5-1-Chris-Faulkner

Black Monday: Oil Price Route

5-1-Chris-FaulknerOh, to have only taken a great big crude short Thursday afternoon before the long holiday.

Oil prices tanked Monday as overly nervous traders trampled the exits. After the smoke cleared, three primary factors stood to blame.

Greece: Boosted the dollar, which always drags on oil prices.
China: Weak stock market leaves viable concerns for Asian crude demand, near term.
Iran: Wants to dump another million barrels per day on the over-saturated world market once the sanctions are lifted.

So much for OPEC. Does cartel membership mean anything anymore, or can any one of the dozen participants produce, or cut production at will?
Does 30.3 million barrels really mean 31.5? And why again are we welcoming Iran back into the world markets when they can’t be trusted an inch?

Many models indicated a return to the $40s in 2015 before an upleg could resume and it looks like today’s triad was the trigger. Indications are that oil prices could test the recent lows, then settle back into the mid to upper $60s by year’s end. However, that was before the Greek vote, and far more important, the Chinese stock market swoon.

The world’s second largest economy is experiencing a market free-fall akin to ours in 1929, and is certain to have ripple affects across the globe. It already did in the commodity trading pits today. Swift releasing of buying margin on printed money (that will certainly fix the problem) and propping up shares will only compound nervousness and could make the eventual outcome even more severe.

Meanwhile, Secretary John Kerry continues closed-lip meetings in Vienna to free Iran from their global sandbox, and once they can come out to play again, they want to bring over 1 million barrels of oil with them. The world does not need more Iranian oil, but obviously President Obama and Secretary Kerry could care less. All they want is Iran to be free to pursue a nuclear program again. Go figure.

Once again, we are stepping away from any kind of fundamental norm related to the world’s oil prices, but that’s the way oil has always traded. Perhaps the prior models will hold, perhaps not. Today’s picture is too unexpected to predict at this point.

The biggest concern with this drop is how it will affect producers who are already sliced to razor-thin margins. The $10 per barrel that was shaved off prices this time could hurt, and painfully so. If prices slide and stay down, this could lead to the flush-out that many analysts were saying must happen before we resume a substantial up-turn.

Written by: Chris Faulkner, CEO of Breitling Energy Corporation and author of the recent book, “The Fracking Truth.” He is also the producer of the documentary, “Breaking Free: The Shale Rock Revolution.”

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Pope Francis Missed The Mark With His Environmentalist Encyclical

Pope Francis Missed The Mark With His Environmentalist Encyclical

Without a doubt, Pope Francis is a dynamic and charismatic leader who is going to make a significant mark on the world’s stage, much like his predecessor Pope John Paul II.  I see this Pontiff making a significant mark on history.

Currently, the world badly needs even one public figure who could help revive hope and give people confidence in the future.  I’m disappointed, however, when I keep hearing this Pontiff deplore those who are successful and talk about how downtrodden the earth is.  He is clearly sending the wrong message for our time. (We already have a prominent leader who has beaten American hope and confidence down to the lowest levels since the Carter Administration)

But when the Pope clearly sided with the environmentalist movement recently, I feel his position needs to be rebutted from someone inside the oil and gas industry, particularly related to his statements about fossil fuels.

It was clear when Francis became Pope that he was going to admirably aid the plight of the poor.  His history as an Argentinean bishop speaking on behalf of the less privileged had long been established.  I have been surprised, however, as Pontiff, the sheer extreme to which he is advancing that message.  This Encyclical, “Laudato Si”, exemplifies just how willing he is to favor contemporary social issues over theology, doctrine and spiritual living.

There have already been many reviews of the 172 page document which includes statements such as:

- The earth’s resources are also being plundered because of short-sighted approaches to the economy, commerce and production.

- Climate change is a global problem with grave implications: environmental, social, economic, political and for the distribution of goods. It represents one of the principal challenges facing humanity in our day. Its worst impact will probably be felt by developing countries in coming decades.

- The earth, our home, is beginning to look more and more like an immense pile of filth.

- Nowadays, for example, we are conscious of the disproportionate and unruly growth of many cities, which have become unhealthy to live in, not only because of pollution caused by toxic emissions but also as a result of urban chaos, poor transportation, and visual pollution and noise. Many cities are huge, inefficient structures, excessively wasteful of energy and water.

- Saving banks at any cost, making the public pay the price, foregoing a firm commitment to reviewing and reforming the entire system, only reaffirms the absolute power of a financial system, a power which has no future and will only give rise to new crises after a slow, costly and only apparent recovery.

- The problem is aggravated by a model of development based on the intensive use of fossil fuels, which is at the heart of the worldwide energy system. Another determining factor has been an increase in changed uses of the soil, principally deforestation for agricultural purposes.

- There is an urgent need to develop policies so that, in the next few years, the emission of carbon dioxide and other highly polluting gases can be drastically reduced, for example, substituting for fossil fuels and developing sources of renewable energy.

- We know that technology based on the use of highly polluting fossil fuels – especially coal, but also oil and, to a lesser degree, gas – needs to be progressively replaced without delay. Until greater progress is made in developing widely accessible sources of renewable energy, it is legitimate to choose the lesser of two evils or to find short-term solutions. But the international community has still not reached adequate agreements about the responsibility for paying the costs of this energy transition.

Even within the last statement about hydrocarbons, there is double-speak.  He claims we must replace fossil fuels “without delay”, yet is willing to accept the lesser of two evils (live without fossil fuels being the worse evil) and continue status quo.  Pardon me?

Here are some of the problems with what Francis put forth.  First, this was likely compiled by Vatican staff who were given the directive to advocate certain viewpoints, and did the best they could piecing together random information about topics which they knew basically nothing.  Let’s face it: Rome is a LONG way from West Texas or North Dakota.

Second, the Pontiff didn’t acknowledge one fundamental moral reality about fossil fuels:  Without them, the world’s poor would suffer more, not less.  Think about all of the societal values that come from fossil fuels that currently benefit the underprivileged.  Vaccinations and medications, access to better food supplies, water being pumped or transported into areas that would not otherwise have it, relief from temperature extremes, even in remote areas.

