American Oil and Gas Reporter - March 2016 - 86

ConventionSection: Texas Alliance of Energy Producers

Texas Alliance Restructures
To Tackle Challenges
By Del Torkelson
GRAHAM, TX.-Tom Hanks' character
demonstrated it in the 2000 film, Castaway,
by among other things, removing his abscessed tooth with an ice skate and befriending a volleyball. "Need taught him
wit," was how some expressed it in 1500s
England, but Plato's Republic may have
encapsulated the concept best by declaring
necessity to be the mother of invention.
For an independent oil and natural
gas industry enduring commodity market
doldrums in early 2016, that necessity
manifests itself on balance sheets, and
the invention is evident in the many ways
companies are adjusting their plans, improving their efficiencies, and trimming
their costs.
The principle also extends to the Texas
Alliance of Energy Producers as the group
prepares for its 2016 expo and annual
convention, April 19-20 in Wichita Falls,
Tx., says Chairman George Rogers, president of Bettis, Boyle & Stovall Inc. in
Graham. "Any time there is a downturn,
all organizations-private or public, companies or associations-are forced to refocus," he reflects. "Good things can
come of that. Reorganizing and refocusing
will benefit us in the long term."
According to the Alliance, that reorganization includes administrative changes:
* John Tintera, who has consulted
for the Alliance since 2012, has been appointed executive vice president of government relations and will be based in
Austin.
* The Austin government relations
office also will continue to include consultants Gloria Leal, who has been named
general counsel, and Bill Stevens, who
will function as chief lobbyist.
* James M. Wortham has been hired
as director of membership services for
North Texas, and will head a new office
in Fort Worth.
Alliance President Alex Mills explains
that the blueprint for the reorganization
came from the association's 2020 Committee, which Rogers appointed last year
and placed under the leadership of Alliance
immediate past-Chairman Townes Pressler.
86 THE AMERICAN OIL & GAS REPORTER

According to Mills, the committee's recommendations included creating the position to which Tintera was appointed.
Responding to legislative and regulatory
developments in Austin while also meeting
the challenge of numerous legislative and
regulatory developments from Washington
is a juggling act, Mills acknowledges,
going on to say that distributing some
duties to Tintera should benefit the association. "As someone who spent 22 years
at the Texas Railroad Commission, where
he was executive director, John fit the
bill perfectly," Mills describes. "We want
to work out all the kinks in this reorganization before next January's legislative
session, so it makes sense to do it now."
Tintera is well-known in Austin and
brings impressive experience to the position, Rogers reflects. "He knows regulations so well and is a proven leader,
having led the RRC staff," Rogers lauds.
"His focus is going to benefit us."
Mills adds that Worthum is a good
choice to head the North Texas office because of his extensive connections in the
Dallas-Fort Worth metroplex, having
worked for more than 30 years with the
area's producers in positions at Mitchell
Energy, Devon Gas Services, Crosstex
Energy Services, BFX Midstream, and
Marabou Midstream Services. He also
has been a longtime Alliance member
and has served on its board of directors.
"He is perfect for membership recruitment in that area," Mills assesses.
New Model
A glance at oil and gas prices around
the time Rogers became the Alliance's
top officer-in April 2014, the 12-month
strip for crude oil stood at $97.17 while
natural gas was $4.76-helps illustrate
how much has changed for the industry
during his tenure. Two years later, independent companies are struggling to survive. "Not many companies can make
$30 oil work," he assesses. "Everyone is
trying to cut expenses, but price is the
critical issue and we just need higher
ones, plain and simple," he states.
As long as wells' costs exceed the income they yield, no volume of sales will

turn a red balance sheet black, Mills reflects. "No company can endure negative
cash flow for very long," he reasons.
"Most of our members are small independents; 60 percent of them have 10 or
fewer employees, and a large proportion
of their production comes from stripper
wells."
According to Rogers, this downturn
differs from the model established in
1986, 1999 and 2008. "This one is has
lasted longer and is probably more severe,"
he reflects. "In the past, you could almost
chart those downturns. They lasted about
14-18 months and product prices declined
about 65 percent. This one already is in
its 20th month and product prices have
declined 75 percent."
Although much of the oil surplus that
has sent prices tumbling has been attributed
to an effort by the Organization of Petroleum Exporting Countries to weaken
North American shale players, small independents with a significant share of
marginal wells are getting hit the hardest,
Rogers assesses. Nevertheless, he says,
few can hang tougher than independent
producers.
"Alliance member companies have a
lot of great leaders, and most of them
have been through these cycles before,
so they know we are going to get through
this," he considers. "They have experience
and know how to manage their companies,
cut costs, and certainly how to raise
money and survive. There is no question
in my mind that most companies are
going to survive. Some will go away
with mergers and bankruptcies, but those
assets will be absorbed by other companies, and a lot of the employees will be,
too."
Moreover, no one can execute the
proverbial business goal of buying low
and selling high if prices only climb. Today's conditions make for a buyer's
market, Rogers notes. "There are a lot of
opportunities if you have cash, private
equity, bank credit, or can issue stock,"
Rogers affirms. "Now is a better time to
invest than at $100 oil."
And while Rogers says his company
is on the lookout for bargains, he also

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