An oil powerhouse
A statistics expert is confident the U.S. will become the world’s swing producer.
Allen Gilmer, chairman and CEO of Austin-based Drilling info, is confident the United States will increasingly replace Saudi Arabia as the world’s swing oil producer. That’s the case even if oil prices don’t rise much from their current levels above, he said.
In fact, his company, known for bringing statistics to the oil patch, doubled down during the two-year bust, recently acquiring Chicago-based Global View Software and the assets of Denver’s Ponderosa Energy.
Gilmer recently shared his bullish outlook with the Houston Chronicle.
Q: What do you see as the ceiling and floor on oil prices? We’ve already seen $100 as well as $26 these past few years.
A: We have a resource base here in the United States that suggests we could add production far beyond our ability to actually consume it. That’s of course going to bring the crude oil down and retard it. That’s why we see the future as sort of being this roller coaster of ups and downs, but not dramatic like what we’ve seen. My personal feeling is that ceiling is close to $60. It’s hard for the real floor — any time you can momentarily go above or below — to be below $45.
Q: Are efficiencies and cost reductions so improved as to make it profitable with current pricing?
A: Across the board in the U.S., the wells we’re drilling today are producing 60 percent better than they did in 2013. In the Permian, they’re producing 90 to 100 percent better than in 2013. That’s a pretty huge geopolitical influence relative to the globe.
Q: Does more automation and the need for fewer wells needed for the same oil production mean fewer jobs?
A: There’s that old saying — pigs get fat; hogs get slaughtered. It’s better for all of us to be little tiny cute pigs than big fat hogs. This is an industry that’s still going to pay high wages for really high-quality talent. What we’re not going to see is paying high wages to get lowquality talent. As one friend of mine says, “Here, McDonald’s, here are your workers. We don’t want them.” This industry works better when it’s highquality people who are here for the long term.
Q: How has the shale boom and horizontal drilling coupled with hydraulic fracturing changed the need for analytics and techniques?
A: The oil industry used to be a land grab — whoever got the land first won. Well, now it’s kind of like chasing tigers. You grab a tiger, but now what are you going to do with it? They made the mistake of drilling wells not knowing what they were doing and destroyed a lot of the value. They’ve falsely proven that it’s bad acreage.
Q: How is that playing out in the booming Permian?
A: We definitely see a differential in the Permian between great players and bad players. The thing that’s different is the Permian is anywhere between four and a dozen plays stacked on top of each other. We’re kind of in the first or second inning of that whole deal out there.
Q: Is that creating a Permian bubble?
A: Some people are paying more than it would suggest they can recover from a single well for that acreage. You’re going to hear people say it was oversold, and they’re going to forget the ones that were really great. (Irving-based Pioneer Natural Resources), for instance, has been out there forever with low-cost acreage because they bought it when it was known as the world’s largest uneconomic oil field. Now they’re sitting on a tremendous amount of resource. They’re completely immune to the Permian bubble. They’re going to be winners. Somebody who’s buying in today with lots of money who’s never done it before, well then, the jury is still out on
that. Q: Did the bust weed out most of the bad players, including bad environmental actors? A: There are certain people where it’s just congenital. I think it’s weeded out a lot. A lot of these guys were old and used to doing it a certain way. They’d rather just thumb their nose than do the right thing. Most of those guys are no longer there. Q: So you see U.S. exports of crude and other petroleum products taking off ? A: I see the Port of Houston and Port of Corpus Christi as being incredible winners. As California becomes a more difficult place to export from and, with the expansion of the Panama Canal, and all the petrochemical infrastructure we have here and continue to build, the Texas Gulf Coast is a great place. I was out fishing by Corpus Christi, and there was tanker after tanker after tanker lined up. It was pretty awesome.