American Oil and Gas Reporter - January 2012 - 210

★

The Presidential Papers
Arkansas Independent
Producers & Royalty
Owners Association

WILLIAM H. "BILL" HANNA
President
Hanna Oil & Gas Co.
Fort Smith, Ar.

from the president
I wrote an article for The American Oil
& Gas Reporter this time last year that
started by saying natural gas then was trading at $3.59 an Mcf and oil at $83 a barrel. As of late November 2011, natural gas
was $3.79 an Mcf and oil was at $95 a barrel. Oddly, the volatility is gone.
This has both an upside and a downside.
The benefit is that companies can manage
better in a stable price environment, in
which predictability enables more budgeting certainty. The downside is that hedging has become nonexistent. In the past,
the market has been optimistic about future pricing models. Today, a look at the
near-term future does not inspire much

confidence, with the economy dampening
our industry's optimism. Nevertheless, it
is encouraging to see the market drive activity. If the economics can support operations, the natural result is sustained and
even increasing activity.
As for pricing volatility-or lack thereof-we always drilled
regardless, since we
had no control over
the market price. We
are the price takers,
not price makers, and
only control our finding costs.
It is interesting to look at what is happening-and what has happened-in other
areas of the country. Shale plays account
for 30 percent of U.S. natural gas production. However, overall production has
not increased as much, since the conventional gas business has shrunk and changed
the shape of the pie. Consequently, services have become scarcer in conventional gas areas. If a play lacks a big budget,
it also tends to lack sufficient services.
This also is a market driven reality. Although our company's activity is down a

$'LYLV
LRQRI8QLW/LQHU&RPSDQ\

(QYLUR*XDUG
ŽŶƚĂŝŶ ŵĞŶƚ^ǇƐƚĞŵƐ

,1672&.$1'5($'<726+,3
3URYLGLQJQDWLRQZLGHVDOHVRIVHFRQGDU\
*DOYDQL]HG0HWDO
FRQWDLQPHQWV\VWHPVDQGRWKHURLOÀHOGVROXWLRQV
6HFRQGDU\&RQWDLQPHQW6WUXFWXUHV

*DOYDQL]HG0HWDO6HFRQGDU\ &RPSOHWH&RQWDLQPHQW
&RQWDLQPHQW6WUXFWXUHV
6\VWHPV
=HUR*URXQG0HWDO
+HDY\'XW\:DON2YHUV
&RQWDLQPHQW6WUXFWXUHV
/RDG/LQH&RQWDLQPHQW

'HQQLV&DPSEHOO

)RDP&RQWDLQPHQW%HUPV
7DQN%RWWRP6DYHUV
7DQN%DWWHU\
&RQWDLQPHQW/LQHUV

&DOO)RU$4XRWH7RGD\

: : : ( 1 9 , 5 2 * 8 $ 5 ' & 2 1 7 $ , 1 0 ( 1 7 & 2 0
210 THE AMERICAN OIL & GAS REPORTER

bit, we are struggling to find drilling rigs
and cementing, logging and fracturing
services. This requires longer-term planning with greater lead times and the
stress of scheduling fracs before drilling.
We are pretty good, but in that scenario we
have to be really good. I hate to think what
would happen if we did not have a well
to frac come frac day.
Economic Driver
In the great state of Arkansas, our state
regulators have been volleying back and
forth about which agencies will control
which activities. It seems like the Department of Environmental Quality's understanding has evolved to the point that it recognizes the effectiveness of the Arkansas
Oil and Gas Commission's oversight-primarily because the AOGC's regulation
has worked.
Although Arkansas' industry has been
blessed with many opportunities, we still
feel the growing pains from the Fayetteville Shale play's emergence. Our legislators are another year wiser, and hopefully are learning more about our terrific industry and the positive effects it is having on our economy through employment
and tax revenue growth.
The Arkansas Independent Producers
& Royalty Owners Association continues
to grow and can boast about its involvement in this year's successful legislative
session. The 2011 session began with the
introduction of some poorly written legislation aimed at the oil and natural gas
community, but it was not enacted. That
legislation will be back-and we hope it
will include adjustments to make it acceptable to all concerned.
Our industry never has wanted open access to areas that really do call for scrutiny. We invite scrutiny and have an open
door to all opposing views. The type of
transparency that exists today is necessary.
Gone are the days of hiding and hoping
no one sees what is happening. The companies working today are professionally
managed and attempt to educate landowners, work with community leaders and cooperate with the public. Our state should
be proud they are operating here and take
care not to discourage their work.
Jobs are the key to rebuilding the
economy and this state's oil and natural
gas community is doing its part to provide
good, high-paying positions. Oil and natural gas support 30,000 Arkansans work-

American Oil and Gas Reporter - January 2012

Table of Contents for the Digital Edition of American Oil and Gas Reporter - January 2012