Happy days here again for oil landmen
Optimism is the prevailing mood as climbing oil prices lift spirits and spur companies to resume drilling
Optimisim prevails at NAPE, formerly the North American Petroleum Expo, held in Houston, where more than 11,000 dealmakers buy and sell land rights, scout prospects and make connections they hope will lead to a big score.
Two years of gloom seemed to lift from the oil industry this week as thousands of deal makers descended on Houston to buy and sell land and drilling rights, scout prospects and make connections that might lead to a big score down the road.
The semiannual gathering of landmen, formerly known as the North American Prospect Expo, was awash with optimism, showing that nothing cures an energy downturn like rising oil prices.
The conference opened Wednesday, almost a year to the day after oil prices slid to a 13-year low of $26.21 a barrel on February 11, 2016.
“Everybody, at this time last year, was stepping out of an abyss,” said Carl Campbell, chief operating officer at Alamo Resources, a Houston oil company with about 25 employees. “We didn’t know where the bottom was.”
Today, with prices above $53 a barrel, attendance at the conference climbed to more than 11,000, up from about 3,000 in the summer session. Sponsors were back and larger production companies, like Sanchez Oil & Gas of Houston, and Excalibur Resources of Dallas, were spending again, dishing out $10,000 or more on booths and other promotional activities.
Executives from familyrun and publicly traded
companies, who talked of buying new land and starting new drilling programs, reported a surge in oil field confidence, if not always in oil field activity.
“We certainly think the days of really, really bad prices, in the $30s and low $40s, are behind us,” said Robert Clarke, a research director at energy research firm Wood Mackenzie.
When the exhibit floor opened Thursday morning in George R. Brown Convention Center, landmen — the name for men and women charged with cutting oil and gas deals — walked with smiles on their faces. West Texas’ Permian Basin appeared, again as the star of the show. Permian operators and landowners glowed with the oil field’s newfound resurgence.
The Permian is now so busy, several said, oil production companies are competing to contract with drillers, truckers and hydraulic fracturing crews and budgeting for doubledigit cost inflation.
Bryan Sheffield, chief executive of Austin-based Parsley Energy, said conditions in the Permian feel like 2011, when shale drilling was revolutionizing American oil production. Sheffield recalled that it was then so difficult to hire companies for hydraulic fracturing jobs that he took oil field services executives to a World Series game between the St. Louis Cardinals and Texas Rangers just to get on top of their waiting lists.
Pitchers and catchers just reported to spring training this week, but Sheffield said the competition to line up fracking crews is intensifying. Parsley, which has spent nearly $3.5 billion already this year on Permian acquisitions, has budgeted a 15 percent increase in well costs this year over last, Sheffield said.
“It’s déjà vu all over again,” he said.
Eight other U.S. plays, from North Dakota to Colorado to Pennsylvania, are set to receive more investment this year than last, according to Wood Mackenzie. Over the past month, U.S. companies have added 82 rigs in the patch, the largest addition in one month since early 2011, Clarke said. The SCOOP and STACK in Oklahoma added 17 rigs; South Texas’ Eagle Ford grew by 11; East Texas’ Haynesville added five.
Attendees of the conference, now known simply as NAPE, generally said they’re feeling the uptick. There’s been more competition to buy and lease oil and gas mineral rights, said Clay Gordon, director of business development for Strata Resources, a family-owned oil and gas company based in Denver. He may have three or four competitors while bidding on any given deal this year, he said; deals last year were lucky to get one.
More companies are looking to lease 3-D seismic data, a sign of renewed interest in exploration, said Mark Sweeney, a vice president at the Houston seismic library company Seitel.
Al Porretto, a geologist and consultant from New Orleans, said improving fortunes were visible throughout the conference.
“It looks like the money is starting to come back into the industry,” he said, looking out on a full convention floor on Thursday. Huddles of men and women in suits clogged the aisles.
Porretto said he feels it, too. He puts together oil and gas prospects in Louisiana for oil companies and has been getting more business recently.
Privately, some confided that they’re not so sure the rebound has yet arrived in their fields. There’s a lot of optimism, they say, but not a lot of business yet.
Denver landman David Gremel said he has seen signs of an uptick — more interest from oil and gas companies in leasing on federal land, for instance. But drilling in the Rocky Mountains is still depressed, he said.
He said he’s rolling with the punches.
“I’ve been in this business a long time,” he said. “It’s just another cycle.”