00:00:00 Jordan
This episode of the Energy Pipeline is sponsored by Caterpillar Oil and Gas. Since the 1930s, Caterpillar's manufactured engines for drilling production, well service and gas compression. With more than 2100 dealer locations worldwide, Caterpillar offers customers a dedicated support team to assist with their premier power solutions.

00:00:26 Speaker 2
The energy pipeline is your lifeline to all things oil and gas to drill down deep into the issues impacting our industry. From the FRAC site to the future of sustainability, hear more about industry issues, tools and resources to streamline and modernize the future of oil and gas. Welcome to the Energy Pipeline.

00:00:49 Jordan
Hello everybody. Welcome back to another episode of the Energy Pipeline. It's me your host, Jordan Yates. Today we are joined by Steven Anderson, the president and Chief Executive Officer at Evolution Well Services, as well as one of our co- hosts, Bill Jensen. Everybody knows Bill. So Steven, you say hi first because you are the guest.

00:01:11 Steven
Hi Jordan. Thanks for having me on.

00:01:13 Jordan
Of course. Bill, say hello to everybody.

00:01:18 Bill Jensen
Good afternoon everyone. Or good day or just we'll leave it at that.

00:01:21 Jordan
Bill, I feel like that's always your go- to is good afternoon. I love it. So, so polite. You're awesome.

00:01:29 Bill Jensen
Well, thank you. I try to be, it's nicer.

00:01:31 Jordan
Oh, for sure. One day Bill's sass will come out. We'll see it. Steven, we brought you on today because we want to talk about the concept of electrification in the oil fields and kind of its role in relation to sustainability. I feel like these are two kind of hot topics and we just want to get started right off the bat with some questions. Are you ready?

00:01:54 Steven
Yes, I am. Thank you.

00:01:57 Jordan
You guys are both so polite. Oh my goodness. I got to loosen you guys up. So right off the bat, what does electrification entail in the context of the oil and gas industry and how does it contribute to the sustainable practices?

00:02:12 Steven
It's a good question. It's something that actually has been going on for some time. I think it's certainly gained some strength in recent years, but there's a recognition as it relates to both equipment, the reliability of that equipment, the reliability of the fuel sources, and ultimately ways in which to reduce emissions. But what's interesting about sustainability is that I think the electrification is also beneficial for the employees in many other ways. So I think what it entails is really looking at all the different value chains within oil and gas, recognizing where the right investments, the right sources of equipment at the right scale can satisfy the needs of those particular areas in oil and gas. Then finding really all of those participants within that ecosystem, being willing to support it. Then you find really some momentum from that point forward. So whether it's in production or excuse me, upstream, downstream, midstream, even in refining, I think you see really a lot of momentum and really encouraging progress to get there. I think ultimately that will drive safer, more efficient operations, but obviously the ability to create a cleaner production overall. I think in the context of a lot of the sentiment around oil and gas historically, I think you see the innovation within this sector kind of proving itself out once again when there's pressures both internally and externally to improve or to electrify.

00:03:47 Bill Jensen
A couple of things you mentioned there, Steven, safety and employees. One, what benefits do you see that electrification provides to help safety? Because I mean we're talking about big time voltage here and then looking out for the employees.

00:04:06 Steven
So I think it's a great question. One of the things about on the electrical side, I think you're bringing new employees depending on the voltage into oil and gas that historically have not been there. Certainly in the application of even our technology on a medium voltage side, you see that. I think expanding that in terms of wages, certainly in terms of the compensation that can be achieved for those positions, I think is great. Giving those particular groups and resources outlets for sort of exploiting their craft and the technical skill sets that they have. I think it's also safer. You might think electricity is a little bit more dangerous, but what's interesting about electrical components is they wear out much less frequently. So there's tremendous safety standards in the electrical community and there has been for a long period of time. The mining industry is an example of that. So for us, and I think for a lot of others, they look to the mining industry or other industries that have used electrification in a pretty rugged environment to deploy in the oil and gas sector. So when you have those safety standards and you can follow them, you actually see that it's quite a bit safer. So as it relates to getting the equipment in place and then ultimately operating it, it's tremendously safer. Even in a maintenance cycle, the fact that you have longer maintenance cycles or intervals, the risk to personnel going in and doing maintenance or repairs is reduced just because the exposure is reduced as well. That's something that we certainly find to be true in our experiences we've been operating ourselves.

