The OIPA — OKOGA - What a Strange Organization

Oklahoma Oil and Gas Owners,

It’s no secret that Berlin is not a fan of the newly re-branded OIPA — OKOGA. They often complain that the oil and gas industry is unfairly targeted and that somehow oil and gas businesses are more deserving of special treatment than others.

The OIPA — OKOGA supported House Bill 2150 and claim the measure is needed to give mineral rights owners the opportunity to file court cases to battle over-restrictive rules. Some municipalities in central Oklahoma such as Newcastle, Piedmont, Minco, Amber, Tuttle and Blanchard have implemented rules that arguably conflict with the state statutes that that already bar local jurisdictions from adopting ordinances, rules or regulations that exceed the Oklahoma Corporation Commission’s authority to regulate the oil and gas industry.

From Berlin’s reading, nothing is currently preventing mineral owners from suing local governments if the governments enact rules that would be considered a taking pursuant to Article 2 of the Oklahoma Constitution. Do we now need rules explicitly stating who can file lawsuits? Are we going to constantly push back against bad legislation with more bad legislation?

Berlin’s favorite part of the OIPA — OKOGA’s involvement in the case is that they previously supported a municipality against an independent operator when the operator was claiming that the municipality’s rules and regulations conflicted with the state statue’s regulating oil and gas development. This is weird, but unsurprising for the unprincipled.

More to follow,

Berlin

Assorted Links (and a chance to win an Amazon gift card)

Oklahoma Oil and Gas Mineral Owners:

Here are a few links that Berlin read over the weekend that will be of interest:

Duke is sad that he didn't buy more Oklahoma mineral rights and royalties in the MERGE before the Governor James B. Edwards well was drilled by Citizen Energy. 

The Perfect Oilfield (unfortunately, not the STACK/SCOOP/MERGE..): 

Once one starts tacking on zeros to the production numbers, Berlin's former tong working brain starts to spin a bit (like chains...). It sounds very impressive and I'm sure the Bedouins of that desert prefer the sovereign didn't own the mineral rights. H/T to Tyler Cowen for the link and the introduction to Shellman's blog.

‘Enormous’ Merge Play Resource Rivals Major World Gas Fields (fortunately, the MERGE, unfortunately not the STACK/SCOOP)

The secret has been out for some time, but the Governor James B. Edwards well drilled by Citizen Energy, has led to the development of the MERGE (...who coined this one and what does it stand for?*) and that means money in the door for Oklahoma oil and gas mineral owners in the Tuttle/Minco/Union City area.

Sheriff Takes Food from Prisoners, Locks up Whistle Blower (weird and legal, but shouldn't be)

For some reason, we take liberty for granted. Vote them out.

More to follow,

Berlin

*the wittiest explanation for the MERGE acronym will receive a $10 Amazon gift card. Email Berlin or comment below. Competition ends close of business 27 March 2018.

Tom Ward is back and that is good news for Oklahoma mineral owners

Oklahoma Oil and Gas Royalty Owners,

NewsOK business writer Jack "in the" Money, reported a new partnership, BCE-Mach, LLC ("Mach"), that was formed earlier this year between Mach Resources, LLC, and Bayou City Energy. Bayou City Energy will be providing capital to the acquisition and development efforts of Mach Resources, LLC, that is led by Tom Ward.

Mach Lease Bonus = Pleased Oklahoma Mineral Owner

This announcement should make Oklahoma oil and gas mineral owners smile (and dream about purchasing a new combine...). In the recent past, Ward has been associated with Chesapeake Energy, Sandridge Energy, and Tapstone Energy (so much energy that its giving Berlin chest pains). Chesapeake and Sandridge specifically, were known for paying 2x-4x the going lease bonus in the area in order to assemble their prospect. 

Mach stated "It is our intent for this platform to be aggressive in consolidating and redeveloping select under capitalized regions of the upstream sector" (in Oklahoma and Kansas). Mach has not recorded any oil and gas leases in Oklahoma to date, but one could read the under capitalized tea leaves steeping in the mid-continent and see Mach stepping back into the watery tar pit f/k/a the Miss Lime.

