Newspaper article THE JOURNAL RECORD

Independent Drillers Remain Wary of Oil Price Surge

Newspaper article THE JOURNAL RECORD

Independent Drillers Remain Wary of Oil Price Surge

Article excerpt

DALLAS - A decade ago, the nation's wildcatters celebrated soaring oil prices in a delirium of borrowing, drilling and sumptuous living. But now, independent drillers who gathered for their annual convention in Dallas this week are cautious, even wary, about the latest surge in oil prices.

Faced with capital and manpower shortages, and anticipating that domestic crude prices will range between $21 and $25 a barrel after the crisis in the Middle East ends, many members of the Independent Petroleum Association of America say they plan to make small increases in their drilling activity next year.

Perhaps the biggest reason is that unlike the years after the Iranian revolution and a tripling of prices in 1979, most wildcatters now explore more for natural gas reserves instead of new oil discoveries and are not likely to reverse the trend.

Natural gas prices were depressed for weeks after the Iraqi invasion of Kuwait on Aug. 2, and are not expected to rise to much more than $2 per thousand cubic feet this winter. If natural gas kept pace with crude prices, it would sell for about $3.50 a thousand cubic feet. A thousand cubic feet of natural gas provides about a sixth of the energy as a barrel of crude, but in recent years has been priced about one-tenth of the price of crude.

But even though crude prices have more than doubled since mid-June, total revenues for independent drillers have not risen substantially.

``We will probably increase our capital spending next year by about 10 percent,'' said Bill Johnson, the president of Tex/Con Oil and Gas Co., a Houston company that operates 900 wells and has investments in 2,000 wells.

Natural gas accounts for two-thirds of Tex/Con's daily production.

Johnson said his company's higher spending might not add much new production because drilling and development costs were rising even as oilfield efficiency had ebbed. Deliveries of line pipe used to connect wells to pipelines are frequently late, drilling pipe used in the fields is aging and many oilfield-service crews lack experience, he said.

``We've had situations where our own field workers had to show a service company crew how to cement a well,'' he said. ``The oilfield-service industry is capable of handling 900 to 1,100 rigs a day, and we are pushing the upper limit.'' The number of drillings rigs operating for the week ended Friday was 1,089.

At the height of the oil boom in December 1981, the count reached a peak of 4,500. But the rig count plunged to a low of 663 after oil prices collapsed in the summer of 1986.

Two wildcatters, Frank Pitts, of Dallas, and Lew Ward, of Enid, said they planned to drill a few more wells next year at average depths of 12,000 to 15,000 feet. …

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