Taylor,
Thanks for your comments.
I see an entrepreneur as someone who sees an opportunity and creates a business in order to seize that opportunity. GF by that definition is an entrepreneur. His getting rich along the way and his cronies participating is at present a small fries delight. I see no difference between what he is doing and any other entrepreneur only that he has not expanded his circle wide enough and not been shrewd enough to take his effort to the next level. My opinion is his new "friends" CSFB certainly look to profit from the relationship and the circle grows wider with shrewder operators by their participation. It is undeniable that AIPN searches for OIL and is by that definition a “wildcatter” parenthetically Webster's defines wildcatter: as one who drills for oil in an area previously considered unproductive. He has been loath to drill wells in the past because it costs enormous money and is hard, risky going without a deep pocket behind you. In fact if he had drilled in Columbia or Peru we would likely be out of business. I consider that AIPN as you well know a risky play. Nonetheless in 1997 it was the highest percentage gaining stock for the year. That run was built on more then just hype.
I still have not changed my mind on the opportunity just on the need for a change in the jockey GF has shown he can not handle the thoroughbred that he is riding and that is just a normal progression in the evolution of a company like AIPN. I will not argue that he has taken a long time to get to the starting gate.
Interesting article that highlights what I believe to be the final lynch pin in the Majors strategy to eliminate domestic production, create monopolies of old, and break the Arab autonomous piggy bank, all accomplished through the vehicle of low OIL prices. Call me paranoid.
April 3, 1999
Small Oil Producers Are Cautious About Starting Up
NY TIMES
By AGIS SALPUKAS
ven after a 30 percent jump in crude oil prices last month, Terry Smith, the general manager of the Tidelands Oil ProductionCo., is not sure it is time to begin reopening oil wells.
Tidelands has 834 wells off the coast of Long Beach, Calif., but it shut down 327 of them the last year as oil prices plunged.
Prices had been so low for so long that Smith is reluctant to spend the $30,000 it takes to bring a well back and rehire workers, even though he says he makes a profit when prices are $10 a barrel. West Texas intermediate crude oil traded at above $17 a barrel this week for the first time in more than a year, largely on the strength of cutbacks announced by big oil producers last month.
But Smith's cash has been depleted, he has laid off a third of his workers and, as with thousands of other small, independent producers, he is worried that prices might collapse again. "I want to see if this thing is going to stabilize," he said in a telephone interview.
Independent oil companies like Tidelands account for 40 percent of the oil produced in the United States. Many are facing the same kinds of hard choices that Smith confronts. While they have seen many downturns, the last year has hit them particularly hard, with crude prices at a low of $10.35 a barrel in December. Their problems make it unlikely that domestic production, which hit a 50-year low of about six million barrels a day last month, will recover soon.
Those that have suffered most and will have the hardest time recovering are the very small producers. They typically own about 10 so-called stripper wells. Many motorists glimpse wells of this type from the highways in states like California, Texas, Oklahoma, and Kansas, the pumps slowly bobbing up and down, extracting about 2.2 barrels a day at each unit from old and often declining fields.
Even though they produce very small amounts individually, together they account for 1.3 million barrels a day. That is about 20 percent of domestic output and roughly the amount the United States imports daily from Saudi Arabia.
While lower crude oil prices have enabled consumers to enjoy some of the lowest gasoline prices in decades, and cheap oil has contributed to low inflation, those working in the domestic oil industry have paid a heavy price for these benefits.
About 52,000 jobs have been lost since October 1997 in oil and natural gas production, according to the Bureau of Labor Statistics. Many of these will not be replaced.
There are 574,000 oil wells in the nation capable of producing an average total of 6.4 million barrels a day, but about 136,000 of them have been shut temporarily. Of those wells, which are capable of producing about 550,000 barrels a day, some oil economists and industry experts predict that up to half could be abandoned.
The loss of production could turn out to be as high as 400,000 barrels a day. Some experts say many wells that will be restarted are likely to produce at lower rates because of equipment and technical problems.
Such a large loss of output means that domestic oil production is expected to continue to decline even if prices maintain their current levels. Last month, imported oil made up more than 55 percent of the United States supply, one of the highest levels ever, and increasing dependence on imported oil is likely to continue.
"It not just like turning the tap back on and we recover the production that has been lost," said Scott Espenshade, the senior economist at the Independent Petroleum Association of America.
Of particular concern is the loss of the skills and knowledge of experienced workers who have been laid off and moved on to other fields. The losses range from crews that can handle the tough job of drilling and keeping wells producing to the extensive web of thousands of small and large companies that provide services and equipment that enable many small producers to operate.
Smith of Tidelands, for example, said most of the 65 workers he had laid off had found other jobs in the strong California economy and would not return to the volatile oil industry. Thus, he will face the expense and strain of training new people. Once he decides to bring the wells back he will have problems finding contractors to help with the work because some have gone out of business or cut back severely themselves.
Many among those who have been laid off have been struggling, especially in places where the local economy is not strong, like the area around Great Bend, Kan., a city of about 15,500 in the central part of the state some 90 miles northwest of Wichita.
After spending 32 years in the oil industry, Dan Murta, who lives in Great Bend, lost his job as vice president with TomkatLtd. a small independent oil company based in Wichita. From a salary of $45,000 a year, he said, he was now reduced to earning little more than minimum wage as a telemarketer.
In past downturns, Murta recalled, he was able to fall back on being a consultant to the industry for $200 to $300 a day. But so many producers have shut down that even that has dried up.
Murta recalled that the Halliburton Co., the Dallas-based company that is one of the world's biggest providers of oilfield services, once had seven centers in Kansas where those in the business could get equipment and workers to maintain and drill wells. But because of cutbacks by the company, which merged with Dresser Industries,the only office left is in Liberty, Kan.
When he began working for Texaco in 1973, Murta recalled, eight big oil companies had operations in Great Bend. "They've all gone," he added.
Danny Biggs is the general field superintendent of the Pickrell Drilling Co. of Great Bend, which has about 300 wells in the area, of which 50 are shut. He is worried that even if prices are high, he may have trouble gearing up again. As wells sit idle, all kinds of problems can develop, including water seeping into fields and cracking in pipes.
"It's like letting a car sit around for six months," Biggs said. "You don't know what might go wrong." His company, however, has the financial strength to recover because the wells that have kept pumping have provided cash flow.
Others are not as fortunate.
Virginia Banks Lazenby , the chairwoman of the Bretagne Corp., a 600-well independent based in Nashville, Tenn., said that while her company was able to conserve enough cash to rebuild, many people did not have the capital. "It's going to be an extended time before they can begin reinvesting," she said.
Even the smaller producers might have to invest $10,000 to $15,000 to get a well pumping again. That is a substantial sum when, in a good year, with crude oil prices in the range of $17 to $18 a barrel, a producer with 10 wells might net about $10,000.
"It's going to be harder for the small producer to find the capital," Ms. Lazenby said. "That's why not everyone is going to get back in."
She was also pessimistic about the long-term future for small operators. "There are few young people coming in," she said. "They're just tired of fighting it."
DrRisk |