This would be weird, but not unusual. After all, if you are the only company taking a risk and you fail, you will get fired and will be accused of being a poor steward of your investor's capital and a poor explorationist (Johnny's word, not Berlin's) to boot. But if you are one of many to take a "risk" and you all fail, you may get fired (or may not), but you will be okay enough (because others were just as wrong) that you'll get an "atta boy" or "we understand, the macro-headwinds shifted" or "man, we were just as surprised as you were that the LOE never decreased" and will be able to raise money again. 

Either way, it will advantageous for the Oklahoma mineral owner to follow Mach's war path to greatness. If you have any more questions on Mach or you would like to sell your Oklahoma mineral rights and royalties, please contact Berlin.

More to follow,

Berlin

Mark Papa's Got a Brand New Bag, and it's Weird

Oklahoma Oil and Gas Interest Owners,

Mark Papa of Centennial Resource Development, Inc. ("Centennial") has made some bold statements recently regarding the future of oil and natural gas production from shale reservoirs. The thrust of his claim is that energy companies will not be able to produce as much oil and gas as they have forecasted. Berlin will not fault Papa for his statement, which could very well prove to be correct, but she believes that his arguments are faulty. Since Berlin has not interviewed Papa, all that she can analyze are his public statements. Berlin's comments are bolded and italicized after Papa's quotes:

1. “The oil market is in a state of misdirection now” - Unfounded statements like these give Berlin the willies. Oil is a commodity traded across the globe in high volumes. In which direction should the oil market be heading besides it's current direction? Papa doesn't say whether the price is too high or too low, but Berlin assumes Papa means that company stock prices are too high...? Hard to know.
2. "Mr. Papa told executives and investors that most of the best drilling locations in North Dakota and South Texas have already been tapped." - This should also give one pause. Maybe he could re-frame it as the best drilling locations that we know about in North Dakota and South Texas have been tapped. But, Berlin would presume that Papa would concede that there are unconventional reservoirs in North Dakota and South Texas that haven't been discovered. If he wouldn't concede that, then he should make a bolder claim such as "exploration geology in North Dakota and South Texas is fruitless as everything worth finding has been discovered." Papa isn't going to say that of course. In addition, even if the best locations in North Dakota and South Texas have been tapped, they aren't the only places to find oil and gas in economic quantities. He excluded every other basin to include the Anadarko and the Permian (where Papa's company is focused).
3. “Apparently, you can just use your imagination to dream what might happen with big data in five or 10 years.” - This skeptical take on the future of technology in the oil and gas sector is just mere paragraphs before the article mentions how, while at EOG, Papa utilized new technology to drill for oil in shale reservoirs instead of gas. It would be odd if Centennial wasn't spending money on R & D or continued using vendors and service companies that have failed to innovate. (note, Berlin isn't screaming "put it on a blockchain," just that it isn't logical to discount how technology will further change the industry. Something tells Berlin, that Papa hasn't spent all night prying casing joints around with 2x4's before they are sent up the cat-walk and through the v-door....there is some room for automation...)

The Godfather of Oklahoma mineral rights. Not the same Papa.

Maybe the weirdest part is that Papa is still at the helm of Centennial, a  pure-play Permian concern currently valued around $5 billion. Papa hasn't said how he has positioned Centennial to cope with the "misdirection." Berlin argues that it is a bit self-serving of Papa to claim the market is too optimistic, but keep his company long.  And if it isn't self-serving, then should his shareholders be upset that he believes the sector (which would include Centennial) is overvalued and that he hasn't returned more cash to shareholders? It would take some brass ones to take the other side of the trade. It is difficult for any publicly traded oil company to decrease production from one time period to the next and while staying in the good graces of "the market." Then again, shareholders continue to buy high and sell low. Berlin has argued before that managers and shareholders are often misaligned and that seems to be the case again with Centennial and Papa.

If Papa or anyone else feels like Berlin has erred in analyzing Papa's statements, please comment below.

More to follow,

Berlin