Who would suffer most if we implemented “without delay” this environmental extremist position?  Let’s presume a hospital in a remote Sedan village switched to renewable energy “without delay”.  Consider all the men, women and children in just that one area who would not receive medical care because there wasn’t enough storage capacity to sustain surgical operations.  The poor around the globe would die because the lights were turned out because fossil fuels are evil.  That makes no sense, while the rich would still have access to the best of care.

Would we do the poor justice by eliminating fossil fuels?  Certainly not.

Meanwhile, in what I perceive as sheer hypocrisy, the Pontiff flies about the world in a Vatican jet, powered 100% by fossil fuels.  Francis’ home itself is one of the world’s foremost monuments to accumulated wealth and extravagance.  I don’t see any recent news reports about a plea to sell off Vatican treasures and give the money to underprivileged causes.

So let’s demonstrate parity here.  Before we start talking about the evil corporations pillaging and exploiting planet earth for the sake of capitalistic greed, why not ground the Vatican jet, open the windows and let the fresh Rome air blow through, put some of the golden treasures on Ebay and tour the world in a horse-drawn carriage.

THEN, let’s talk about taking fossil fuels away from the poor.

I get really tired of these environmentalists, Pope Francis now clearly among them, trashing the very source of the lifestyle the are in no way willing to forego.  And to hang this new environmental platform on the backs of the world’s underprivileged, when they would be the most affected, rips my cord.

What we need is to frack more around the world, not less.  A Berkeley 2013 report suggests U.S. carbon emissions dropped 12% between 2009-2013, approaching pre-1996 levels.  This is because we are producing and using more natural gas, which is the cleanest burning bridge solution available.  In the United States, renewable energy (in development for half a century) comprises a scant 3-percent of our nation’s total electricity needs.  On top of that, you can’t use renewables to fly or drive (you still have to plug a Tesla in to something that is about 70% powered by coal or natural gas) and you can’t store it.

The Pope should stick to what Pope’s do best – communicating a spiritual message of hope and pointing people to God.  Heaven knows, the world needs more of that right now.  Let scientists to do what they do, develop future technologies to solve the world’s problems.  And allow free-based market capitalism to continue funding massively expensive drilling projects to help insure that next time you jump on an airplane, that you are not relying on a windmill or a solar panel to get you across the ocean.

Opinion by: Chris Faulkner, CEO of Breitling Energy Corporation and author of the recent book, “The Fracking Truth.” He is also the producer of the documentary, “Breaking Free: The Shale Rock Revolution.”

 

Gasland Producer Josh Fox Disrespects Stuart Varney On Live TV

Gasland Producer Josh Fox Disrespects Stuart Varney On Live TV

Gasland Producer Josh Fox Disrespects Stuart Varney On Live TVTo get the context of this, you should take the next 4:42 to watch the video of the exchange between Stuart Varney and Gasland producer Josh Fox.  In it, Fox calls Varney a liar and you will see how Stuart keeps his composure as he abruptly terminates the interview.  Watch this, and then let’s discuss a few key points:

http://video.foxbusiness.com/v/4283101446001/obama-administration-actually-supports-fracking/?#sp=show-clips

For one, Josh Fox appears like he just came out of a three-day campout looking for methane water.  I have been on that same set with Stuart several times, and would not have the gall to show up looking like that.  For one, it’s disrespectful.  Stuart’s studio is in midtown Manhattan and Stuart himself is a well-respected journalist cut from traditional cloth.  He has had a distinguished career with CNN, CNBC and now Fox Business.  Stuart is sharp, witty and ahead of you in the interview.  He deserves the respect of someone appearing on his set in proper, respectful attire that complements his image and that of the show.

Next, Josh Fox claims the EPA is double faced and the Obama administration supports fracking.  Let me say after innumerable meetings with pro-energy politicians, I can say with certainty that the Obama administration disdains fracking and is basically tolerating it because they know to further impair it would be political and economic suicide.

One Congressman who has been with the President on several occasions told me that Mr. Obama is a staunch environmentalist who would do away with all hydrocarbons tomorrow if he realistically could.  The President is likely paving his future as a spokesperson and highly paid consultant for the environmentalist movement once he’s finally out of office.  The tracks are certainly being laid in that direction.

The EPA report states:

“We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States.”

http://www2.epa.gov/sites/production/files/2015-06/documents/hf_es_erd_jun2015.pdf

If the Obama Administration’s EPA had any viable, probable, conclusive evidence with which to slam hydraulic fracturing, they would have.  But they didn’t.

This report basically discredits all of the claims Josh Fox presented in Gasland (which had already been debunked extensively by the Colorado Oil and Gas Association http://cogcc.state.co.us/Announcements/Hot_Topics/Hydraulic_Fracturing/GASLAND%20DOC.pdf)

With his movie hanging in the lurch of governmental discrediting, Josh Fox appeared on Stuart Varney’s show trying to say the EPA is speaking out of both sides of its mouth, and that the President support fracking.  Hogwash.

But the interview turned nasty when Josh Fox blatantly accused Stuart Varney of lying.  As you saw from the clip, Stuart Varney owns property in New York in a watershed area.  When he was buying the property a dozen years ago, the neighbors joked about being able to light the water on fire, and Varney says he gave it a try.  That’s good enough for me.  Knowing Stuart’s curiosity and his interest in fracking, I’m certain that he did.  He’s an inquisitive journalist, after all.

Sorry to burst your bubble Josh, but this is something our first President also did, not too far from the area in question.  That’s right, George Washington and Thomas Paine lit surface water on fire in 1783 at the Millstone River in New Jersey.  Paine documented it in his writings.

http://scienceprogress.org/2011/11/what-would-george-washington-do-about-fracking/

Evidently, there was a reenactment of this in the same area, and I wish I knew the outcome of whether that same body of water was ignitable or not today.

http://blogs.discovermagazine.com/loom/2008/10/17/science-and-politics-the-tale-of-george-washingtons-swamp-gas/

Here’s my main issue with how Josh Fox handled this.  It’s more of a psychological analysis than a scientific one, because we already know what the facts on fracking support.

It is a well-established fundamental element of human behavior that we generally project onto others what we are dealing with ourselves.  In other words, if a wife yells at her husband for being lazy, guess what?  If a parent yells at their kids for having a messy room, guess what?

For Josh Fox to accuse Stuart Varney of being a liar.  Guess what?