00:05:46 Jordan
That's so interesting the way that you put it because I used to kind of think electricity is scary. If I accidentally got the tip of my blow- dryer wet, can I plug it into the wall? Am I going to die? Is this a toaster in the bathtub kind of situation? It didn't happen until probably I guess a year and a half ago when I started working for a ceramic capacitor manufacturer during my day job where I would learn so much deeper about the electronics, how they work, and the safety measures that are taken on a component level is just absolutely insane to where these electronics are so safe on so many levels and they have to go through such rigorous testing to get to the point where the end user even has it in their hand. So I like that you pointed that out because I feel like electricity seems like this magical unknown source that is just kind of floating in the air, but there are very technical aspects to it. I say all this to lead into my next question, which is can you define a little bit more what we're talking about when it's electrification in the oil and gas industry? Is this the motors? Is this going to be seen on a drilling rig? Where are we seeing it and what is being electrified?

00:06:57 Steven
You really see it everywhere, the entire value chain in oil and gas. You see it in upstream, in particular on drilling rigs that have been electrified where the motors have been converted to electric. You see it in completions. Evolution pioneering electric frack certainly is a big part of that where the equipment in and around the well pad for completions is being electrified. You see it in the midstream, you see it in compression is a big push. You also see it in production where a lot of the equipment that's used to actually, once you bring a well on production, is being electrified as well. So it's really as much as you can possibly electrify it's good. But like I said sort of early on, I think the industry is trying to tackle that which can be electrified the easiest with the biggest bang in terms of economic benefit. I think also in terms of emissions and then honestly it is adoption and acceptance. I can sit here and show you dramatic economics benefit for the services that we provide. They're electrified, but unless the organization in which we're serving can support the needs to obtain, to engage us and really get all of the value out of electrification of a frack, then they're not necessarily going to see it. So you have to have buy- in organizationally, community- wise in order to do that. So you see an awful lot of it. And often because it's new in many applications, that is where the risk is. It's the transition to it where people are not traditionally exposed to it. So I think to Bill's example, it is scary in the beginning, but the lack of knowledge potentially, or someone not necessarily respecting it in the beginning can be risky. But all of the moving parts and often in a combustion engine can certainly be dangerous as well. They're just people who are typically used to those risks. So I think once you kind of socialize around those issues, you recognize it's a lot safer. It ultimately delivers on the benefits that people talk about. This is not something that you quote economic, operational and safety benefits, and then they don't come true. You see it all over the place. I think what electrification generally entails is finding a more reliable way and a more sustainable way of powering the operations that we have. In its core, it's converting a hydrocarbon to an electron and then using those electrons to more efficiently execute a particular task. That is what it is. It's basically... and I think once you see it for that level of simplicity, you really get to understand sort of the value dynamics that you get.

00:09:51 Bill Jensen
That's neat. It is nice how you break it down to say basically you're taking a hydrocarbon, turning it into electrons, electricity, and carrying it through. Can you expand on what some of the key components and technologies are involved in the electrification, like motors, battery storage, renewable, anything else that goes along with that? Then there's a follow- up in there. You spoke about mid- level voltage in that. What are some of the voltages there? I'm not trying to ask that question to pin it down to say, oh, that's scary again, but just so that you can get the scope of what the industry's doing, what you at Evolution and your team has been doing, where that all fits.

