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REMARKS TO WEST TEXAS STATE UNIVERSITY
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(TIME: 8 MIN.)
GOOD EVENING.
I’M PLEASED TO BE HERE.
BEFORE I BEGIN MY REMARKS, I’D LIKE TO TAKE CARE OF A SMALL HOUSEKEEPING CHORE.
WE’VE PROVIDED SOME INFORMATION PACKETS FOR YOU ON THE TABLES OUTSIDE.
ONE OF THE ITEMS YOU’LL FIND IN THE PACKET IS A FORTUNE MAGAZINE.
FORTUNE WROTE A VERY NICE ARTICLE ON THE GULF DEAL AND MESA, AND WE WANTED A FEW EXTRA COPIES.
SO WE ORDERED 100.
BUT SOMEWHERE ALONG THE LINE A MIX-UP OCCURRED AND WE ENDED UP WITH 100,000.
IT’S NOT A BAD DEAL, BUT WE HAVE A STORAGE PROBLEM.
SO YOU’LL HELP US OUT IF YOU’LL JUST TAKE ONE OF THOSE PACKETS WITH YOU.
I THINK THIS IS THE ONLY TIME I’VE REGRETTED COMING INTO SUCH GOOD FORTUNE.
I THOUGHT I WOULD [Text stricken: VISIT WITH] [Handwritten addition: tell] YOU [Text stricken: A LITTLE] TODAY ABOUT CURRENT INDUSTRY CONDITIONS AND THE OUTLOOK FOR YOUR CAREERS IN GEOLOGY.
I REALIZE THAT THE JOB MARKET IS A TOUGH ONE FOR PETROLEUM GEOLOGISTS, ESPECIALLY IF YOU’RE COMING STRAIGHT OUT OF SCHOOL WITH NO EXPERIENCE [Text stricken: UNDER YOUR BELT.]
I CAN SYMPATHIZE WITH THAT.
WHEN I GRADUATED FROM OKLAHOMA STATE UNIVERSITY WITH A BACHELOR’S IN GEOLOGY IN 1951, MY CLASSMATES AND I FACED [Text stricken: THE SAME] [Handwritten addition: a similar] SITUATION.
OF THE 50 GEOLOGY MAJORS GRADUATING THAT YEAR, ONLY FOUR LANDED JOBS [Handwritten addition: as a geologist] STRAIGHT OUT OF COLLEGE.
I WAS FORTUNATE ENOUGH TO BE ONE OF THEM.
THE INDUSTRY AT THAT TIME WAS IN A SLUMP AND WAS HEADED FOR A DECLINE IN ACTIVITY THAT WOULD CONTINUE [Text stricken: THROUGH 1970.] [Handwritten addition: into the ’70’s.]
IT’S [Text stricken: KIND OF] INTERESTING TO LOOK BACK AT THAT PERIOD AND COMPARE IT TO INDUSTRY CONDITIONS TODAY.
IN THE 1950s, OIL AND GAS COMPANIES WERE JUST BEGINNING TO EXPLORE IN THE ALASKAN FRONTIER. . .AND IT WOULD BE MANY YEARS BEFORE THE GIANT 9.6-BILLION-BARREL PRUDHOE BAY FIELD WOULD BE DISCOVERED.
MAJOR OIL COMPANIES WERE STARTING AN EXPANSION INTO FOREIGN EXPLORATION.
THE PRICE OF SAUDI ARABIAN CRUDE—WHICH WE DIDN’T PAY TOO MUCH ATTENTION TO AT THAT POINT—WAS $1.75 A BARREL.
AND NOBODY HAD EVER HEARD OF OPEC.
AT THAT TIME, THE U.S. WAS A BIG CRUDE PRODUCER IN THE WORLD MARKET AND ACCOUNTED FOR ABOUT 62% OF WORLDWIDE PRODUCTION.
TODAY. THE U.S. ACCOUNTS FOR ONLY 27% OF WORLD CRUDE PRODUCTION.
[Handwritten addition: The reason is that the United States is a high-cost producer in a world of oversupply.]
WHAT’S EVEN MORE INTERESTING IS THAT THE AVERAGE U.S. RIG COUNT IN 1951 WAS 2,543.
THIS WEEK, WE HAD [Handwritten addition: 2,199] RIGS ACTIVE IN THE UNITED STATES.
MANY OF THE TECHNOLOGIES THAT YOU HAVE STUDIED AND WILL UTILIZE IN YOUR WORK WERE ONLY DREAMS IN THE EARLY 1950s.
FOR INSTANCE, 3-D SEISMOLOGY.
3-D, TO US, MEANT WEARING THOSE FUNNY GLASSES WHEN YOU WENT TO THE MOVIES.
SO IN MANY WAYS, THINGS HAVE CHANGED DRAMATICALLY.
IN OTHER WAYS, THEY ARE JUST AS TOUGH, ESPECIALLY WHERE THE JOB MARKET IS CONCERNED.
IT’S SIMPLY NOT EASY TODAY TO GET A JOB IN THE PETROLEUM INDUSTRY WHEN YOU’RE FRESH OUT OF COLLEGE AND HAVE NO EXPERIENCE. . .ALTHOUGH A RECENT SURVEY OF THE AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS SAYS THAT THE OUTLOOK IS IMPROVING THIS YEAR OVER LAST YEAR.