Especially from the producer of a movie and a sequel that have been proven to be full of mistruths, misrepresentations, exaggerations, and sensationalism.  Analyzed and rebutted by third party facts, not a bunch of sensational and emotional garbage.

So while Josh Fox deals with his own psychological justifications for his work, he will certainly have to find another pulpit because I’m confident of one thing:  Varney & Company on Fox Business is now and forevermore closed to Josh Fox.

Written by: Chris Faulkner, CEO of Breitling Energy Corporation and author of the recent book, “The Fracking Truth.” He is also the producer of the documentary, “Breaking Free: The Shale Rock Revolution.”

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The fracking of US-Saudi relations

The Fracking of US-Saudi relations (Arabianbusiness.com)

Chris Faulkner is lamenting public ignorance on fracking a few minutes into our conversation. “Ask the majority of people on the street what ‘fracking’ is and they’ll say they don’t really know, but that it’s something negative,” the founder, chief executive and president of Texan oil company Breitling Energy Corporation says. “It’s amazing how many years [the industry] has been doing it and people still don’t have a good grasp of what it is.”

Fracking, or ‘hydraulic fracturing’ as it is officially termed, involves drilling into shale rocks in the ground and then injecting water, sand and chemicals at high pressure, to release natural oil and gas. The controversial method, which has come under relentless attack by environmental lobbyists, is said to make otherwise prohibitively expensive oil extraction commercially viable.

It is still pricey, says Faulkner, in an interview with Arabian Business. An oil well typically costs $3m to drill and $5m to frack, “but in the US that’s all we have left”. Natural wells have all but dried up in the US, making fracking the last resort for the shale gas explorer.

The pressure also is building up in this part of the world, particularly in Saudi Arabia, Faulkner warns during his visit to the Middle East this month.

The kingdom’s state-run oil company Saudi Aramco recently announced plans to invest $7bn on top of $3bn earmarked last year to start its own fracking revolution. Speaking at a conference in Riyadh in January, Aramco chief executive Khalid Al Falih declared Saudi Arabia was the “next frontier” in shale gas exploration — the kingdom is estimated to have the fifth largest shale gas reserves in the world, and shale production is considered crucial in helping the country maintain its powerful position within the global oil market.

But Faulkner says he is not convinced Saudi Arabia can fulfil its ambitions if oil prices remain low — a situation the kingdom is helping to sustain by maintaining bullishly high production levels. “Shale gas is expensive oil,” he says. “The average break-even price in the US is about $55 a barrel versus $10 or $15 [for] conventional [oil production], so a factor of around four times — and we have access to all the equipment and water, which Saudi Arabia does not.”

“Can it [Saudi Arabia] even begin to frack when oil [sale] prices are so low? Is it really positioned to get oil out of the ground for $60 a barrel when it has historically insisted upon $100? I don’t know if it’ll be accustomed to this.

“Then there’s the question of water — one resource in which the kingdom is not rich. This could be the Achilles heel of any fracking operation in Saudi.”

Faulkner evidently has an agenda to position the US as a latent rival to Saudi Arabia’s long-established oil reign, but he knows what he is talking about. His Dallas-based company is just ten years old but during that time the entrepreneur, who began his career with numerous dotcom ventures in the early 1990s, has carved out a role for himself as an outspoken member of the pro-fracking lobby. The self-proclaimed ‘Frack Master’ makes regular public appearances to quash what he calls “negative mis-messaging” by Greenpeace and others that have fuelled anti-fracking sentiment in the West. Last November, he spoke during a public hearing involving the Texas Oil and Gas Association and campaigners that fought to ban fracking in the north Texan town of Denton. The oil company was defeated and Denton became the first town in the state to ban fracking — the very technique that had put Texas at the epicentre of a national energy boom.

But last week, the Texas governor Greg Abbott signed a bill into law that prohibits cities and towns from banning hydraulic fracking, giving the state sole authority over oil and gas regulation. The ruling is a triumph for Faulkner, with many of Breitling’s 607 oil wells located within the Permian Basin in West Texas [the others are in the states of Kansas, North Dakota, Louisiana and Oklahoma]. The company plans to drill 54 additional wells across 4,000 acres of land in Sterling County, Texas, over the next six years, so the governor’s support is crucial.

But Faulkner says the case has highlighted how dismally the global oil and gas industry has responded to the powerful anti-fracking campaigns.

“Anti-frackers are fighting from the grassroots — the small-scale, community level. They’re thinking, ‘ok, we can’t beat the whole country but we can go to the communities and convince them fracking is bad’ and hope that will spread into the state-wide effort,” he said.

“The oil and gas industry has not done a great job at responding to this. It hasn’t understood that the campaigns are about social media and acting at a local level; that this has a far more emotive impact than national TV and newspaper advertising. The Denton case made it clear we still have a long way to go in matching our response to theirs.”

The challenge he and his compatriots face is that most people don’t believe industry claims. “They think Greenpeace is run by scientists when most of them are just activists. They think scientists know what they’re talking about and business people are liars. So the activists have done a spectacularly good job at putting out the wrong message.”

Faulkner is lobbying US President Barack Obama for greater support for the oil and gas industry — though Obama is not a huge fan of fracking and Faulkner is not a huge fan of Obama. His ultimate wish is for the 1970s-era ban on US oil exports to be repealed — a move that, while unlikely to happen in this presidential term, would profoundly strengthen the US’s position on the global oil and gas stage and signify a threat to countries such as Saudi Arabia and Russia that have long held a substantial chunk of the market.

At the time of writing, a bill introduced in February by Texas Republican Representative Joe Barton had 26 co-sponsors in the 435-member chamber, including four Democrats, and it could see increased support if more Representatives from non-energy-producing US states sign up, according to reports.

Faulkner’s message is clear: the US means (oil) business and the Middle East had better watch out. Despite crude oil falling below $54 a barrel for the first time in more than five years earlier this month, Saudi Arabia continues to produce almost 10 million barrels a day and has signalled it has no intention of changing its policy while it has $700bn of foreign currency reserves in the bank.

However, Faulkner points out that Saudi Arabia is racing through its cash faster than anticipated. The country announced in December it was increasing spending for 2015 by 4.3 percent to $358bn — equivalent to $15bn per month — and holdings in its central bank have dropped by 5 percent from $755bn to $708bn in just two months, according to the International Monetary Fund (IMF). Although the kingdom is still rich, the figures are alarming for a country where domestic spending is used to help maintain peace among its citizens.

