Equipment Yard and Well Pad Visit in Midland, Texas 12/16/12 to 12/18/12
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1 659 Van Meter Street Suite 510 Cincinnati, OH Date: January 11, 2013 To: John Casanova, Layne Gobrogge From: RE: Dale Dean Brian Miller DeanHouston, Inc. Equipment Yard and Well Pad Visit in Midland, Texas 12/16/12 to 12/18/12 Location: Midland Texas area was a primary target of our research: We had an expert consultant, Mike Gauthe of Lufkin Industries. Decades of Oil & Gas Industry experience with relationships key to production and filtration. Midland Texas is a prime area of drilling activity within the Eagle Ford shale play. Visit Objective: To learn more about the various HD equipment that operate in this industry sector, gain firsthand knowledge about the applications and talk with key personnel on site about the HD units and operation characteristics and service needs. Primary: Visit an HD equipment yard where frac spread and other operation units are staged and maintained. Identify all HD filtration applications Meet key service personnel to discuss service/mp and filtration needs Learn about the service channels associated with the HD units Secondary: A well pad visit to a Vertical/Horizontal Drill Operation and a second option, a Frac spread in set-up and operation - Completion Operation Observe and inspect HD equipment that operate on the site Identify the filtration applications on all HD and hydraulic units Meet/consult with key maintenance personnel (AKA The Motorman ) to learn the maintenance programs (MP) associated with the HD equipment and service channels Meet/consult with the property manager or key staff (Owner/Operator) to learn more about the hierarchy of service and vendor interaction on the site. Who is responsible for or services what in regards to the HD equipment. 1
2 Summary: Our investigation revealed the vast scale of drilling operations in the area and the service industry that surrounds them. The large equipment yards (operated by Baker-Hughes, Halliburton, etc.) service and maintain thousands of heavy duty trucks and equipment for the region. The Midland area also hosts hundreds of independent and regional HD service, supply and rental companies well as many transport and other on-road fleets. The image above represents a small segment of the Midland area. The small white squares are individual well pads. The inset shot shows a close-up of a well pad activity (Frac spread in this case). The majority of each well pad contains one well due to the close proximity of each well site. Field Observations: On arrival, we met with Mike Gauthe, Sales Director at Lufkin Industries in Midland. Lufkin in a global leader in well pumps and pump management systems. After a well is completed, a well pump is installed and monitored. Lufkin makes 80% of those well pumps worldwide. Lufkin supplies many of the Midland operators including large national operators like Baker-Hughes that service hundreds of Frac sites and smaller independent operators. Mike set-up a tour at one of Baker-Hughes equipment yards and to a smaller independent operator E.G.L. Resources (at one of their well sites). 2
3 Baker-Hughes: This equipment yard services and maintains 500 HD fleet units (tractors, trailers and service vehicles) for frac spreads. This is just one of three equipment yards Baker-Hughes has in the region, all servicing similar fleets. We met with their maintenance supervisor, Chad Brooks and his team. We toured their filtration supply center, service bays and toured the equipment (trucks and trailers). They use a wide variety of filters. We took account of the HD filters they use: Baldwin Wix Fleetguard Donaldson Parker They have an extended interval lube program reaching 800 hours between service changes. They use Royal Purple Synthetic Oil with a NAPA (WIX) extended life filter. Air and fuel filter intervals run between 200 and 400 hours. They do