00:10:37 Steven
Sure. That's a good question, bill. And I think one thing I'll probably clarify too on the conversion of a hydrocarbon to electron. In the case of wind and solar, it's not. It's taking energy of some other source, not necessarily from a hydrocarbon and converting it to electron, but generally, and most consistently it's done from natural gas powered solutions that generate electricity, which is certainly the case for evolution, but it generally is as well in normal utility applications too. So electrification, at the end of the day, you have to generate the electricity in one form or fashion. The way it's done historically in a utility setting is you've got different types of power plants that can be steam generated. You can certainly use natural gas, which is by far the biggest in the US. You've got coal- fired generation and then ultimately it's generated and then it has to be distributed to where it's needed. That's the way our grid works today, what is happening in the oil field more frequently are something called microgrids. So what you're doing is, instead of bringing the transmission and distribution lines to where it's needed, you're bringing the generation, the power generation to where that electricity is and you're bringing the gas, the natural gas, which is typically the fuel source to burn, to create the electricity to that location as well. In the oil field, it's available in abundance. It's produced exactly where it's actually needed. So the benefit of a microgrid is that you have movable power generation. You can create that utility grid, if you will, in a much smaller geography. It gets much more efficient, you have less risk. But the key piece there is the mobile power generation, which is something that our organization certainly has spent a lot of time designing and engineering, but there's other applications and other companies that do it as well. So what's key is you have to have the fuel source. Generally it's natural gas. You have to have the source of power generation. That can be a turbine engine, it can be a reciprocating engine. Then you have to have the ability, like in our case, we actually distribute the electricity through cables because we bring power generation right to the location where we want to use it. That ultimately gets fed into electric motors and electric motors are powering whatever is necessary, whether it's in upstream, downstream, midstream applications, all the ones that we talked about previously. So that's really what has happened and really what has created the evolution of oil field electrification is mobile power generation, and it could be mobile that's rapid on wheels like our applications, or it can be skid mounted. But nevertheless, you're getting some sort of power generation or electricity right to the source that you want to use it. You're not generating in one central location and then distributing it out to a bunch of other locations. You're bringing the generation right to where you need, so you're eliminating that distribution. In terms of voltages, historically kind of in the upstream space, you've seen 600 volt platforms, 480 volts has been around. That's typically considered lower voltage. Medium voltage is a pretty big range, and this is where it probably gets into people's opinions, but there's 4, 160 volt platforms, but there's also 13,800 volt platforms. A lot of mobile generation is generated at 13, 800 volts. Then you use transformers. That's what's important about electricity is there's the ability to generate it at one particular voltage, but oftentimes it's needed to be used at a different voltage and you have to either transform it down or step it up to get it to the voltage that you ultimately want to use it in. So transformers become very important part of that manufacturing or distribution process of the electricity.

00:14:33 Jordan
This sounds so cool. I loved when you were describing the microgrids because I started daydreaming and I'm thinking about it all set up in this really cool graphic. I'm like, this sounds pretty neat. I want to see this in action. Like you said, you get the natural gas there and then you just feed it back into the system provides the electricity. That just sounds so nice. I love how it all goes together so smoothly. It's such a beautiful picture in my head. I don't know if that's considered beautiful to everybody, but to me the integration sounds absolutely gorgeous. But I have this question where with the energy transition going on and the sort of public perception of it. A lot of times when we think electricity, we think batteries. So I feel like a lot of people may be thinking, okay, you're electrifying the oil and gas industry, so we're using giant batteries to be used in these motors. Is there a place where the batteries are being used or is it more so like you said, converting either the renewable solar, wind, what have you, natural gas to the electricity? Is there a place for batteries here?