“Saudi Arabia’s social programmes cannot be sustained at these oil prices,” Faulkner says. “The kingdom needs upwards of $90 per barrel just to break even. How long will Saudi Arabians allow them to burn through all this money?

“Is the country going to carry on depleting assets that took decades to amass, just to teach the world they will not give up their market share? If so, what will Saudis be told they have to give up, and how will they react?”

Saudi Arabia’s determined policy to maintain production also has begun to rub up its Middle East neighbours the wrong way. In the week we meet Faulkner, reports emerge that an ongoing row between Saudi Arabia and Kuwait has forced production to stop for at least two weeks at their shared Wafra and Khafji oil fields, a Saudi comfort blanket that produce about 500,000 barrels a day.

Meanwhile, Oman’s Oil and Natural Gas Minister Mohammed Bin Hamad Al Rumhi told a press conference this month that Saudi Arabia “does not have a God-given right” to control oil prices. “You cannot just dump barrels in the market. Where will it go?” he said.

Al Rumhi added that the current situation was not sustainable for oil-export dependent countries.

“I think that, one of these days, we are going to see OPEC countries like Angola, Nigeria, Gabon, Venezuela, Iran and maybe Iraq, going unilaterally without the Saudis [and cutting production to trim oversupply in the market].”

Faulkner agrees: “There are a lot of dominoes falling the wrong way for Saudi Arabia at the moment. Why are they drilling more?  Do they think they can force prices down further, to their own detriment? They have p****d off a lot of people and there’s a lot of infighting.

“What they’re doing isn’t sustainable and eventually shale production from the US and Mexico and tar sands production from Canada will catch up with them. We’ve never seen Saudi standing alone like this before in modern history.”

Faulkner believes Saudi Arabia’s refusal to curb oil production despite low prices masks deep anxiety about what the future holds for a nation that generates up to 90 percent of its earnings from hydrocarbons. “They need a big [oil] discovery. The reason they’re talking about fracking is because many of their wells are in their last phase of life.

“They are pumping saltwater, nitrogen, CO2 into these wells because the pressure’s so low and they can’t get the gas out of the ground without pushing all this liquid down there.

“They are trying desperately to suck out every last drop but it’s a tell-tale sign they have this level of concern. The oil won’t last forever.”

Lower oil prices should act as an incentive for oil-dependent Middle Eastern countries to diversify their economies, and GCC countries such as the UAE and Qatar have for many years adopted this policy. But Saudi Arabia so far has had limited diversification.

“If I were them I’d be increasing my refocusing efforts,” Faulkner says. “[Low oil prices] are a double-edged sword, speeding up the demise of the revenue stream that is needed to speed up attempts to diversify. It’s a catch-22.”

Meanwhile, the US is showing Saudi Arabia it can operate at lower prices than anticipated: “We’re not down and out, we’re bigger and better, and we have further to go,” Faulkner says. Ninety percent of wells drilled in the US have not been turned on, he claims, arguing that with new discoveries in Canada and Mexico prompting ambitious policies to boost extraction, the Americas could easily produce over 21 million barrels a day to rival OPEC’s 30 million. A so-called “NOPEC” federation between the US, Canada and Mexico could orchestrate production to help stabilise world oil prices, he adds.

The day after our meeting, Saudi Aramco published its annual report claiming eight new oil and gas fields were discovered in the east of the country during 2014. The company did not disclose figures on estimated reserves or production rates for the new fields but said they represented the biggest number of discoveries in the company’s history and brought the total number to 129.

Faulkner is skeptical. “The numbers are always conveniently manipulated. They always seem to show that for all the oil they’ve used up in the past year, they’ve found more — the balance is always at zero,” he says.

“Look, if Saudi Arabia puts its hands up and says the oil’s running out, wars could happen. If people think they’ve hit their peak and come down again, they could have ISIL walking across their back yard! They will become vulnerable.

“But at some point they will have to admit there’s a wall at the end of the tunnel that they will hit if they don’t do something else.”

Written by: Sarah Townsend

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US fracking expert slams ‘desperate’ Saudi oil policy (Arabianbusiness.com)

One of the United States’ biggest advocates of a controversial gas extraction technique known as fracking has hit out at Saudi Arabia’s plans to keep up bullishly high oil production levels despite a worldwide drop in prices.

Chris Faulkner, founder, president and chief executive of Texas-based Breitling Energy Corporation, warned Saudi Arabia is rapidly depleting its vast foreign currency reserves in an aggressive bid to retain its powerful share of the global oil market.

Despite crude oil falling below $54 a barrel for the first time in more than five years earlier this month, Saudi continues to produce almost 10 million barrels a day and has signalled it has no intention of changing its policy while it has upwards of $700 billion in its coffers.

In an interview with Arabian Business, Faulkner said:

“Saudi Arabia’s social programs cannot be sustained at these oil prices. The kingdom needs upwards of $90 per barrel just to break even. How long will Saudi Arabians allow them to burn through all this money?”

He added: “There are a lot of dominoes falling the wrong way for Saudi. Is the country going to carry on depleting assets that took decades to amass, just to teach the world a lesson [that it will not give up its market share]?”

State-run oil company Saudi Aramco also announced plans in January to invest $7 billion on top of $3 billion earmarked last year to launch its own fracking operations, arguing the technique is crucial in helping it maintain its market share. Fracking describes the process of fracturing shale rocks in the ground, then injecting them with water, sand and chemicals at high pressure to release natural oil and gas inside.

But Faulkner told Arabian Business that Saudi Arabia’s persistent drive to increase production actually masks deep anxiety about what the future holds for a nation that generates up to 90 percent of its earnings from hydrocarbons.

“The reason they’re talking about fracking is because many of their wells are in their last phase of life.

“They are pumping saltwater, nitrogen, CO2 into these wells because the pressure’s so low and they can’t get the gas out of the ground without pushing all this liquid down there.

“They are trying desperately to suck out every last drop but it’s a tell-tale sign they have this level of concern. The oil won’t last forever.”

Written by: Sarah Townsend

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Texan Advocate Out to Dethrone OPEC

Texan Fracking Advocate Out to ‘Dethrone OPEC’ (TheNational.ae)

Chris Faulkner, a Texan whose profile as an advocate for the shale oil business in the US has far outgrown the size of the company he runs, is on a mission to “dethrone Opec”.

