Boom for 'wildcatters' in America's Oil Patch

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. 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.

As oil prices top $42 per barrel and natural gas hits $6 per million cubic feet, 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. "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."

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.

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.

Nationwide, the rig count grew by 12 percent 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.

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 reemerging after the 1998/99 downturn."

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.

"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."

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.

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