Focused On The Ban

Why Continental Resources’ Gary Gould, a 25-year oilfield veteran and executive, is joining the charge to lift the U.S. crude oil export ban. For Gould, lifting the ban is about access to quantity, not a restriction on quality.
By Luke Geiver | July 27, 2015

After 25 years working in the U.S. oil and gas industry, Gary Gould has earned a position few executives have ever held. Officially, Gould is the senior vice president of operations for Continental Resources, overseeing the Oklahoma City-based Bakken pillar’s drilling, completion, production, HSE, production services and supply chain segments. Unofficially, Gould has recently joined a group of oilfield veteran leaders – including Harold Hamm – who have positioned themselves in front of Congress, policymakers and industry groups to explain a particular message on a unique issue that Gould says impacts more than just the oil industry: U.S. crude oil exports.

To his drilling, completion or production team, Gould is one of the main voices guiding Continental’s implementation of new drilling protocols, completion methods or service contracts. To everyone else, Gould intends to be one of the new lead voices of reason to work to lift the 1970s-era policy that bans the export of all U.S.-produced crude, a policy that is now irrelevant post shale energy discovery and development. His willingness to transfer the information on the issue researched by Continental’s own internal research team to the outside world is not about Gould’s willingness to tow the company line, but rather, as he explains to The Bakken magazine, a necessary and personal effort that he hopes will yield a momentous reversal of the ban to ensure growth opportunities for Continental, the industry, and our country.

From Cedar Hills To Overseas Refineries
Gould is no stranger to major industry events, and Continental Resources has been a leader in developing unconventional resources with new horizontal well technology for over two decades now. In the late ‘90s, Gould and Continental Resources were involved in developing the Cedar Hills oilfield stretching across the North Dakota and Montana border. At the time, the field was recognized as the largest onshore oil discovery in the continental U.S. in the previous 30 years. It was also the first field in the United States to be developed entirely with horizontal wells and the largest horizontal flood in the world.

Since his time working in Cedar Hills, Gould has been involved with several other important milestone unconventional energy developments from Pennsylvania to Oklahoma. The continuation of the ban, he explains, is what could limit the entire industry’s opportunity to achieve more milestone moments. “It is very exciting working in the industry in the past 10 years. It is more exciting than the previous 10 years when our country’s oil production was in decline,” he says.

Lifting the ban and allowing oil producers from North Dakota to Texas the opportunity to market and move product on the global marketplace, he says, wouldn’t impact the quality of work being done, but rather, the quantity. “The bottom line is that it doesn’t as much impact the quality of the work we do day-to-day, but it does impact the quantity of the work we can perform.”

The inhibition of quantity is related to the refining capacities and oil type specifics for facilities in and outside of the U.S., a point Gould makes with a breakdown of U.S. and foreign refinery characteristics. “We have had a renaissance developing light sweet oil, however, light sweet oil doesn’t fit into the current U.S. refining capacity, which is two-thirds heavy sour oil and only one-third light sweet oil,” he says. “Meanwhile, the majority of oversees refineries are designed for light sweet oil where the refining capacity is only 10 percent heavy sour oil and 90 percent light sweet oil. So, we have a mismatch.”

Currently, the U.S. is the only country in the world that doesn’t allow the export of crude oil produced from within its own borders. Despite the raw data revealing the makeup of the country’s refining capacity and the available information on crude oil storage in the U.S. that shows the country is nearing storage capacity, Gould believes that a major hurdle for removing the export ban lies in proper understanding of the gasoline price argument.

“I believe that some people have not read the dozen or more economic reports from multiple government institutions and renowned universities that show lifting the crude oil export ban will actually lower gasoline prices,” he says. The misunderstanding, he adds, is linked to how gasoline is actually priced. As Gould explains, gasoline prices are based on world prices, not U.S. prices. The proof lies with the U.S. refineries. Although crude oil cannot be exported, refined gasoline can be and is therefore linked to world prices. “Lifting the export ban will only increase the world supply of oil to the refineries,” he says, which in turn will then reduce the price of gasoline. “It is not just the industry saying that, it is multiple government and research institutions saying that,” he says.

At a time when hydraulic fracturing regulations on federal lands and oil price volatility seem to be dominating oil-industry-related headlines, Gould says the issue of the crude oil export ban is still near the top in priorities. “Everyone knows Harold is working very hard in Washington, D.C., to educate our policy makers,” he says. “Our lawmakers have a lot of diverse responsibilities and may not have an understanding of our industry or the ban.” To help speed up the ban’s removal, Gould has joined oil industry execs working to explain the impact of the export ban.

Worth The Effort
Continental Resources may be recognized as one of the most successful and prolific Williston Basin operators in history, but even it hasn’t been immune to low oil prices. This year, the operator has run 13 rigs in the Bakken (with a plan to drop to 10), down 7 from the end of 2014. It has also reduced the number of completion crews working in the Williston Basin for the first part of 2015 from 10 to three. In the first quarter, Continental reported a net loss of $33.8 million.
“Looking ahead, U.S. oil production is starting to roll over, as anticipated,” Hamm said earlier this year in the company’s first quarter update. “Given the depth and quality of our assets, Continental is well-positioned to resume growing cash flow and earnings when the oil price environment improves. We remain encouraged by the outlook for the second half of the year and for 2016.”

It’s that optimism that has Continental and Gould so focused on lifting the export ban. Every major shale energy developer has oil to move now or in the near-term future. But, if U.S. storage and refining capacity is maxed out soon, the possibility for growing U.S. production further could be halted. For Continental, which could be drilling the Williston Basin for several more decades, not to mention other plays located in Oklahoma, that is a possibility it believes is not only unfortunate, but unacceptable.

From his time in Cedar Hills, Gould has seen firsthand how technology and operational efficiencies can change the industry in developing unconventional resources. Currently, he is excited about several facets of the segments he oversees for Continental. “In the Bakken, our operations team is focused on increasing production and capital efficiency through optimizing drilling, completions and artificial lift capacity,” he says.

On the drilling side, Continental reached total depth on eight wells earlier this year in a period of less than two weeks, four days faster than its previous average spud to total depth time. On the completion and production side, the company has increased its per-well profitability with enhanced completions based on hybrid and slickwater designs deployed in the North Dakota counties of Williams and McKenzie that have resulted in 40 to 50 percent improvement in the 90-day production timeframe and a 25 to 45 percent increase in the estimated ultimate recovery volumes.

Because of its success with enhanced completion designs, Continental’s Bakken team has even found success with new artificial lift methods. More production has led the team to use larger pumping unit capacities “in order to produce back that incremental oil production in a timely fashion.”

The company’s success in 2015 during a time of difficult oil prices has Gould excited for the future and the team he is working with, he says. The success and excitement around Continental will continue for decades, he adds, especially if his and others’ efforts to remove the export ban are successful. Doing so will eliminate any doubt that the growth of the industry will continue regardless of foreign producers or refinery characteristics. “As great as the history has been,” Gould says of the unconventional energy industry pre-export ban removal, “the future looks even better.”

Author: Luke Geiver
Editor, The Bakken magazine
701-738-4944
lgeiver@bbiinternational.com