00:15:44 Steven
There is a place for batteries. It's not the most economic solution today. It's very expensive to produce a battery. Industrial application for batteries is really not here in a commercially viable sense on any level of scale today. There's an awful lot of companies in capital and incentives in the government to ultimately invest in and complete some R& D to get to that place. But I wouldn't tell you that today it's commercialized on an industrial scale. Generally what a battery is not used for is a long- term power source. It is typically used for storage, and so it becomes an intermittent option for power if your primary power source is not available or has failed or is temporarily down. The key is that you want the battery to be stored and fully charged so that, when you need it, you can use it for as long as possible. But oftentimes you can have a couple megawatt battery, it can last quite a few hours depending on how much charge you're pulling from it. When I say quite a few hours, I'm not talking necessarily days. I'm talking hours. And depending if you have a really heavy load on the batteries that you're pulling, it can last minutes. So you have to be very careful in that regard. But they certainly serve a purpose today in very short sort of applications on intermittent or from a storage perspective and just kind of solving when your primary source is down. But today they're not there for a long- term power source to really give you the opportunity to use the batteries for an extended period of time. Quite frankly, given that they have to be charged, this is what's also very interesting in an energy transition is the charge has to come from somewhere. I think that's one of the challenges in a transition is that we think about electrification as if you just get electricity. No, it has to be generated. It's typically generated, as I mentioned before, from an original source of a hydrocarbon, certainly from a long- term permanent solution. Intermittent, it can come from the more renewable sources, but batteries the same way. It's a storage place, but you have to be able to charge it and it's charged with some sort of power source in the first place as well. So that's really kind of I think a key component to think about in transition at the use of batteries.

00:18:14 Bill Jensen
Certainly a good thing there that you talk about the transition of batteries. There's a lot of different moving parts there and the electrification in the oil and gas equipment process industry, how does it impact energy consumption, emissions reduction, and the overall operating efficiency? Have you seen gains? Do you see gains or is it a long- term investment, not short- term?

00:18:40 Steven
So I think the best way for me to probably give you some context here is maybe within our own business. There's always just in terms of electrification of what we do is kind of probably what I alluded to in the beginning is that it's real. It's not something that takes a long time to see. You don't sort of make an investment and hope that it gets there. It's something that's real and immediate. Electric frack, for example, drives massive economic benefit in terms of fuel arbitrage. So the customer and the provider, you're seeing anywhere from 15 to$ 30 million depending on the frack application and cost elimination by using field gas that's converted into electricity that's used on location in our equipment versus diesel equipment and diesel consumption. That is meaningful.

00:19:37 Bill Jensen
And that 15 to 30, excuse me for interrupting, but is that a year, a month?

00:19:41 Steven
Per year. There's a wide range of assumptions in terms of a completions program, but that's what you will generally see for one frack fleet for a year. It is a significant amount of economic benefit. In terms of operational efficiencies, it is as good if not better. That's something that's been proven out with the technology that we've deployed. Then it's also safer. We've talked about that from an HS& E standpoint. It requires fewer people to operate. You have maintenance intervals that are longer so you don't have to interact in the equipment quite as much. Then from a noise level and emission standpoint, what typically happens on a frack pad, it's very noisy. Actually, electrical components are very quiet. Anybody that's been around a Tesla or a Nissan Leaf or any other EV knows that. We can be pumping 120 barrels a minute, 10,000 PSI, and we can be having this conversation around the equipment where you're not required to even have hearing protection under OSHA standards. So it's extremely quiet. So that also is very good for personnel. So I think when you look from an emission standpoint, that's always one of the bigger ones because, as we talk about transition, the amount of emissions from the completions process is significant. So the ability to electrify that takes a significant portion of the carbon intensity from a production of a barrel or a molecule gas tremendously down, and you see that instantly. So I think that is one of the things with the oil field is whether it's this industry and sector has always been on the cutting edge of solving problems. At times, there may be problems that are defined that someone else may define those problems for you or push the industry, but certainly the amount of technology that's been deployed from other industries to electrify the oil field is being proven out, up and down the value chain in the oil field. And it's something you see instantly in terms of the benefits,

00:21:44 Jordan
It sounds like it's obviously beneficial. So it sounds interesting. Steven, I want to go back where earlier I think around one of the first questions. You had mentioned that people often have some trepidations towards adopting the electrification in the oil and gas industry. It's interesting because, as you broke down, it's not the electrification that people typically think of big battery packs. We're still using a lot of natural gases to power this electrification. So when people are actually concerned about it, is it because maybe they don't understand that portion? Or is there something that's so significantly different in the process of using, say a diesel engine versus an electrified one that is alarming, if that makes sense?