their own maintenance on all their major Frac equipment, but hire in local companies to service their small hd trucks and equipment like telehandlers, pick-up trucks and generators at their location. There vendors are Equip PM who specialize in the hydro trucks and Fleet Serve for various small hd units. We toured the frac equipment in the yard to see up close the filtration applications and took photos and identified multiple applications per unit. The tractor trucks consisted mostly of Detroit Diesels with a couple of Cummins exceptions. Stewart-Stevenson manufactured the frac trailers and specialized trucks for Baker-Hughes specifications. This equipment included; Blender trailers Crane trucks Sand mixers Water pump trucks Chemical mixers Water haulers Frac pump trailers Sand haulers Chemical bulk trailers Frac manifold trailer T belt conveyor trailer Frac treating iron trailer Acid transport Wire truck Frac treatment monitor trucks Based on our observations and photos of filters, Rick Clay developed a parts and application list that reflects the items we observed (and referenced on Donaldson and Fleetguard literature): [ 3
4 Desc Catalog No. Application Type OEM# Fleetguard Donaldson Wix Baldwin LAF1849 Heavy Duty On/Off Hwy Trucks w/detroit Diesel & Cummins engines FA-1077 AF25139M P RS3518 LAF3551 LAF4816 LAF8388 Heavy Duty On-Hwy Trucks w/cummins, Caterpillar engines P AF1968 Freightliner, Kenworth, Peterbilt, Western Star Heavy Duty Trucks A2116C AF25247 EAF5053 / P PA2705 EAF5100 / P RS3539 Bobcat, Carrier- Transicold, Caterpillar, John Deere, Komatsu, Magnum, Volvo Utility Vehicles, Exavators, Skid Steer Loaders, Auxilliary Power Units M AF25550 P PA4632 LAF5114MXM Mack Heavy Duty Trucks 57MD320M AF26363 EAF RS4634 LAF8047 Bedford, Chevrolet, GMC, International, Peterbilt Heavy Duty Trucks C1 AF4871M EAF5099 / P LL2333 Coolant Coolant Coolant LAF1826 LAF9543 LAF5568 LAF5569 LAF3048 LAF1816 LAF1818MXM LFW4075 LFW5141 LFW5141XL Caterpillar Industrial, Mining Equipment 8N-6309 AF4609 P PA2653 Case, Caterpillar, Gradall, JCB, JLG, Komatsu, New Holland Compressors, Dumpers, Loaders, Motor Graders, Volvo HD Trucks A1 AF25618 Caterpillar, John Deere, Volvo Industrial, Off Hwy, P / P RS3935 Articulated Dump Trucks TT AF26207 P RS4989 Caterpillar, John Deere, Volvo Industrial, Off Hwy, Articulated Dump Trucks TT AF26208 P RS4629 Caterpillar Industrial, Mining Equipment 8N-2556 AF4874 P PA2848 Case, Caterpillar, Drilltech, Euclid, Komatsu, Terex, Wabco Off Hwy Trucks, Drills, Dump Trucks, Excavators VJ-5176 AF880 P PA2454 Caterpillar, Drilltech, Euclid, Ingersoll-Rand, Komatsu, Terex, Wabco Excavators, Off Hwy Dump Trucks, Drills, Construction Equip AF899M Case, Cummins, Doosan, Euclid, Hitachi, Freightliner, Hyundai, John Deere Construction, Dump Trucks, Excavators, EAF5040 / P LL2453 Wheel Loaders, Loaders WF2075 P BW5075 Mack, Michigan, Volvo Heavy Duty Trucks, Excavators, Dump Trucks, Articulated Dump Trucks, Loaders, Motor Graders WF2096 P BW5141 Mack, Volvo Heavy Duty Trucks, Michigan Excavators, Dump Trucks, Articulated Dump Trucks, Loaders, Motor Graders WF2109 ECF B5091 4
5 Desc Catalog No. Application Type OEM# Fleetguard Donaldson Wix Baldwin LFF1000 Dump Trucks, Wheel Loaders, Construction, Heavy Trucks, Excavators, Loaders w/cummins Engines FS1000 P BF1259 LFF2749 Compactors & Paving Equip, Crawler Tractors, Dump Trucks, Industrial, Mining, Scrapers, Pipelayers, Wheel Dozers, Heavy Trucks w/caterpillar Engines 1R-0749 FF5319 P BF7587 LFP815FN Bedford Compressors, Dumpers, Loaders, Motor Graders, Chevrolet/GMC HD Trucks FF5207 P BF5800 L5467F Heavy Duty On Hwy Trucks w/cummins, Detroit Diesel, Caterpillar, Maxxforce, Paccar Engines FS19624 P XE PF7748 LFF8059 Mack, Renault, Volvo Heavy Duty Trucks, Excavators, Loaders, Motor Graders FF5507 P BF7814 Hydraulic L2020FN FP590F LFF3358 L9763FXL LFF1021 LFF4102 LFF4296 LFH5013 Champion Graders, Mack, International, Peterbilt