epic session (including multiple Infill Thinking members!). Of the 53 petitions made:
- 19 were “for” regulated cuts (36%)
- 25 were “against” regulated cuts (47%)
- and 9 were neutral (17%)

Here's everything you need to know from the nine-hour meeting in a brief and concise read full of invaluable market intelligence...

Video Explanation Of Porosity & Permeability [10-minutes]

Discover the concepts of porosity and permeability and how they relate to frac’ing in this educational video from Liberty’s VP of Engineering, Dr. Leen Weijers...

California Farmers Use Oil Firms’ Water

The farmers pay about $33 per acre-foot (1,233 cubic meters), compared to up to $1,500 for the same quantity of fresh water, said David Ansolabehere, head of the water distribution cooperative....

North Dakota Oil Companies Have Shed 2,000 Jobs, Could Cut 6,000 More

The global oil price crash already is bashing North Dakota’s economy as the state’s petroleum industry retrenches — and the contraction could go on for months....

As Bad As Paper Oil Prices Got On Monday, The Real Spot Bid Got Worse [Chart Of The Day]

While WTI May 2020 paper contract dropped into negative territory as well, to -$35/bbl, the Plains bid in some fields around the US were much worse, dropping as low as the -$50s for some grades. Here’s how things looked on Monday, April 20, 2020 vs. recent history...

Ring Energy, Inc. Enters Into Purchase and Sale Agreement on Its Delaware Basin Acreage

Ring Energy, Inc recently entered into a Purchase and Sale Agreement to sell its Delaware Basin asset located in Culberson and Reeves Counties, Texas...

Produced Water Treatment Demands Accurate Measurement

Magnetic flow meters can provide advanced diagnostics to spot trouble before it’s too late...

How Pennsylvania’s Natural Gas Boom Has Led To Carbon Emission Cuts

As the nation’s second-largest natural gas producing state, with output reaching 6.2 trillion cubic feet in 2018, Pennsylvania is at the tip of the spear in realizing these generational environmental benefits...

Schlumberger Estimates 100+ US Frac Crews Will Still Be Active At The Bottom [Live Blog Complete]

Schlumberger’s more bullish view of the bottom than the narrative going around of 50 – 60 crews is a not so subtle nudge to the market that anecdotally-driven consensus may be overshooting the downside risk at the bottom. Of course, this statement was made before negative oil prices!

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