By Kris Axtman
04-06-04 Five years ago, Hollis Sullivan scoffed at someone who said he was
too busy to return calls. How could anybody be that busy, he wondered. Now he
gets it. "We're maxed out," he says, bumping along a dirt road toward
his latest project. As oil prices top $ 42 per barrel and natural gas hits $ 6 per mm cf, Mr
Sullivan is one of thousands of small, independent producers from California to
Wyoming stepping up exploration and production. Five years ago, he was drilling
no more than four new wells a year. This year, he'll drill nearly 35. Across Texas,marginal stripper wells are pumping again, rigs are searching
for new resources, and college kids are taking a second look at the industry.
Ivanhoe Energy, a California-based firm, plans to drill up to 65 new wells this
year in California, Wyoming, and Texas, up from about 14 last year. Experts say
it may be the start of a new oil boom, stimulating the faltering industry and
lessening US dependence on foreign oil. Nationwide, the rig count grew by 12 % this year, with 1,373 rigs drilling
for oil or natural gas. It's a far cry from the record 4,500 rigs of 1981. But
it's a significant change from just five years ago, when only 488 rigs were
drilling -- an all-time low. Back then, oil dropped to $ 12 a barrel -- less than it costs many small
producers to extract it from the ground -- causing a lot of worn-out wildcatters
to finally leave the business for good. Texas, with about half of all US active rigs, is key to understanding the
industry -- and companies are seeking hundreds of new permits here each month.
But what's even more significant is the number of wells that are being completed
each month, says Mr Matthews. In February, for instance, there were 680 gas-well
completions -- a 30-year high. In March, there were 705. But even that's become difficult; worker shortages have been a growing
problem. But experts are hopeful. For the first time in years, interest at
colleges is up. Mr Baxter, for instance, advises the Energy Club at SMU's Cox
School of Business, and says more students are asking him about careers in
energy. The Energy Club was revived last year after a long dormancy, and it's grown
to 25 members -- many with stories like club president Jonathan Parker's. He'd
planned to use his MBA in banking or consulting, but as he learned of the
industry's opportunities he changed his focus to energy. The shift is even clearer at larger Texas universities. During the heyday of
the '80s. schools like the University of Texas (UT) and Texas A&M graduated
1,000 and 400 petroleum engineers a year, respectively. Last year, UT graduated
40; A&M graduated 30. Sullivan's youngest son, now in high school, talks of getting into the
industry as well -- though his older siblings, more aware of the ups and downs,
chose other careers. Sullivan says $ 40 a barrel is nice, but he'd be happy with
a consistent $ 30 -- as it's been for the past 18 months. He's not your stereotypical wildcatter. Shy and unassuming, he admits to
crying at his daughter's recent college graduation. But like any small producer
still left in the business, he's smart. Even before oil prices reached $ 40, he
was drilling for more -- and branching out, exploring for more environmentally
friendly natural gas.
Source: The Christian Science MonitorWildcatters in America's oil patch experience boom
Amid the spotted cows and purple thistles that dot the ranch land of northern
Texas sits a massive drilling rig, its workers pulling up almost 12,000 feet of
pipe once the drilling is complete.
"There are so many ups and downs in this industry," says Sullivan.
"After a couple of roller-coaster rides, you get tired. But it seems like
we're moving into a new climate of higher prices, and producers are getting more
comfortable."
But while record prices are creating happy wildcatters, they point to a growing
likelihood of sustained high prices as the chief incentive to step up
production.
"Record high prices are nice, but sustainability is what allows these guys
to stay in business," says Mark Baxter, director of the Maguire Energy
Institute at Southern Methodist University (SMU) in Dallas.
It's been a slow ramp-up, say experts, because so many workers had to be laid
off and rigs shut down during that time, and it's taken a few years for
producers to pay off mounting debt.
"Producers can't immediately start drilling again," says Bill Stevens,
executive vice president of the Texas Alliance of Energy Producers. "And
because it takes a lot longer to get rid of debt than to collect it, a lot of
people are just now re-emerging after the 1998/99 downturn."
"But anybody that's left after these wild price swings since the 1980s is
very, very smart," says Charles Matthews of the Railroad Commission of
Texas, which regulates mining and mineral rights. "They are the
survivors."
"We are seeing companies [being] much more productive than they were
before," he says. "The difference is that they don't have the large
staffs they used to have. Now they hire consultants and subcontractors."
"For a long time, fathers, uncles, aunts that had been laid off were not
encouraging their children to go into the industry. But that seems to be turning
around. I'm sure the news of these high prices is makinga difference."
"The opportunity for MBA students is enormous," says Mr Parker, who
will graduate next May.
This fall, 140 UT freshman are enrolling as petroleum engineers -- "the
largest freshman class in years," says Matthews. His job as railroad
commissioner includes speaking to high scholars about the business. "For
the first time in a long time, we're beginning to see young people take a second
look."
"It drives you crazy. You can't plan or budget. You just have to be
adaptive because at any moment, your pay check could be cut in half."
He survived the last downturn without much debt and took advantage of high
prices faster than most. He's increased his staff from 7 employees four years
ago to 21 today. Asked if all the ups and down are worth it, he nods. He can't
explain why, but he loves the business. Maybe because he's good at it.