Heavy Duty Trucks 2020SM FS1206 P PF Airman, Carrier- Transicold, Ingersoll- Rand, Hitachi, Kobelco, Kubota, John Deere, New Holland Excavators, Backhoes,Skid Steer Loaders, Compressors, Lift Trucks, Auxilliary Power Units, HD Trucks Mack, Volvo Heavy Duty FF42003 P BF7683 Trucks FS19918 P BF1386-O Freightliner, Caterpillar, International, Cummins, Mack HD Truck, Construction, Terex Dump Trucks, and Cummins For FH230 QSK50 Engine Hsg FS19763 P PF7928 Hitachi, Komatsu Construction, Dozers, Loaders, Excavators, Off Hwy Trucks w/cummins engines FF5693 P / P BF1262 Caterpillar Crawler Tractors, Excavators, Wheel Loaders, Industrial Vehicles 1R-0755 FF5317 P BF7639 Komatsu Compressors, Dozers, Cranes, Excavators, Loaders, Motor Graders, Toyota Lift Trucks, Construction Equipment FF42007 P BF330 Bell, Caterpillar, Ingersoll-Rand, Champion, Volvo Articulated Dump Trucks, Backhoe Loaders, Crawler Tractors, Crawler Loaders, Telescopic Handlers, Wheel Loaders, Graders, 9T-0973 HF6586 P BT8876- MPG 5
6 Compressors, Drills Hydraulic LFH5659 Bobcat, Case, Caterpillar, Ford, Gehl, John Deere, New Holland, Volvo Dozers, Wheel Loaders, Compactors & Paving Equip., Telescopic Handlers, Excavators N9086 HF6547 P BT8874- MPG Desc Catalog No. Application Type OEM# Fleetguard Donaldson Wix Baldwin Hydraulic LFH8417 Caterpillar, Case International, John Deere, New Holland Skid Steer Loaders, Backhoe Loaders, Hauler Truck RE51797 HF6590 P BT8870- MPG Hydraulic Hydraulic LFH5004 LH9407 LFP2160 LFP3191 LFP4005 PH1218 LFP3000 LFP2285 Leroi Backhoe Loaders, Crawler Loaders, Dump Trucks, Telescopic Handlers, Scrapers, Compressors, Drills, Motor Graders HF6585 P Caterpillar Crawler Tractors, Graders, Off Hwy Trucks, Wheel BT8892- MPG Loaders 1R-1809 HF35480 P PT9407MPG Gen Sets, Dump Trucks with w/series 50 Detroit Diesel engs., All Series 60 Detroit engs. built beginning in December, 1992, LF3620 P B495 Caterpillar, Wheel Loaders, Dump Trucks, Compactors, Crawler Loaders, Excavators,, Lift Trucks, Articulated Dump Trucks, Mack HD OTR Trucks 2P-4004 LF667 P B76 Caterpillar Compactors & Paving Equip, Dumpers, Excavators, Crawlers, Graders, Industrial, Mining, Off Hwy Trucks, Scrapers, Wheel Dozers, Compressors 2P-4005 LF3374 Chevrolet & GMCPick up Trucks & Hummervehicles LF3679 Construction, Concrete Mixers, Dump Trucks, Excavators, Wheel Loaders, Loaders, Graders, Scrapers, Compressors, Drills, HD Trucks, Dozers P / P B99 LFP / P B1428 w/cummins engines LF3000 P BD103 Heavy Duty On Hwy Trucks w/navistar DT and Detroit Diesel P / engines C1 LF3883 P B7030 6
7 PH2808 LFP8642 LFP3236 Airman, Bobcat, Case, Caterpillar, Doosan, Earthforce, Gehl, Hitachi, Kobelco, Komatsu, John Deere, New Holland, Volvo, YanmarBackhoes, Loaders, Lift Trucks Excavators, Skid Steer Loaders, Transporters, Compressors, Auxilliary Power Units, Wheel Loaders, Generators, Light Towers LF16034 Ackerman, Kalmar, Volvo Excavators, Compactors, Lift Trucks, Articulated Dump Trucks, Loaders, Motor Graders, P / P B1421 Mack Dump Trucks LF3410 P B7409 Caterpillar Compactors & Paving Equipment, Wheel Loaders, Crawler Tractors Mack, FreightlinerHD Trucks, 485GB3236 LF3973 P B7225 Desc Catalog No. Application Type OEM# Fleetguard Donaldson Wix Baldwin LFP4005RN Caterpillar Compactors & Paving Equip, Dumpers, Excavators, Crawlers, Graders, Industrial, Mining, Off Hwy Trucks, Scrapers, Wheel Dozers, Compressors 2P-4005 LF3566 P XE B7245 LFP4005XL Caterpillar Compactors & Paving Equip, Dumpers, Excavators, Crawlers, Graders, Industrial, Mining, Off Hwy Trucks, Scrapers, Wheel Dozers, Compressors 2P-4005 LF9691A ELF7405 / P XD B7249-MPG LFP449 Bobcat, Case, Caterpillar, Challenger, Champion, IHC, John Deere, New Holland Skid Steer Loaders, Cable Layers, Compactors & Paving Equip., Graders, Skid Steer Loaders, Concrete Mixers, Cable Layers, Rollers HF6167 P BF853 LFP2292 Ahlman, Akerman, Barber Green, Bobcat, Broyt, Carrier- Transicold, Case, Caterpillar, Claas, Clark, Daewoo, ERF, Fermec, Ford, Gehl, JCB, Komelco, Komatsu, Hanomag, Leyland, Manitou, Massey- Ferguson, Volvo Excavators, Motor Graders, Telehandlers, Skid Steer Loaders, Excavators, Telescopic Handlers, Backhoe Loaders, Compactors & Paving Equipment, LF699 P BT217 7
