The PDC Bit killed the Oilfield

I know I usually don't blog on Sunday but living in the Bible Belt keeps one thinking about the good Lord... and energy exploration. Plus my Jewish friend C.W. (who celebrates the Sabbath on Saturday) sent me this. You'll find a significant correlation in information between this article and a few of my older posts and since the NY Times has been tapping into my blog I wanted to be sure y'all new that my information truly is cutting edge. My sermon is simple....

Jesus Saves,
God Spends... &
We Consume.

Our consumption, or rather over-consumption, has gotten us in trouble once again. We are a nation of heavy-hitters, over-eaters and over-reactors. In my last post I wrote of changes-- quick and even rash changes. We have to be real about our economic recession. Things are not better than they seem, they are going to get worse. I wish they were not but they are. 3 years ago when I first entered the oilfield, the outfit I was with must have hired a hundred employees in a year's time. The oilfield was booming and we needed as many hands as possible to meet the demand. They over-booked to cover themselves in case another worker was ill or needed a vacation or left/fired. A company with 300 employees 2 years ago, servicing 70 - 90 jobs a day is now employing 200 employees and serving 40 jobs a day...if they are lucky. This does not include pay-cuts. Oh and did I mention that the energy stocks and companies continue to outperform the rest of the markets by at least 10% daily. I'd hate to see what the marshmallow peeps Q1 numbers look like.

When the boom hit, companies doubled their prices and their employee base. Demand and exploration is down so jobs and pay follow suit. In the Barnett shale, a service company like mine will charge $9000.00/day for a standard package. Recently, I have heard of companies offering the same services for $3500.00. Trust me this is an absurd number that barely covers the cost of tools and supplies, never mind compensation. I agree with the linked article above which points out that when the oil and gas demand increases again, we will see a sharp increase in prices at the pump. Since the oilfield and market is in a constant cycle of over-reaction, when we see a resurgence in demand, it will take time to hire recently laid-off or fired workers. Money will be thrown around again in a rushed and haphazard manner. The supply will again fall short of the demand and vice versa. Time is money and to get it done quicker...well, there will be a fee for that.

One last comment about time and the Barnett Shale. We use different drilling bits out here. Roller-cone pits, button bits and PDC bits...and others. PDC are diamond coated, and have cutters all around the edges. They are mean, aggressive, fast drilling bits. Button bits and roller-cone bits often drill at a tenth of the speed at which PDC bits drill. These Shale wells used to drill 8000' in 3 weeks at about 15'/hour. We drilled 8000' in 6 days last week. Technology is a two-edged sword as it has significantly contributed to the ease at which we are now able to drill while simultaneously taking vast quantities of money out of the pockets of many men and women (keeping even greater capital circulating throughout the economy) as they sit at home for longer durations between jobs.

Now we are cutting back so much, that oilfield hands are faced with surmounting bills and credit payments that they can not afford because they over-extended themselves believing the market would sustain itself after 4 amazingly profitable years. Not to mention the rig workers that remain in the field don't see home often because they are some of the few hands left, thereby imposing additional strain on their psyche by keeping them away from valuable time spent with their families. So when they do have time off they may self-medicate with alcohol or worse. I'm not trying to paint a bleak picture for you but I'm giving you some truths that I've realized while out here on the open road. This is the oilfield and this is part of our American landscape.

But, Dallas/Fort Worth and Texas in general maintain a flowing well amidst an economic drought. (Dallas #1 fastest growing city in the nation, Houston #2) It could be the ridiculously low housing prices, the infrastructural and industrial diversity, the non-existent state income tax and government benefits for business owners...the weather maybe, but I like to think it has to do with faith: real hope and belief in one another and a higher power. Many of these hard working longhorns are willing to make sacrifices while expecting the industry to recoup by late November and it is by the grace of God that I can spend a few bucks on my friends and family these days. Plus the mighty invisible hand of the market favors the bold.

Keep consuming...that's all we seem to do well.
Be Blessed.
rf

It's a dirty Job, but...

After a few conversations and one pointed blog comment, it has come to my attention that the public wants to read about the darker side of the petroleum world. The kind that Gore Vidal muses about while smoking far too many cigarettes at an Amsterdam wormwood cafe. Since I value my readers' opinions, one of whom may be a writer for a timely and well proliferated New York newspaper, I have decided to share some of the oilfield secrets. Gotta feed the monkey, right? We all know what happens if you don't...my have your face ripped off.

Alright, so... There is plenty of oil to go around for many thousands of years...trust me. And OPEC is a conspiracy. Well...maybe not a conspiracy but they are a cartel and do conspire against petroleum importing nations by fixing prices since they control 40% of the world's most precious commodity. In fact, many economists suspect that OPEC is responsible for the United States decline in the international economy. Since 2005, OPEC has slowly been divesting from the US markets thereby weakening the dollar and transferring interest to the Euro.

Also it is a well known fact that OPEC was started in Baghdad in the late 50's and early 1960's after Venezuela approached Iran and other middle eastern countries. Current members include Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela. No surprise...we don't carry great relationships with many of these countries. Saudi Arabia (worldwide leader in petroleum reserves and production) produces about 11 million barrels of oil per day and the US produces close to 9 million. Unfortunately the United States consumes 21 million barrels of oil per day. Obviously we then have to import oil...making us an importing nation and not an exporting nation thereby excluding us from the ever so powerful Organization of Petroleum Exporting Countries. Gotta feed the monkey...right.

US and OPEC relations have been soured over the years for a number of reasons and a number of oil field workers that I've spoken with believe that last year's price gouging was a direct result of OPEC's desire to see what the markets could sustain. Years ago, former dictator, Saddam Hussein was recorded several times demanding OPEC increase oil prices solely for the profit of OPEC member states. Now that we occupy Iraq...well, we have a slightly better opportunity to contain anti-US lobbies within the international oil market.

Truly, I can't speak in any authority with respect to the international oilfield. Give me a few years. Domestically, I understand that the US citizens employed by energy-interested companies are doing their best to make a profitable and honorable living for themselves and their families. Many of these men and women are 3rd generation oilfield hands. Like the car industry in Detroit, and the coal mines in the Appalachians, the oilfield in the south is a traditional market-- made up of hard working American families purely reaching for security and the American Dream. The oilfield is one place that hires employees based on their performance, grit and stamina; many ex-convicts and high school dropouts find their way into the oilfield and excel making an excellent living while contributing greatly to the US economy. I promise you these workers take pride in what they do.

We are responsible for many of the economic woes in the world but price gouging at the pump is not one of them. We are on the demand end of the market. Our enemies control the supply. The trouble is as we move towards sustainable energies, our enemies will continue to drive up the prices of current energy supplies. Look again at the OPEC nations and see what other exports they produce. Not many. We just better perfect those green solutions because as the Saudi Sheik once said, "The stone age didn't end because we ran out of stones." That is to say change comes with united movements and usually in slow doses. But be not confused, we aren't paying at the pump because we want to...we have to. And when the supply chain is cut off, then we may need to make new friends or find ways to produce more oil.

Keep the peace.
Truly,
rf