00:22:33 Steven
Sure. I think there's a number of factors that can come into it. People get comfortable with what they do and how they do it and the execution with it. So sometimes a new change of new technology, often you want it to be proven first. The good news is a lot of the electrification in the oil field today has certainly been proven. So I think you're seeing a greater level of adoption. There's not a lot of folks who are willing to be first movers. Some have the culture to want to do that, and I think that's very helpful. I think that there is sometimes concern that the trades or the experiences that are traditional oil field would maybe go away. Diesel mechanics as an example, people are worried about job security. I think certainly in the oil field, we employ so many people in this country that I think we should be protective of those jobs without question. I think electrification doesn't put them at risk. I think it highgrades them. And as I mentioned earlier, I think it actually gives people a broader range of trade they can use in even other industries. I think that it ultimately increases in many ways the compensation they can earn. The other part that I think can be a bit of a challenge is oftentimes to even perform the work that we do on electrification, you have to have portions of our customer base and within their companies actually have to communicate differently than they historically have. So in order for us to get gas to put in our equipment, we have to have gas available on location. So the production team now has to be involved in completions. That's not normally the way it works. So you get different parts of different organizations to communicate and coordinate, and that isn't always the easiest thing to do. But when you do, you unlock value that is very obvious. So sometimes that is it. I think the other thing that is a bit new is some of the technologies that we bring in to do this are not traditional oil field technologies and not just electricity itself. In our case, when we generate electricity, we actually use an aero derivative turbine. It's the same technology that sits under the wing of an airplane. So we've brought that technology into the oil field and people are worried about it being reliable doing what it says it's going to do. Sometimes those are different skill sets. So a lot of times it's just different and it takes time for people to get accustomed to it. But those are some of the examples that have kind of brought some of the hesitancy early on and some of the questioning that I think we've been able to overcome at this point as an industry.

00:25:04 Jordan
That's really cool. I like to sit here and act so progressive and be like, yeah, just change. Do what's obviously better. But I feel like a very maybe relatable example for people who aren't actually doing this stuff on a daily basis and going through it would be like, " You're using your Apple computer," and then someone's like, " Actually, here you go. Switch to Windows. I need you to start working immediately." It's like things like that where maybe one is better than the other, but it can be stressful to go through these changes. I imagine that you have to have some pretty thick skin to be the guy constantly coming in, shaking people's worlds up, being like, " Hey guys, we have this really good way of doing it. Just give me a minute to prove it to you." I commend you for that. I don't have a question. I just wanted say a good job.

00:25:46 Steven
No, I appreciate that. I think that the industry as a whole has exercised some level of patience, but I think as also some open- mindedness too. I think once you're able to prove it, this industry has proved resilient and always able to do more with less. I think continuing to reduce the cost of producing the lowest carbon intense barrel or molecule gas you possibly can, and that will continue to be the case. I think with anyone, if you're delivering a service, you're providing value, you don't need to sell it to someone. You need to prove it to them, and they get to understand it and sort of socialize those issues at their own pace. Every organization is different. And at the end of the day, if you deliver a service and you deliver value that is sustainable not only in sort of an ESG perspective, but sustainable in terms of long- term and durable, it's not quick and easy and then reverts back to an expense, then I think that you can expect you to have sort of a durable lifespan of selling and convincing the industry that this is the right thing to do. So I appreciate that, but I think that the industry as a whole has done a pretty good job of it

00:26:56 Jordan
Just passing on the compliments. Bill, you got another question for Steven? We're getting close to the end, but I want one more insightful Bill question.