8 LFP9024 LFP959FHE Crawler Tractors, Wheel Loaders, Lift Trucks, Construction Equipment, Compactor Rollers, Generators,Transporters, Loaders, Pegaso & Volvo HD Trucks Hitachi, Komatsu Construction, Loaders, Excavators, Off Hwy Trucks w/cummins engines LF9024 P BD7176 Aveling Barford, Euclid Dump Trucks, Detroit Diesel engines TP959L FF5037HE EFF0047 BF7697 E.G.L. Resources (independent operator): We toured an active drill site with another Lufkin client. E.G.L. Resources is an independent producer in Midland. They own the rights to 3000 acres south of Midland. John Starck is part owner and the operator of the well pad we toured. This was a vertical drill site only. At the time, they were cementing the down hole cases that seal the drill hole from the water table. This gave us an opportunity to observe the equipment around the drilling rig (power gens, various off road equipment and pumps). 2 Caterpillar Gen Sets 1 Telehandler to load and remove drill pipe Drill rig (hydraulics with several units attached) 1 bulldozer 2 service trucks 1 smaller generator for lighting Materials are trucked in daily (water, sand, fuel) The power gens ALSO used Royal Purple Synthetic lube E.G.L. uses several service providers for their operations: Onyx Construction to clear and prepare the site Academy Drilling for down hole operations FracTech for frac and completion E.G.L. material stats: Most well pads in this area are small and in close proximity to other pads so one well per pad is the norm. Starck s operation timetable is as follows: Well pad construction and prep =6 days Downhole drilling vertical (11,000ft) = 5 days Fracking (9 to 13 stages) = 3 days 40,000 barrels of fresh water for drill and frac 40,000 truck loads of sand per 3 days of fracking E.G.L. completes 2 wells per month E.G.L. plans to work the 3000 acres for 20 years and projected to yield $1.0B. 8
9 Fracking site: We finished up our Midland visit with a Frac site we found while exploring on the last day. We were not permitted on the site, but were able to view the operation from server angles around the outside of the pad. This gave us first hand knowledge of how much horsepower and equipment is in use at one time. The fracking stage has the most HD equipment in use. To feel the rumble of the ground and the size of the soot cloud overhead was impressive. Key Takeaways: The oil and gas industry in west Texas is enormous and a great place to target filtration sales growth The service industry that supports the drilling activity spans on-road and off-road in large levels The amount or equipment and material needs are well under represented given the amount of activity in the area. 9
10 Recommendations: FRAM sales should have main focus on the large national and regional service providers like Baker-Hughes and on road transport providers due to the fleet volumes and amount of equipment and materials needed to supply and support so many operations. Secondary focus on large rental services and region service providers. Team up with a premium oil manufacturer (i.e. Royal Purple) to offer extended interval programs to large fleets and service groups like Baker-Hughes, Schlumberger, Haliburton and Weatherford. Next Steps: DeanHouston to follow-up with Baker-Hughes maintenance supervisor for equipment and filter list (01/13) DeanHouston to follow-up with John Starck at E.G.L. Resources to get access to their service providers for equipment lists and their service channels. (01/13) DeanHouston and FRAM (Christopher Reamsnyder) to meet with Mack dealer in Midland to discuss equipment market and service. (01/13) 10
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