Mr Faulkner, the chief executive of Breitling Energy in Dallas, is in the UAE on what he says is a regular fact-finding tour and to share his views on international oil policy.

“About twice a year I go to the Middle East to tour the region, hold meetings and see first-hand what’s going on there,” he explains. “It helps us strategise at Breitling Energy to understand the dynamics that you don’t read in the headlines.”

Breitling Energy is minuscule by industry standards – with revenues of about US$16 million and net earnings of just over $800,000 in the second quarter of last year, the latest data available. However, Mr Faulkner has garnered considerable media attention in the US for views that he himself bills as “controversial” on environmental regulations for hydraulic fracturing or “fracking” and more recently on the idea of a North American counterweight to Opec, what he calls “Nopec”.

“It makes a lot of sense,” he argues. “Opec has been losing its credibility, its viability and its ability to control the price of oil globally. [Nopec] doesn’t have to be adversarial to Opec but can be a sizeable counterbalance and take advantage of the chink in the armour.”

There is “a small but growing swell of support” for the Nopec idea, including some in Washington, Mr Faulkner claims, although that does not include anyone in the current administration, of which he is not a fan.

What would Nopec look like and what would it do? “Not a cartel, obviously,” Mr Faulkner says, “but a coalition of resources, trade, technology and cooperation between Canada, Mexico and the United States. Combined and working together, North America could generate upwards of 20 million barrels of oil per day, and that should be enough to permanently dethrone Opec as the sole regulator of world oil prices.”

There is a precedent for a North American equivalent to Opec: the Texas Railroad Commission, which set world prices for much of the first half of the previous century, when the state dominated world oil production.

But few in the industry see much prospect for a revival of any explicit US price-setting role.

“It’s highly unlikely, for legal and practical reasons, that any entity here in the US could set quotas for the production sector as the TRC did in the past and as Opec does today,” says Jay Hauck, head of The Crude Coalition, a Washington DC lobbying group for refiners and other interests that, among other things, opposes lifting restrictions on US oil exports.

“Because US drillers respond to price alone, and not some domestic ‘oil czar’, I do not see how American oil exports would disrupt Opec’s power to set the price of crude,” Mr Hauck says.

It is the widespread view in the industry that the Saudi-led Opec strategy has since last year been aimed at letting the oil price drop to squeeze costly North American production off the market.

That strategy has backfired, Mr Faulkner asserts.

“The exercise the Saudis have put us through has made us stronger and better,” he says. “They thought they could push prices down and cause massive bankruptcy. What they didn’t realise is that for the last few years [US fracking companies] have been pushing to innovate and drive technology further: we can do now with two drilling rigs what it used to take three, and in 20 days what used to take 30.”

That means the break-even price for new wells at the Permian Basin in Texas, where Breitling Energy mainly operates, is now down around $30 per barrel, Mr Faulkner reckons.

But there have been signs that the US fracking sector is responding to lower oil prices – with a sharp decline in the number of rigs operating, according to data from Baker Hughes, an oil services company.

Smaller companies in the shale oil sector are falling into the hands of larger, stronger players, illustrated by last week’s $2.1 billion bid by Noble Energy for Rosetta Resources.

Mr Faulkner says Breitling Energy is looking to buy other companies itself, although the company’s over-the-counter traded shares have fallen sharply since last year and are quoted around 20 cents compared with 78 cents last summer.

How did Mr Faulkner gain such prominence as an industry voice in the media? The Houston Chronicle wondered that in a profile last September. Especially as the 37-year old is a relative newcomer to oil, having been until a few years ago an internet entrepreneur.

In an industry where many executives tend to be reticent, “Faulkner draws attention as an energy executive who is unusually candid and accessible to media, large and small”, the newspaper concluded.

That includes a willingness to take positions on fracking that draw heat from environmentalists and politicians. He has even written a pro-fracking book, The Fracking Truth

Written by: Anthony McAuley

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Chris Faulkner on Oil Price Volatility

Oil not back above $100 before 2020 says Breitling Energy’s Chris Faulkner (Arabianmoney.net)

The oil price is currently at a high in the middle of forming a double-bottom with prices heading back down again to test the lows of this year before they go to $65 to $85-a-barrel for WTI crude, Breitling Energy CEO Chris Faulkner told ArabianMoney in Dubai this morning.

But he does not see oil prices back above $100 before 2020, confounding the optimists in the industry.

Fracklog

The Dallas-based oilman is en route to making a speech in London at an event organized by Platt’s where he is set to explain how a ‘fracklog’ in US production threatens to flood the oil market anytime prices get above $60-65 a barrel, as has already happened.

‘I think Saudi Arabia has been surprised by the resilience of the US fracking industry,’ he said. ‘They did not realize that 90 per cent of our wells are drilled but not fracked and can therefore be brought quickly into production at little additional cost.

‘Once the price of oil passes about $65-a-barrel we can have oil back on stream in two to four weeks. We have become the swing producer of the world oil market, replacing Saudi Arabia.

‘There are 4,000 wells not producing but ready to provide this quick supply. The Saudis don’t seem to have realized that our capacity would not just be shutdown and go away.’

2020 vision

Mr. Faulkner’s view is that this potential supply will keep the lid on higher oil prices for a long time, with no chance of $100-a-barrel oil again before 2020.

‘That is, of course, on top of all the oil floating in tankers around the world at the moment. Iran has 35 million barrels in tankers and there is plenty more oil supply waiting to come back from Libya, Iraq and Iran.

‘How long can Saudi Arabia afford to continue its current strategy? Nobody knows. But it looks like the days of OPEC price management are over.’

What could change this forecast? Mr. Faulkner admits his calculations could be disrupted by war or geopolitical instability, although he notes that oil traders have learnt to live with the civil wars in Yemen and Syria.

Would the upcoming change of US administration in 18 months’ time change anything? It naturally depends who wins and we don’t know the candidates yet, although there are front runners.

Jeb Bush

Mr. Faulkner would like another man with his roots in the oil business, Jeb Bush, to be the next president who he reckons would be ‘more pro-Saudi and anti-Iran than the current administration’ though equally committed to energy independence for North America. Mrs. Clinton would be a less easy call.

