After 2-year low, the oil search accelerates
Energy companies have a lot more reasons to go out and look for oil and gas now than they did last year, or the year before: Oil prices are stable, drilling costs have slid, and energy demand is finally on the way back up.Skip to next paragraph
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But in Houston's glass office towers, filled with energy-related businesses, executives don't just show you today's snapshot. Their eyes are glued on 20 years from now, and they don't like what they see. Americans have forgotten the importance of energy independence, they say. This has hurt and will continue to hurt the pace of exploration.
Proven reserves of United States oil and natural gas have shrunk by 28 percent since 1971, and ''here we have to lay the blame on Uncle Sam,'' says Jim Woodok, the lively vice-president of exploration for Exxon Company, USA. High taxes, restrictions on land available for drilling, and regulations have been a drag on exploration. ''I'm tired of telling that to Washington,'' he states, and so Exxon is now telling it to the public: with an educational campaign on offshore drilling.
However, the near term has been hard to overlook. Many companies - and the people who invested in them - landed with a crash after the last boom in oil prices. In 1978 there were about 2,300 rigs in use. Oil prices started their triple leap. By 1981 the rig count was up to 4,500, with new companies taking advantage of the market. Overly high expectations of the market caused a fall as swift as the rise though, and as the oil glut came into being, the number of rigs in use plummeted to a low of 1,800 last year.
Little wonder then, that the modest upturn in exploration and drilling since last year is causing some excitement. ''I feel we are on an upward trend that will continue through 1985,'' says a confident Ike Kerridge Jr., economist at Hughes Tool Company, a major supplier to the industry. Of course, he adds, that trend will keep its course assuming continued strong economic growth across the nation, a normal winter next year, and stable crude-oil prices.
Mahogany-paneled offices and exquisite marble flooring speak for themselves at Hughes: The company gained a lot from the booms of the '70s. But afterward, it suffered like the rest of the industry, losing $91 million last year. Mr. Kerridge says companies like Hughes will benefit from the exploration uptick.
Major energy companies and independent wildcatters are stepping up exploration efforts for a number of reasons. Cost is one, says Jon Rex Jones, president of the Independent Petroleum Association of America and chief executive officer of Jones Exploration Company. Trying to drum up business, equipment suppliers and drilling contractors have slashed prices. Mr. Jones says drilling costs for his company of 125 employees dropped 40 percent in two years.
''Equally important,'' says the lean, tall Texan, ''is what people imagine will happen.''
What they are imagining is that oil prices won't drop. The price stability of the last year has given the industry - and investors - confidence. Investor interest is especially important to the independent companies, because they don't have the financial resources for exploration that the major corporations have.