ASPO-USA - With Rig Counts Falling At 50/Wk, What Outlook For Ouput, Employment, Oil Patch Workers?

[hatrack]

I am a directional driller, one of those fellows who steers a drill bit into petroleum targets thousands of feet beneath the surface of the earth. Recently I was on a rig and one of the young roughnecks asked me, “It is going to be bad, isn’t it?” I replied “I don’t think so. This well should be like most of the others around here.” “No,” he answered, “these rigs are going down aren’t they?” I was caught a little off guard by his question and could hear the fear in his voice. I guess he could tell from my gray hair that I had seen this before. Yes, I have seen this before.

When I was the young roughneck’s age, back in the 1980’s, oil and gas prices were in steady decline. They finally collapsed in 1986. In January of that year, I returned from a well in south Louisiana. The crew had been called into the office for a word from our boss. As we stood in the owner’s office he announced that we had no more work - it was all gone. “All future work has been cancelled.” We knew things had been slowing down but we were not prepared for the news that it was “all gone.” Not only gone for our company, but for essentially the entire industry. I left the office stunned, for as a contract hand, I did not have the luxury of unemployment insurance. As I opened the door to our home, I was met by the beaming face of my wife, “Honey, I’m pregnant!” To say the least, the next few years were a challenge. I reinvented myself, initially in the electrical utility industry and later in alternative energy.

I re-entered the oil patch in the mid 1990’s after it was apparent that the country was not yet going take the alternative energy option seriously. Oil and gas prices collapsed again in 1998 following some economic problems in Asia and the perception that demand would be reduced. That same year my mother passed away and upon returning from my mother’s funeral, the first call that I received from my employer was, “Charlie, we have to let you go.” It took a while for all of it to sink in. So, once again I reinvented myself, this time as an underground cable locator. It was honest work but not the best in pay so the siren call of the money on the rigs brought me back two years later. .

EDIT

Regardless of how we as individuals in the oil and gas industry cope with this downturn, all of us, as well as our society, will in time face the consequences of having lost this rig and the hundreds more now lying in the grass. I believe that within 2 to 4 years we will be facing a serious shortage of natural gas and the roughnecks will be asked to “come back, please!” Some will walk away and never look back. As for me, I hope that finally the United States is serious about alternative energy, because our very survival is at stake.

EDIT/END

http://www.aspousa.org/index.php/2009/03/laying-down-tools/

[madrchsod]

1. here`s an mp3 of charlie brister

http://odeo.com/episodes/23566124-Charlie-Brister

reminds me a lot of my steel working trade over the years...

[pscot]

2. The Word. Straight from a member of the Ewing family

http://www.blueridgenow.com/article/20090315/ZNYT01/903153005/-1/ENTERTAINMENT?Title=As-Oil-and-Gas-Prices-Plunge-Drilling-Frenzy-Ends

“The big bonanza is over,” said Jay Ewing, the completion and construction manager for Devon Energy in the Barnett Shale field here, where so far this year his company has brought its rig count from 35 to 8. “Everyone is really shocked how fast everything has turned.”Energy experts and company executives warn that oil and gas companies now cutting back on investments will be unable to respond quickly to a future economic recovery. John Richels, Devon’s president, said that if the slump lasted two years, it could then take 18 to 24 months for companies to reassemble rig crews.That means a glut could rapidly turn to scarcity, sending energy prices soaring again. Already, experts are predicting that lower domestic gas production by the end of the year will require increased imports of liquefied natural gas from places like Qatar.Through most of this year, gas supplies are not likely to decline sharply because so many shale wells came on line recently. But those wells should start to decline in productivity by next year, potentially leading to tight gas supplies if industrial and residential use picks up significantly in the second half of 2010.“Inevitably, the market doesn’t react; it overreacts and shoots itself in the foot,” said Adam J. Robinson, director of commodities at Armored Wolf, a California hedge fund
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The number of oil and gas rigs deployed to tap new energy supplies across the country has plunged to less than 1,200 from 2,400 last summer, and energy executives say the drop is accelerating further.
Lower prices are bringing to an end an ambitious effort to squeeze more oil from aging fields and to tap new sources of natural gas. For the last four years, companies here drilled below airports, golf courses, churches and playgrounds in a frantic search for energy. They scoured the Rocky Mountains, the Great Plains, the Gulf of Mexico and Appalachia.
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The reversal of fortune could have important implications for the future health of the nation’s energy companies, for consumer wallets and for national aspirations to rely less on foreign energy sources.The drilling cutback has been particularly stark for natural gas. Gas exploration had soared in recent years after technology advances enabled the exploitation of gas trapped in huge shale beds found around Fort Worth, western Pennsylvania, upstate New York and elsewhere.But that boom has created such abundant supplies that companies are not only drilling less but also deciding not to pump from wells already drilled.Thousands of oil and gas workers who migrated around the country to work in new fields for fat salaries have been laid off.
“The big bonanza is over,” said Jay Ewing, the completion and construction manager for Devon Energy in the Barnett Shale field here, where so far this year his company has brought its rig count from 35 to 8. “Everyone is really shocked how fast everything has turned.”

Energy experts and company executives warn that oil and gas companies now cutting back on investments will be unable to respond quickly to a future economic recovery. John Richels, Devon’s president, said that if the slump lasted two years, it could then take 18 to 24 months for companies to reassemble rig crews.That means a glut could rapidly turn to scarcity, sending energy prices soaring again. Already, experts are predicting that lower domestic gas production by the end of the year will require increased imports of liquefied natural gas from places like Qatar.Through most of this year, gas supplies are not likely to decline sharply because so many shale wells came on line recently. But those wells should start to decline in productivity by next year, potentially leading to tight gas supplies if industrial and residential use picks up significantly in the second half of 2010. “Inevitably, the market doesn’t react; it overreacts and shoots itself in the foot,” said Adam J. Robinson, director of commodities at Armored Wolf, a California hedge fund.
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One reason companies need to make cuts is that the cost of drilling and servicing operations, while falling, is still roughly double the 2005 level, while the prices oil and gas companies earn from their production are suddenly below the 2005 level. Meanwhile, the cost of borrowing money for exploration and production has soared recently in the credit crisis.“When everybody sobers up after the first quarter and sees what their real cash flow is going to be,” said G. Steven Farris, chairman and chief executive of the energy company Apache, “people are going to be very discouraged about how much capital they have to spend and that will depress the rig count even further.”
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