He’s saying the current oil price is a ‘W’-shape and that we are at the top of the middle right now. What could also pull oil prices back down, aside from the supply-demand dynamics of the ‘fracklog’, is another global financial crisis.

In 2008 the first global financial crisis pulled oil down to $34 and Mr. Faulkner sees $40 in similar circumstances, possibly as soon as this autumn.

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How “NOPEC” Could Change World Oil Price Dynamics (OilPro.com)

About twice a year, I go to the Middle East to tour the region, hold meetings and see first-hand what’s going on there. It helps us strategize at Breitling Energy to understand the dynamics that you don’t read in the headlines. This is the first trip back since the cartel refused to cut production in November, 2014, sending oil prices in a free-fall.

Saudi Arabia has never been in this position before. They have always had the United States standing with them. We started building their oil fields in 1941 and taught them how to produce and market crude to the world. Except for the embargo of 1973/74, we have mostly been friends and allies, on and off the stage. Then, when the attacks of 911 occurred, we learned the details of how the Saudi’s had been funneling our own oil money to bolster terrorist groups.

Then, enter the Obama administration. On multiple occasions, from the Arab Spring to King Abdullah’s funeral, this President has continued to distance the Kingdom like no predecessor before him. What you put out, you get back, and the Saudi’s have begun to pull away from America as well. Saudi Arabia requested the President’s help to oust King Assad of Syria. He refused. They asked for help to stamp out a tiny rogue terrorist cell in Syria, now known as ISIS. He refused. They also begged him to leave the Iranian nuclear sanctions in place…

Now we want them to cut production? It’s not going to happen. In fact, they’ve been on a drilling spree. Since March, 2014, rig counts there are up some 30%, while here they are down over 50%.

There’s more to that number than meets the eye.

The Saudi’s are burning cash faster than expected. In two months alone, they lost an estimated $36 billion from their central bank’s net foreign assets. Defense spending also spiked, particularly due to the administration’s determination to lift the Iranian sanctions and the war in Yemen. This burn-rate is not sustainable for the Saudi’s, much less the rest of OPEC. Libya, Venezuela, Nigeria and the other smaller producers are in far worse economic condition. How long are they willing to keep burning cash at this pace to try to prove a point? It appears they’re cranking up production to compensate.

Saudi Arabia thought they could lever the United States to its knees by holding to their 30.3 million barrel quota when global demand was in decline. Problem is that Saudi has rarely in the past, and certainly not now, held to any stated number. They push extra oil onto the market when the want, change prices on a whim, and yank supply off the market equally fast. And they never show their hand.

There are no changes expected when OPEC reconvenes in Vienna next month, but what they weren’t anticipating was such resilience from the United States. They’re betting an outdated strategy will beat our shale revolution, and that hasn’t happened.

There is a small but growing swell of support for something I advocated last year: A North American Energy Federation. “NOPEC,” if you will. Not a cartel, obviously, but a coalition of resources, trade, technology and cooperation between Canada, Mexico and the United States. Combined and working together, North America could generate upwards of 20 million barrels of oil per day, and that should be enough to permanently dethrone OPEC as the sole regulator of world oil prices.

While some on Capitol Hill like the idea, the reality is it will take a change of administration for such a scenario to have any hope of reality. But it’s worth exploring now, and has the potential to return America to a place of dominance and power on the world’s energy stage.

It’s going to be an interesting week in the Middle East indeed.

Written by: Chris Faulkner, CEO of Breitling Energy Corporation and author of the recent book, “The Fracking Truth.” He is also the producer of the documentary, “Breaking Free: The Shale Rock Revolution.”

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Jurassic Kimmeridge formation “game changer” for UK shale, says Frack Master

Following reports that the Jurassic Kimmeridge formation in England could contain more oil than Saudi Arabia’s Ghawar – the world’s largest oil reserve – the conversation about oil and gas drilling in England is heating up, once again.

Chris Faulkner, CEO of Breitling Energy Corporation based in Dallas, Texas, known by the media as the ‘Frack Master’, thinks that the reports are a “game changer” for England and that shale exploration will still be viable in the UK, despite oil and gas prices.

“We knew about this potential long before it became news and now UKOG has proven what the geology showed.  This is actually an extension of the same formation that was being extracted in the North Sea. It just comes on land, and ironically is not far from Gatwick Airport,” Faulkner said.

“This is a game changer for England, and they will now have to shift their entire focus on how to approach oil and gas production.  There’s too much at stake now for them not to,” he added.

“Shale oil gas will take some time to bring online, but this is a long-term investment and prices will always fluctuate up and down. Now the UK can gain independence from foreign supplies by developing this massive resource under its own soil.”

According to Faulkner, the two biggest obstacles to shale in the UK are growing public opposition and complex planning regulations.

Article Author: Huw Jenkins

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Who’s Winning the Oil Battle: OPEC or the United States? (Watchdog.org)

It’s been more than four months since the Organization of Petroleum Exporting Countries put global oil prices into a virtual free-fall when it decided at its semi-annual meeting in Vienna to not cut production.

That has put a tremendous amount of pressure on what’s been called the shale oil revolution in North America and in the United States in particular.

Who’s winning so far? Well, that seems like trying to read tea leaves in a barrel of crude.

“I think it’s two freight trains running at each other,” said Chris Faulkner, CEO at Dallas-based Brietling Energy.

Nine months ago, global oil prices topped $100 a barrel. Now those prices have been cut nearly in half.

After experiencing a remarkable energy boom in the space of less than five years, U.S. producers are now pulling back spending. Rig counts are down by 52 percent since last December, which means fewer jobs in the oil fields and ripples though state and national economies.

“There are certain areas that are just not economical at $50″ a barrel, Faulker told Watchdog.org.

But just because U.S. producers are suffering some pain doesn’t mean OPEC members are not.

In fact, you can make a very strong case OPEC is in worse shape than North American producers, who have surprised some analysts with their resiliency.

“Shale in the U.S. is a unique, new source of oil — not just geologically but in the way it can be produced,” Julius Walker, senior consultant at JBC Energy Consulting, based in Vienna, said in an interview at a recent oil conference in Houston.

“It can react much, much more quickly,” Walker said. “Companies are smaller and more dynamic. They can bring production online much more quickly, then can slow it down much more quickly. It just reacts in a way that’s completely different than conventional oil.”