00:27:03 Bill Jensen
A Bill question. Well, you've talked about some of the challenges of being able to get people to buy into it and show how to do it, and you've touched on the challenges there with getting people to not sell them on it, but allow them to see the benefit. What do you see the economic implications and long- term benefits of electrification into the industry, and what is those impacts on costs of operation and total cost of ownership and profitability?

00:27:40 Steven
There's a lot to the question. I think that, I'll tell you what I'll touch on. I've sort of highlighted at least probably these areas previously, but-

00:27:51 Bill Jensen
Pick a highlight.

00:27:51 Steven
Sure. I think here, I'll tell you where the economics are and ultimately to people. One of the things that I think electrification is it's here to stay. So those skill sets and those jobs, whether it's the manufacturing those components, whether it's installation of those components, running the components, maintaining them, whatever it is, it's here to stay. The ability to be an electrician for example, is a very broad- based skillset. I think that keeps you in demand as an employee. I also believe that the components in the electrical world, whether it's power generation, whether it's the electrical components themselves, they last a long time. So while it is capital intensive to get started because you have to convert equipment over, you have to invest in these assets, the total cost of ownership over time is dramatically reduced for a lot of the things that we talked about in terms of maintenance and the like. I always try to use this example and at times people roll their eyes at me, but it is something to try to make it personal. That is that when's the last time you went to flip a switch on in a fan in your house and you expected it not to turn on? It just does and it does for a very long time. If it doesn't, there's an issue that you track down and you resolve that problem. That's not always the case when you're turning on your car. The mechanical issues you have for something like that, they break more often. So when you wire up an electrical system, it's much more reliable and durable over time. The more we can build those systems out, we can save dollars as we've described. I think we can give a better opportunity for our personnel in terms of jobs and security because those components and electrification is here to stay. I think certainly in terms of reducing carbon intensity, there's no better way of doing it than electrification. I think that you really do see the real benefits of cost, social benefits, emissions and safety, and it's more reliable over time in terms of efficiency. I really think the more people see that the better. So you can quantify them on a lot of different ways, but it certainly holds true across that entire value proposition and up and down the value chain within oil and gas.

00:30:20 Jordan
Very well said.

00:30:21 Bill Jensen
Excellent. Thank you,

00:30:23 Jordan
Steven. I just want to let you know if I ever have an oil and gas company, I will let you electrify it.

00:30:28 Steven
I appreciate that. There's a lot of folks out there doing it, but we're certainly proud to be a part of it.

00:30:35 Jordan
Amazing. Well, thank you so much. We are just about to the end of our time. Is there any remaining thoughts or, if somebody wants to reach out to you, where they can find you and all of that?

00:30:46 Steven
Sure. I appreciate the opportunity to be here. Evolution has played a big role in what we do. People can look us up on our website at evolutionws. com, but would be happy to talk to anybody and educate them about the things that we do, but also maybe help them on their journey of electrification too. Just trying to be good stewards to the industry. So I appreciate the opportunity to be here, to talk to you guys and in the platform to discuss what we do in this industry.

00:31:15 Jordan
Thank you. Bill, any remaining thoughts from you?

00:31:19 Bill Jensen
No, it's been a wonderful journey through the electrons here, and I appreciate your time and your explanation, Steven. Thank you very much.

00:31:29 Jordan
I wish I would've looked up a good electrification pun before this. This feels like a good time to use one, so insert electric-

00:31:37 Bill Jensen
Here. I've got one.

00:31:37 Jordan
What is it, Bill? What is it?

00:31:40 Bill Jensen
I'm charged up about electricity and electrifying the oil.

00:31:47 Jordan
There it is.

00:31:47 Steven
That was a good one. That was a great one, Bill.

00:31:48 Jordan
There you have it. Thanks so much for listening to another episode of The Energy Pipeline. As always, I'm your host, Jordan Yates, and I'll see you next time. Bye- bye.

00:31:57 Speaker 2
Come back next week for another episode of the Energy Pipeline, a production of the Oil and Gas Global Network. To learn more, go to oggn. com.