In a year when West Texas Intermediate crude
prices never fell below $23 and gas prices tripled over where they
were last year, one would think there would be a lot of joy in the
However, 2000 didn't seem like much of a party year,
despite some grand occurrences that otherwise would make it a year
of wine and roses.
- The lowest oil price of the year was $23.85. This was higher
than the top price in 1998 ($17.83). It also was more than the
average per barrel since 1993. The 2000 highest price hit $37.20
in late September. Average for 11 months of the year was over
$30 a barrel.
- Gas prices were $2.14 per mmbtu on the first trading day of
2000. On Dec. 1 the price was pushing $6, and by mid-December
the price had topped the $10 mark.
- The prices over the course of the year certainly caught the
attention of the consuming public over the world. Fuel prices
drew angry protests in England and throughout Europe. Carping
by U.S. consumers prompted discussions in Washington, D.C., about
energy policy that have been on the back burner since the times
of Jimmy Carter's presidency.
- An executive from the industry was nominated -- and then elected
-- vice president of the United States.
- More geophysical data at good prices became available to the
industry, and the new drilling and technology were put to task
in deep waters.
But the industry, exhibiting more angst than elation,
reacted as middle-aged professionals who have the BMW, the two-story
house with a pool, wonderful spouse and college-bound kids, and
still wonder why they are not happy.
Hiring levels remained low, drilling activity was
average and merger-related layoffs and downsizing continued.
Merger activity certainly is having its effect on
the psyche of the industry, with the blockbuster Chevron-Texaco
and BP Amoco-Arco deals being done in 2000.
of AAPG Members
Vastar (included in Arco's member counts)
Number of members as of 11/1/2000
The major mergers of 2000 in Figure 1 notes the number of AAPG
members in the affected companies. These mergers alone directly
affect about 1,800 active members.
Invariably, the number of geologists remaining with
the merged entity is less than the sum of the two in pre-merger
Figure 2 notes the number
of AAPG members affected by recent mergers, with double-digit percentage
declines seen in the number of professional explorers in the ranks
of the merged entities.
It is also startling to note the effect the decade-and-a-half
industry downsizing has had on the AAPG membership -- even in pre-merger
In 1990, there were 568 AAPG members employed by
Amoco; in 1998, before the BP-Amoco merger, there were a total of
568 members in both companies.
This occurs in the face of the most positive price
environment for two decades.
"In my 72 years in the oil business, I've never seen
anything like it."
Those are the words of legendary Houston wildcatter
Michel T. Halbouty, who's been around the industry in both good
times and bad.
"In other years when we got a dollar a barrel price
increase, we'd be happy and we'd use it and go out and find some
more oil," Halbouty said. "Now, we have $35 a barrel, and there
is very little extra drilling."
Observers, including Halbouty, see recovery from
a downturn in 1998-99 as a major culprit in the current slightly
funky feeling of the industry.
"Companies are buying reserves and paying off debt,"
Halbouty said. "They're not drilling wells. I thought that when
the price stabilized at $25 that we'd see more activity.
"Maybe it's because we don't have the rigs and we
don't have the manpower," he continued. "We could have 100 rigs
and still not be able to drill."
Past AAPG president James A. Gibbs, principle of
Dallas-based Five States Oil and Gas Co., agreed with Halbouty,
noting that the spot price for oil in Oklahoma was $8 a barrel for
a time in 1999.
"A lot of people are getting their balance sheet
back in shape," Gibbs said.
"Those who have production are smiling now, but nobody's
jumped in with a big amount of money to do some big deals."
With only the big companies able to play in the deep
Gulf, and plays such as the coalbed methane that is long term, capital
intensive and not conducive to a singular creative action.
"The coalbed methane play is not a one-well deal,"
Gibbs said. "In the past an independent could drill a well or two
and be just fine. Times have changed. Now it's more like we are
conducting a war rather than engaging a skirmish."
"There is also a high degree of skepticism -- particularly
on oil -- on how long the higher prices are going to last," he added.
Gibbs sees more confidence in gas prices, "but the
prices have gone up so far so fast, the investors outside the industry
haven't gotten the word yet."
Gibbs also pointed out that there are companies who
have staked out large claims in basins, such as Mitchell Energy's
Barnett Shale play in North Texas and the coalbed methane play in
the Powder River Basin.
"There are a lot of plays that are tied up," he said.
William L. Fisher, also an AAPG past president and L.T.
Barrows Professor of Geological Science at the University of Texas
at Austin, concurs with Gibbs' assessment, with "mid-sized independents
are gearing up to increase their mix of gas" in proportion to their
Fisher saw 2000 as a "mixed bag," with drilling rates
40 percent higher than in 1999.
"The outlook for gas is quite positive," Fisher said.
"However, oil is more complex. There's much less confidence outside
the industry as to where prices are likely to be, even at the end
"The market doesn't think that $35 oil could be back,
and could even go to $10, depending on the response to the market
and the imprecise method to calibrate supply and demand."
Fisher said he sees the majors holding back, taking
a conservative approach in trying to help maintain the price and
bolster the profits and the share prices, which have not had nearly
the jump a price environment in the mid-30s would suggest.
Fisher also sees companies looking to "hire a few
"The companies know they are desperately behind in
having young people in their mix," he said, "and the efforts to
hire new young people have been fairly selective."
Fisher said that while the demand for geoscientists
is conservative, the supply of geology and geophysics majors has
shrunk tremendously as well.
"Students have a remarkable way to respond to the
marketplace," Fisher said, "and they do so quickly."
With fewer geoscientists around, who is going to
do all the work that is being required?
"The amount of prospect generation, from a practitioner
aspect, is substantially greater than it has been before," Fisher
said. "The new technology, where a geologist can sit in a Houston
office and can monitor drilling amplitudes in real time on a well
in Thailand, means a whole new manpower economy."
Add to that the way 3-D data can be downloaded onto
a workstation -- and the functions that can perform -- and it's
clear that fewer people are required to generate prospects.
Additionally, Fisher added, some are saying their
new technology is providing a 35-50 percent new field discovery
Now that is a reason to smile.