Small Texas Company Finds Times Right for Expansion

Article excerpt

By Jack Z. Smith

Fort Worth Star-Telegram

FORT WORTH _ U.S. oil production has sunk to a 35-year low.

Crude prices have cascaded below levels of six years ago, and a fractious Organization of Petroleum Exporting Countries is threatening to send prices plunging further.

The giant American oil companies are shedding domestic properties and devoting ever-larger percentages of their drilling budgets to foreign exploration.

Amid this troubled industry environment, Texland Petroleum of Fort Worth epitomizes the opportunities still available in the United States to small oil companies with a sharply focused strategy.

"We're absolutely in the right business," insisted R.J. "Bob" Schumacher, the relentlessly upbeat president of Texland, an 80-employee company that this year expects to post revenues exceeding $30 million.

Schumacher, 64, says he can now drill a west Texas well for $275,000 _ nearly 40 percent less than the $450,000 it cost him to drill the same well a dozen years ago in the oil boom year of 1981.

And with Big Oil selling many of its domestic petroleum properties, Little Oil is gaining access to promising drilling leases it never before had a crack at, Schumacher said.

As an example, he cites Texland's recently announced agreement with oil giant Unocal Corp. of Los Angeles, whose $9 billion in annual revenues make it roughly 300 times the size of Texland.

Under the agreement, Texland has gained the right to explore for oil on Unocal leases in a 5,500-square-mile area that spans eight counties in the oil-sated Permian Basin of west Texas.

The deal is particularly appealing to Texland because the leases are in the Lubbock area and westward, where Texland has the bulk of its existing oil production, geological expertise and longstanding relationships with oilfield service companies.

In addition, the deal gives Texland access to reams of highly detailed seismic data that was collected by Unocal in an extensive study performed over a four-year period. The data will help Texland pinpoint likely locations of oil deposits and determine where to drill most effectively.

Under the agreement, Texland gained the drilling rights and seismic data in exchange for agreeing to drill at least 25 exploratory wells in the area over the next five years. Unocal will receive 2 to 6 percent of production revenues from any successful wells that Texland drills, Schumacher said.

Jerry Namy, a geologist who is Texland's executive vice president for exploration, says the Unocal pact offers Texland the potential to double its proven oil reserves from 26 million barrels to more than 50 million barrels within five years.

With major oil companies such as Unocal scaling back U.S. exploration in search of bigger drilling targets overseas, "there are some tremendous opportunities" for smaller companies such as Texland, Namy said.

The smaller companies can operate domestic oil properties more profitably because they have substantially lower overhead costs, Namy said.

As a keystone of its strategy, Texland confines itself almost solely to the north rim of the Permian Basin, where the company's geologists and petroleum engineers have become intimately acquainted with the nuances of the basin's complex oil reservoirs. …