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| Please
take a quick moment to answer 3 survey questions, and we will provide
a summary of the confidential responses in the next issue. |
Survey Results from last time: 8.8% Majors 91.2% Independents Last month, our question dealt with how confident our responders are that their company has a sound strategy and business plan for growth and long-term stability. Responses indicated that 62.9% felt their company is well postured, growing and stable;17.1% believed their company's growth has flatlined; 8.6% believed their company's growth and stability is declining; and 11.4% felt their company has no apparent strategy or plan. It is obvious from the responses that our main article this month is timely. |
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| What
is it I need to know about Map Projections? There are many software applications that geoscientists and engineers use in their day-to-day functions that enable viewing raw or interpreted data. There are many applications for GIS (Geographic Information Systems) mapping functions that enable operators to manage a wide range of data fields and operational aspects of the oil and gas business. The first issue that new users face with either GIS applications or other mapping software applications is what projection do I use. Read Further... |
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CEC Energy Consultants assisted Tulsa-based Helmerich & Payne in the identification and evaluation of merger candidates, which resulted in a successful merger of H&P with Denver-based Key Production to form Cimarex Energy. CEC Energy Consultants combines with Rike Services to provide the US Commerce Department with training courses for Russian Oil & Gas Executives in the area of Concession Negotiation, Risk Assessment and Mitigation, and modern Economic Evaluation processes. CEC Energy Consultants combines with Rike Services to assist TotalFinaElf in providing 8-week training courses to train Indonesian nationals to become Well Operations Supervisors. |
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| Have
you noticed that our industry has changed dramatically over the past
decade, and has it all been for the good? The past two years
we have experienced the highest commodity prices I have seen in my
career, yet looking at the industry's activity levels you would think
they are at their lows. I would like to devote this month's article
to explore just how far we have come, what changes have occurred,
and what impact these changes have had on our industry. During the early discovery of many of the first Texas fields, forward-looking geologists began to think about how they could map subsurface geology, when previously they had only attempted to map surface structures. Many people (probably future analysts) that heard those comments made jokes about how foolish a company would be to take such a risk investing the company's capital solely based upon some geologist's interpretation of what the subsurface "might" look like. Why would anyone take such a great risk investing on what can't be seen, when you have visible surface features to guide you? Our industry has always been a high risk industry. Why, first because the commodity that we spend our lives trying to explore for and produce, is a depleting commodity. It cannot be re-made or re-sold. Once it has been used up, it must be replaced. As our society has continued to evolve, energy has always been the driving force behind providing many of the luxuries we enjoy in highly developed countries. Thus, the demand for energy continues to climb and the pressure to replace those depleted resources becomes intense. As previously identified basins continue to mature, exploration and development success begins to deteriorate finding only smaller fields with less reserves. If the prospect of finding oil and gas isn't risky enough, the price received for the commodity itself, is elusive and volatile, and who knows which direction it will go next? Aside from being a capital intensive, high risk investment, the oil and gas industry has the highest of upside potential. When national productivity will no longer meet demand, commodity prices will soar, as is experienced every winter with gas prices when inventories get dangerously low in high demand periods. I know for a fact that in high demand areas such as Chicago and New York, gas has sold on some cold winter days for as high as $75/mcf. Drilling investments always generate higher rates of return than any other investment from any industry in the world. While definitely a higher risk industry it has always enjoyed the highest reward potential of any investment available. Well, what then has really changed substantially this past decade? Well, for starters, our industry has become more dependent upon wallstreet's capital. When I first came into the industry the independents, which make up a large percentage of the total industry's invested capital, raised capital almost solely through private sources. With the dot.com era, we saw how easy it was to form a public company, raise a huge amount of capital, do an IPO and be off making our fortune. Then with the demise of the dot.com and so went the "easy" money. To derive one's capital solely from the public capital markets, one has to learn to compete with not only their own peer group but also our industry to compete with other industries for capital. The end result is the company's that conform and perform to Wallstreet's expectations get the capital, thus, the huge push for maintaining consistent quarterly earnings and solid growth performance to enable outperforming your peer group. Otherwise, there is no capital available for non-conformists. The simple fact is that the oil and gas industry shouldn't be made to compete with other industries that aren't strapped with volatile commodity price spreads, and a depleting commodity, but