AIPRO President Mark Thomas on Keeping Oil Numbers in the Black

Mark Thomas

Mark Thomas, 48, of Magnolia, is the owner of Cornerstone Energy and Red Oak Production Co. and president of the Arkansas Independent Producers & Royalty Owners.

Thomas is a 1989 graduate of Ouachita Baptist University at Arkadelphia. He acquired existing wells to found Red Oak Production Co. in 1995 and then Cornerstone Energy in 2000. Red Oak and Cornerstone employ seven people and use dozens of contractors to produce and explore for crude oil in five south Arkansas counties. Thomas started the companies with the acquisition of existing wells and transitioned into drilling in the mid-2000s, when the cost of reserves through field acquisition became too high for the companies.

The mission of AIPRO is to represent the interests of oil and natural gas producers and royalty owners in Arkansas, while educating others about the benefits oil and gas bring to the state.

In all the excitement over shale gas, the oil industry in Arkansas hasn’t received much attention. How much oil is being produced, and what does the production trend line look like?

Arkansas produces around 20,000 barrels of crude oil per day. This number had been in decline until five or six years ago. The decline has been halted and the curve is now showing a slight increase. In a mature producing basin this is typical. Of course, the larger fields were discovered as long ago as the 1920s and are in some phase of depletion. Smaller fields are still discovered, but most “new oil” is found in untapped reservoirs contained in the old fields.

Fracking for gas and oil has become a household term, but have there been technological advances in the production of oil from conventional sources?

Our fields have been blessed with high-quality reservoir types. Porous and permeable sands and limestone have yielded the oil from the southern counties of Arkansas. Fracking is seldom needed to stimulate oil flow. There has been some 3-D seismic work done in the area with success. Only a small part of the producing regions have been subjected to 3-D seismic study, providing some opportunity for the future. The great technological leap helping oil exploration has been in well logging, the electrical evaluation of subsurface strata. New single-pass porosity, resistivity and density measurement enables fast and accurate evaluation of formations. Instruments showing orientation of the beds and detecting unseen faults aid in exploration and production of oil.

What ultimately happens to the oil that comes out of south Arkansas? What price per barrel do you need to see for production from that oil patch to be profitable?

Most of the local crude is processed in El Dorado at the Lion Oil Co. refinery. The rest is bought by other firms and sent to various pipeline terminals that ship it to other refineries in the Gulf Coast area. There has been an increase in demand for Arkansas oil shown by outside purchasers. This opens options for our local producers in the sale of their product. Lifting cost — the cost to produce, treat and store oil for final sale — varies from well to well. These costs have risen with the increase in oil prices since 2000. Break-even is probably nearing $40 a barrel. Add exploration cost or reserve replacement to this and you have the real number.

What kind of skills do you look for when hiring? Is the labor pool adequate or do you have trouble finding the employees you need?

A willing attitude is the most important quality I look for in workers. The oilfield is hot in the summer and cold and wet in the winter. It does not stop for darkness of night or much of anything except lightning. Basic mechanical skills, math ability and reliability are lacking in the less than 30-year-olds. But a good worker quickly progresses to higher wages and much more interesting and physically easier tasks. If the worker gets to this level, he usually remains in the industry.