a short-term outlook that includes demand destruction, high levels of uncertainty and budgets hit by a lack of confidence, but large order backlogs that should carry a number of service/equipment companies through;

a mid-term outlook that includes oil prices still above most hurdles (around $80/bbl), slow downs in exploration rather than ongoing field developments, and reduced costs of inputs such as steel;

and a long-term outlook that includes a supply situation that is unchanged coupled with another sharp “supply crunch” when the global economy recovers.

To quote the final conclusion of the report, “In the longer-term, our views are  unchanged and global oil supply limits are likely to be tested again during the next decade.” So, if you are in this for the long-haul - and I can’t imagine that many of you are not - now might be the time to make a strategic investment or two, like John.

Every president since Richard Nixon, Democrat and Republican alike, has publicly promised an end to foreign oil imports at some time during their presidency, usually during a time of elevated oil prices. None has ever come close to fulfilling that promise. When the price moderates, the discussion abates. No wonder, then, that the U.S. has never had, and will likely never have, an energy policy, viable or not. Not much chance that either Obama or McCain would seriously attempt anything resembling an energy policy.  It’s just one of those things that is not done here.

The economic view outside my window does not coincide with the economic map, as I really had hoped it would. There are a number of reasons for my pessimism, the most basic of which are that we are simply switching debt from a limited number of the population to the entire population. The debt has not gone away nor has most of the debtors’ inability to repay it. As the government assumes the debt, it borrows from the public to finance the assumption betting that the pay back of the debt can be financed with new debt, a bet made by many individuals that, collectively, got us into this mess in the first place. Add to that the fact that we have not yet gotten around to the problem of the enormous pile of unsecured credit card debt and I see no reason to be overly optimistic about the economy for the next few years. Demand will fall, and with it the price of oil and gas. Many suggest OPEC may step in and limit supply. Indeed, they may but recall that the move has back fired when tried before, costing OPEC dearly in market share, and that raising energy prices in the midst of a global recession will hardly buy OPEC any friends. My bet (and I am often wrong) is that OPEC production cuts will be limited, the price of oil will not rebound dramatically and we are in for some tougher times than many anticipate. How tough? The near collapse of the industry in the early to mid 80s might be a good point from which to begin speculation.

If you see it differently, let me know.

I grew up, partially, in a small oil camp three miles outside Iraan, Texas. The camp abutted the huge and prolific Yates field, which is still in production. The town of Iraan was named for ranchers Ira and Ann Yates whose ranch sat atop the Yates field.

Growing up in the early 1950s in an oil camp miles from the nearest large city (10,000 population or more was large to us) had its moments. The camp, a Gulf Oil Company production camp, was comprised of two rows of houses facing each other over a single street. At one end stood the company warehouse and at the other, the company field office. The houses had been moved to the camp from a similar camp near Burkburnett and dated from a 1920s oil boom there. Although they housed families, they were designed as gang houses composed of a common room followed by a couple of bedrooms placed end to end (in other words, the house was only one room wide), then a kitchen and, finally, a bathroom/back porch combo. Each room had its own exterior door, much

like the house from the Texon camp pictured here. Hot water, and heat, came from field gas. Scorpions, poisonous spiders and poisonous snakes were fairly common, so common in fact that we gave them little thought save for a back -of-the-mind wariness.

There were several kids in the camp. In a way, every mother was a mother to all of us. That made it tough growing up because there was always a set of parental eyes on you. Consequently, we were almost always in some kind of trouble. My worst, and most frequent, transgression was slipping through the piping and hiding under cattle guards to watch cars and trucks pass overhead. I couldn’t explain the fascination today, but it was high style back then.

We had little in the way of entertainment. We occasionally drove the 50 or so miles to see a movie. On truly lucky weekends, the local oilfield supply store secured a movie which was projected on the side of their two-story building to a crowd assembled in lawn chairs on a near by lot. Otherwise, it was pretty much rock throwing wars, foot races and other such juvenile foolishness.

Had we lived in the big camp at Texon, oh how different things might have been. It was a metropolis. Built between 1924 and 1926 by the Big Lake Oil Company (BLOC) to house its employees and their families, the camp counted 1,200 residents by 1933. According to The Handbook of Texas Online (www.tshaonline.org), the BLOC provided a grade school, church, hospital, theater, golf course, tennis courts and a swimming pool for the camp. BLOC president Levi Smith was an avid baseball fan and sponsored the Texon Oilers, a semi-professional baseball team. The camp also housed commercial ventures including a drug store, a cafe, a boarding house, a tailor shop, dry-goods store, grocery store, barber and beauty shops, a service station, a dairy, an ice house and a bowling alley.

That’s a far cry from our 10 house outpost in deep West Texas. Still, I am guessing that they did not have a lot more fun than us.

If you grew up in an oil camp, or know someone who did and passed on some stories, please let me know at wpike@hartenergy.com.

Bill

Photo by TexasEscapes.com

To take a look at the preview of the report, go to: http://www.ey.com/Global/assets.nsf/US/Industry_Oil_and_Gas_Global_E&P_benchmark_study/$file/Global_E&P_Benchmark_Study.pdf

Bill

The good old days? Most certainly not,  unless you count as good drilling wells from a semi-submersible  with a bumper sub as motion compensation for the string, or you count as good kick-starting  8 1/2 X 10  Ajax engines all day. Aside from old friends, there is not too much good to go back to in this industry, especially in terms of technology.  So, this should be an enjoyable new trick. There is a new generation out there that is much more savvy about all this than I am, but I will catch up.

That brings me to a topic of some interest. Exactly how different is the new generation of professionals from the old dogs of my generation? We certainly hear a lot about the differences. And the industry and the societies are accommodating young professionals as though they were a different group altogether. (Check out Rhonda Duey’s blog for more comments on the new, young professionals.) To be sure there are some differences. However the challenges of finding and producing oil and gas remain daunting, as they always have. While the equipment may improve and innovations such as intelligent energy may change the way we develop fields, my bet is that the mentality, drive and perseverance are the same in the old guard and the new. We probably just don’t organize and communicate in the same ways.

Your thoughts?

Bill