if your choice is to access capital from public markets, you become subject to the "streets" expectations and requirements. Wallstreet has recently made examples to the rest of the industry, of those public company's that have grown through acquisition rather than the drill bit. In their view, this enables a company to have more consistent and growing financials, but it requires properties to be sold routinely by the larger companies if that is your only source for growth potential. The problem exists that the larger companies can't make sense of selling off some of their lower valued assets, when the result will impact their next quarterly earnings, unless they can be successful at replacing those "lost" reserves either with acquisitions or new drilling. Thus, the vicious cycle continues, and everyone that is public learns to compete, conform and perform as expected, or become extinct and eventually non-existent. Acquisitions have only played a significant role as a competitor for invested capital over this past decade. There are many independents whose only existence depends upon acquisitions, as they have no exploration capability to find oil and gas by the drill bit, nor have the capital they are willing (or allowed, as restricted by their capital sources) to "risk" for such investments. If you were to take away all the "new" reserves most public companies have added to their books over this past decade, that are derived from acquisitions, many public companies would be incapable of showing any kind of growth at all. This is evident in simply looking at our country's production curves that are increasing in their decline with no prospect for turning the corner. Our country is simply adding less and less "new" reserves, because most of our experienced growth that has been truly realized in the individual companies, has been found by moving reserves from one company to the next and not really finding "new" reserves. Most public company CEO's ask, what choice do I have? Our shareholders and directors are expecting us to perform and meet the "street's" expectations, and if not, why? This is a common response from most of public oil companies, because they feel there are no other alternatives to sourcing sufficient capital. I personally know several large private independents that wallstreet would love to encourage to go public, but they choose not to, because they don't want to be caught in the trap and required to comply with the dictates and expectations of wallstreet. They don't have to… because they have all the capital they need. The answer is NOT for our industry to become more risk adverse as wallstreet would desire (which it obviously has become here of late)…which means we will never begin to turn the corner on stopping the steep declines and lessening our dependence upon foreign oil for our country's stability and security. Read Further... |
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|
A&D
Highlights |
| Vintage
Terminates Agreement to Acquire Unita Basin position from El Paso Forest Oil closes Permian and S Texas Acquisition of 102 BCFE for $103 million |
|
News
Highlights |
| China
Gas Blowout OPEC will not Increase Output US Crude Oil Imports Rise 6% to Rebuild US Inventories US Halts Alaska Oil Shipments |
Upcoming
Events |
| Nape Expo 2004 - George R. Brown Convention Center, Houston, Texas Feb 5-6, 2004 |
| CEC
Energy Consultants 6700 Woodlands Parkway Suite 230-304 The Woodlands, Texas 77382 Office: 713-502-9235 Fax: 281-419-1046 www.CECEnergyConsultants.com Mike.Cherry@CECEnergyConsultants.com |
| Since
1999, CEC Energy Consultants has been an engineering
project management firm that allows you to outsource operations, engineering,
and business development projects while maintaining project control.
Outsourcing maximizes your profitability by allowing you to allocate
your key employee personnel to the company's strategic projects, ensuring
operational success and safety. CEC uses industry software such as Geoplus Corporation's Petra Workstations for both geologic and engineering functions, to enhance the identification of new business development opportunities with existing or newly acquired assets. Petra is unparalleled in its ability to build isopach maps and log cross-sections, but more importantly from an engineering standpoint, to analyze and screen public data sources for acquisition and drilling prospect leads as well as other advanced geologic and engineering functions. CEC Energy Consultant's expertise in using the latest technology application tools will result in reserve additions and well productivity enhancements to your asset base. Visit our website to learn more about CEC Energy Consultants' incredible new technological, engineering and operations capabilities. If you feel this newsletter would be of benefit to someone you know, please feel free to forward a copy as well as distribute anything I make available in these newsletters to your staff and employees. |
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| How
do I pick the correct grid size for contouring? A contour map is our best attempt at visualizing an interpretation of a geological surface or reservoir property. A computer-generated contour map provides us with an opportunity to view a non-biased interpretation; however, since each computer-contouring algorithm employs a specific mathematical model, the resulting contour map has its own inherent bias. And given the vast number of gridding algorithms and options available, computers can generate an almost endless number of variations or interpretations for our consideration. Read Further... |
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| Rike
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American Prospect Expo (NAPE) February 5-6, 2004 Houston, Texas SPE Annual Technical Conference and Exhibition September 26-29, 2004 Houston, Texas |
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