While hydraulic fracturing techniques used by U.S. producers is more expensive than the conventional drilling OPEC countries employ, the break-even price is much higher for most OPEC members — many of which need oil to be well over $100 a barrel to pay for their government spending programs:

Global Oil Competitiveness Issues by Petrie Partners

So why did Saudi Arabia — the dominant member of OPEC — refuse to cut production if it and other members are going to lose money in a low-price environment?

There are plenty of geopolitical reasons, but the Saudis and other Persian Gulf OPEC members like Qatar and Kuwait can afford to absorb the pain.

Saudi Arabia, for example, entered the price decline with an estimated $750 million in foreign currency assets — a nice cushion to potentially starve out U.S. producers during tough times.

But that doesn’t help OPEC countries like Nigeria and Venezuela, whose economies were already in trouble before the price drop. Now, those countries are teetering and the internal pressures within the cartel have intensified.

On Thursday, the OPEC governor of Libya called on OPEC ministers to change course and cut production.

“OPEC members, as a unit, need to re-evaluate their strategies,” Samir Kamal, head of planning at the North African country’s oil ministry, told Reuters by email.

Libya’s appeal came just weeks after the oil minister in Nigeria called on OPEC leaders to call an emergency meeting before the next scheduled conference June 5 and reverse the November decision.

But OPEC leaders haven’t budged.

Saudi Arabia announced last week it’s actually increased its oil output to a record 10.3 million barrels a day with no expectations of cutting back.

Just days earlier, Saudi Arabian oil minister Ali al-Naimi said his nation would be willing to “improve” global prices only if non-OPEC countries such as Russia and Mexico cut production as well.

To make things worse for struggling OPEC members, if a proposed nuclear deal with Iran is signed by the Obama administration and other western nations and sanctions on the regime in Tehran are quickly lifted, millions of barrels of Iranian oil will come into an already glutted market, putting even more downward pressure on prices.

Iran is a member of OPEC but is a long and often bitter rival of Saudi Arabia.

Last Thursday, the Iranian oil minister took a jab at the Saudis’ insistence that OPEC’s decision last November was the correct one.

“It seems (OPEC’s decision not to cut output) does not work well, because prices are coming down,” Bijan Zanganeh told Reuters. “We haven’t witnessed stable situations on the market.”

The situation has led some energy experts to wonder if OPEC can even survive.

“The end of OPEC” might be closer to reality now, said Ed Morse, global head of commodities research at Citigroup and a respected voice in global energy markets. The shale revolution “has created a sort of existential threat to Saudi Arabia and OPEC,”Morse said in a report released in February.

Others aren’t so bearish about OPEC’s future.

“Of course the strategy is working,” Gary Ross, executive chairman at the PIRA Energy Group, told the Financial Times. “You just have to be patient. For the Saudis there is no turning back at this stage.”

What about the future for U.S. oil producers?

“The short term is not great, we’ve lost jobs,” Faulkner said.

But in the long run, Faulkner thinks the United States will not just survive but thrive and leave OPEC and the Saudis gasping for air.

“We’re not a down and out kind of crowd,” Faulkner said in a telephone interview. “When someone kicks us, we don’t run the other way. We fight back. What we’re going to do is do things better, more efficient. We’re going to drive technology and innovation and we’re going to do more with less.”

Saudi Arabia’s oil exports in 2014 dropped 5.7 percent in 2014 compared to 2013.

“We need to tell Saudi, thank you for what you’ve done. You’ve made us a much stronger industry,” Faulkner said. “Your conventional assets are dwindling. We’re finding new, unconventional assets every day over here and we’re going to surpass you in this marathon.  You’re going to be the No. 2 producer in the world and you need to get used to eating American dust. That’s what’s going to happen.”

Article Author: Rob Nikolewski

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Should North America Create Its Own Version of OPEC?

Since the 1970s, the Organization of Petroleum Exporting Countries has set the tone for the price and production levels for world oil.

Now, a hard-charging executive based in Dallas says it’s time for the United States, Canada and Mexico to join forces, flex their economic muscles and create a North American version of OPEC.

“It would be a wake-up to OPEC that you’re no longer the only 800-pound gorilla in the room, that there’s another version of you in North America and you need to take us seriously,” Chris Faulkner, CEO and chairman of Breitling Energy, told Watchdog.org.

Faulkner envisions a confederation of all three countries, which currently produce about 15 million barrels of oil per day, that could pave the way to North American energy independence while smoothing out price instability at the same time.

“I want to make this very clear: This is not for price manipulation,” Faulkner said in a telephone interview. “This is for price stability, a shield against volatility.”

Breitling Energy issued a news release Friday pitching the idea and quoted Faulkner saying, “If you like paying less than $3 per gallon for gasoline, this is the best way to ensure we’re not subject to being whipsawed around because of OPEC’s distemper.”

Can a U.S.-Mexico-Canada energy alliance really be created?

“It’s an idea that’s been discussed before and the devil’s in the details,” said Carlo Dade, director of the Centre for Trade and Investment Policy at the Canada West Foundation, a think tank based in Calgary, Alberta. “The obvious issues include, would it run afoul of antitrust laws in various countries? So there’s a host of immediate practical issues on the legal front.”

“It’s an intriguing idea, but right off the bat there are a number of things that need to be thought through,” said Tony Payan, director of the Mexico Center at the Baker Insitute for Public Policy at Rice University. “But the potential is there. And the ability of all three to achieve energy independence together is there. I don’t think any one of them can do it alone, but together it is quite possible they can do it.”

Faulkner foresees the three countries trading technology, production, information and infrastructure such as pipelines.

“We’re all in the same boat, all on the same side of the pond, we’re all fighting for the same thing,” Faulkner said. “I know Mexico wants piped oil from us. We’re bringing oil from Canada through truck and train and we’re supplying oil up to Canada so it’s all moving around already. Why not get us all at the same table?”

“That’s one of the quiet problems we have is moving the skilled people,” Dade said. “If you can have that up and down North America, the savings in terms of the labor would be significant and make us a helluva lot more competitive.”

How would a three-nation oil confederation be put together? Would it involve the respective governments? The biggest companies? Both? And who determines who makes decisions and who doesn’t?

“How much do we want to empower a trilateral agency with imposing a North American energy policy?” Payan asked. “How many teeth and how sharp the teeth on this particular council or trilateral agency? Would they have the power to enforce a series of decisions on a sector that, at least in the United States and Canada, operates pretty much on the invisible hand of the market?”

Those are thorny questions, especially regarding Mexico.

The government of Enrique Peña Nieto has made moves to introduce free market reforms to oil giant Pemex, but Payan said the corporation is still in the hands of the Mexican government.

“I’m not sure if this would not end up being another trilateral agency with very little power to truly impose restrictions on what is essentially market forces,” Payan said. “These are complicated questions.”

Dade points out the Canadian government has been reluctant to engage in efforts such as the North American Development Bank, created through the North American Freed Trade Agreement, and questions whether Canada would embrace a North American version of OPEC.

“There are questions about aligning interests,” Dade said in a telephone interview Monday. “The bilateral (agreements) tend to work well — Canada-U.S., U.S.-Mexico — but broadening it to include Canada and Mexico on the same page talking about energy requires a little more work.”

Faulkner knows there are plenty of questions.

“We floated it past our industry guys and … a lot of our senators and congressmen like this idea,” Faulkner said. “I don’t know if (President Obama) would be gung-ho right now. He should be but I don’t know if he will be, but I think it’s time to start talking about it.”

The idea comes a little more than four months after OPEC ministers decided not to cut production, which sent global oil prices — which were already sliding down — into a steep decline.

Since then, North American shale producers have had to slash rig counts and costs.

While OPEC’s dominant member, Saudia Arabia, announced earlier this month it increased production to its highest output in 12 years, other OPEC countries such as Nigeria and Venezuela have seen their economies take nosedives.

“We are the biggest producer and we are at their level, side by side and I think (a North American OPEC) makes a lot of sense,” Faulkner said.

“Whether the energy ministers of these three countries meet, whether it’s a panel or committee of the top oil executives based on producer size in the U.S. meet regularly with these three, or it’s the smartest guys all in one room, it’s a way to have a voice against OPEC that gives us a sizable counterpart to them. I think it reduces their influence. I think it plays into the chink their armor that they’ve already got right now, which is all their infighting.”

“To do it in opposition to OPEC or any other organization is probably not a good idea,” Payan said. “I think it should be a more positive, pro-North American framework than a defensive posture against anybody else.”

Dade thinks a potential U.S.-Canada-Mexico confederation may have more regional than global impact.

“The ability to move skilled people back and forth would allow projects to go ahead much more easily and it would also make us more competitive in North America,” Dade said. “So that would be a huge, huge win right there.”

Faulkner concedes the idea has a lot of moving parts.

“This will not happen overnight, but I think this would be good for North America and the rest of the world going forward,” he said. “It’s time to start talking about it.”

Article Author: Rob Nikolewski

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How Texas Could Lead America in Greenhouse Gas Emission Reduction – Why SB 12 Must Pass (Stylemagazine.com)

The 84th Texas Legislative session in Austin is considering a critical bill that could help clean up the air we breathe and position Texas as a national leader of environmental stewardship. Texas Democratic Senator Carolos Uresti’s Senate Bill-12 would use existing state funds already earmarked for emission reduction programs. The measure would convert many of the state’s vehicles to cleaner fuel sources such as natural gas and propane, and provide funding for local communities to do the same.

Texas has 30-percent of the estimated natural gas in the U.S., which is the world’s largest reserve. It is estimated by the Energy Information Administration that America has enough natural gas to meet current and future demand for up to 150 years.

The U.S. Department of Energy (DOE) says there are about 150,000 natural gas vehicles on the road in America. Worldwide, it swells to 15.2 million. In my international travels, I have observed how other countries embrace natural gas vehicles as a cheaper, cleaner, more efficient transportation fuel source. The Honda Civic GX was introduced domestically to flat sales, mostly because of limited fueling options.

Here in Texas, natural gas vehicles have been deployed in several areas. At DFW airport, nearly 500 maintenance vehicles run on CNG and the airport has its own fueling station. Dallas Area Rapid Transit is phasing in 650 CNG busses and vehicles. In Houston, 30 CNG airport shuttle busses save the city nearly $250,000 annually in fuel costs. San Antonio’s riverboats run on compressed gas, safely and efficiently carrying one million passengers a year along the city’s infamous Riverwalk canals. More than 30 Texas companies like UPS, FedEx, Frito-Lay, HEB and McShan Florist successfully use natural gas vehicles.

A DOE - Argonne National Lab Report reveals that natural gas could reduce CO2 emissions by 20-30 percent and toxic carbon monoxide emissions by 75 percent. As a much cleaner burning fuel, particulate matter emissions are reduced by 95 percent and nitrogen oxide and volatile organic compounds are each cut in half.

SB-12 would re-allocate three percent of the state’s $1 billion Texas Emissions Reduction Plan (TERP), a fund created in 2001 specifically for emissions reduction funding. Many of the 28,000 state-owned vehicles would be converted to natural gas, propane, or other alternative fuels. It would also fund strategically placed fueling stations. Municipalities could tap into the allocation on a voluntary basis to convert local fleets to the cleaner burning fuel.

The bill faces an uphill battle from environmentalists arguing for impractical electric powered vehicles and from some lobbyists, who fear more natural gas usage could drive up prices and reduce corporate profits. Refiners oppose the bill, protecting their market share of petroleum distillates.

This legislation deserves bilateral support. Texas needs to lead by example. We have a rich abundance of gas flowing out of the Barnett shale, the Eagle Ford shale, the Permian Basin and the Haynesville-Bossier shale in East Texas. We also have a vast pipeline infrastructure to move it around the state.

Lawmakers are facing immense pressure from self-interested groups who are putting individual agendas and profits ahead of common sense and what is naturally good for Texas.

It’s time to call your state senators and representatives now and tell them we want to become a national example of environmental leadership. The Texas legislature should pass SB-12 for the good of our air, our future and to position Texas as a national leader in producing natural gas while reducing our carbon footprint.

Written by: Chris Faulkner is CEO of Breitling Energy Corporation, a Dallas-based exploration and production company with wells in the Permian Basin and other Texas locations. He is author of “The Fracking Truth: America’s Energy Revolution – The Inside, Untold Story” and “Breaking Free”, a documentary film promoting the benefits of shale oil and gas development.

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