DESPITE THE FACT THAT THINGS LOOK TOUGH, OPPORTUNITIES STILL EXIST FOR AN EXCITING CAREER IN PETROLEUM GEOLOGY.
FOR THOSE OF YOU NOW ENTERING THE WORKFORCE, YOU’RE COMING IN AT A VERY CRITICAL TIME.
THE INDUSTRY FACES SOME SERIOUS PROBLEMS.
RIG ACTIVITY IS DOWN DUE TO LOWER, STABLE OIL PRICES AND POOR NATURAL GAS MARKETS [Handwritten addition: , plus a lack of drillable prospects.]
AND I MIGHT GIVE YOU A PIECE OF ADVICE AT THIS POINT.
IF YOU WANT TO CHECK ON THE INDUSTRY’S HEALTH, JUST KEEP AN EYE ON RIG ACTIVITY.
IT IS INDICATIVE OF WHERE THE INDUSTRY STANDS IN TERMS OF ECONOMIC DRILLING PROSPECTS.
WHEN CRUDE PRICES WERE RISING DURING THE LATE 1970s, THE RIG COUNT CLIMBED TO RECORD LEVELS, TOPPING OFF AT 4,531 RIGS IN DECEMBER 1981.
BUT WHEN CRUDE PRICES SOFTENED, SO DID THE RIG COUNT.
WE HIT A LOW SPOT OF 1,807 RIGS IN APRIL 1983.
AND, AS I SAID EARLIER, WE’RE RUNNING AT ABOUT [Handwritten addition: 2,199] THIS WEEK.
YOU WILL ONLY SEE RIG ACTIVITY IMPROVE SIGNIFICANTLY WHEN CURTAILMENTS IN THE GAS MARKET ARE LIFTED.
DECREASED DRILLING ACTIVITY IS ONLY ONE PART OF THE PROBLEM FOR THE INDUSTRY, HOWEVER.
WE HAVE SEVERAL OTHER PROBLEMS TO SORT OUT, AS WELL.
THE MOST CRITICAL ONE IS FINDING A WAY TO REPLACE RESERVES ECONOMICALLY.
RESERVE REPLACEMENT IS THE NUMBER ONE PROBLEM FOR PUBLICLY-OWNED OIL AND GAS COMPANIES BECAUSE THOSE RESERVES REPRESENT THE PRIMARY ASSETS OF THE SHAREHOLDERS.
IF YOU DON’T REPLACE RESERVES YOU ARE ERODING THE ASSET BASE.
AND THAT MEANS THAT THE VALUE OF THE SHAREHOLDERS’ INVESTMENT IS DECREASING.
IT’S TOUGHER TODAY FOR COMPANIES TO REPLACE RESERVES AT A PRICE THAT MAKES ECONOMIC SENSE.
$29 BARREL OIL WON’T JUSTIFY HIGHLY AGGRESSIVE DRILLING PROGRAMS.
SO COMPANIES MUST EXAMINE THEIR DRILLING PROSPECTS CAREFULLY AND DRILL ONLY THOSE WHICH PROMISE THE BEST RETURN.
THAT’S WHERE PETROLEUM GEOLOGISTS COME INTO PLAY.
THE RESERVE REPLACEMENT PROBLEM, STABLE OIL PRICES AND NATURAL GAS CURTAILMENTS PRESENT A CHALLENGE UNLIKE ANY YOU’VE HAD BEFORE.
THERE IS AN OPPORTUNITY HERE TO STRETCH YOUR CAPABILITIES TO THE LIMIT.
IT MAY MEAN A LOT OF HARD WORK—BY FAR, HARDER THAN ANYTHING YOU’VE ENCOUNTERED UP UNTIL NOW.
BUT THE REWARDS COULD BE GREAT AS WELL.
YOU ARE ENTERING A PERIOD FOR THE PETROLEUM INDUSTRY THAT WILL BE CHARACTERIZED BY CHANGE. . .INNOVATION. . .AND NEW TECHNOLOGY.
COMPANIES WILL UNDERTAKE RADICAL STEPS TO PROTECT AND ENHANCE THEIR SHAREHOLDERS’ INVESTMENTS.
I BELIEVE THAT THE INDUSTRY WILL LOOK COMPLETELY DIFFERENT IN THE NEXT 5 YEARS—MAYBE EVEN SOONER.
WE’VE SEEN A LOT OF RESTRUCTURING ACTIVITY LATELY IN THE FORM OF MERGERS AND ACQUISITIONS.
AND WE’RE LIKELY TO SEE EVEN MORE CHANGES, SOME OF WHICH WILL BE TOTALLY NEW CONCEPTS.
[Handwritten addition: The industry must make adjustments if it is to thrive in the future. The basic structure of companies will have to change, and, most of all, the attitudes of managements will have to undergo major changes.]
YOU HAVE THE CHANCE TO GET IN ON THE GROUND FLOOR OF THE RESTRUCTURING PROCESS AND PLAY A PART IN IT.
IT’S LIKELY THAT YOU’LL SPEND YOUR CAREERS IN AN INDUSTRY MUCH DIFFERENT FROM THE INDUSTRY I HAVE KNOWN.
[Handwritten addition: But don’t let that frighten you in any way. Restructuring is necessary and urgent and it should result in a much more cost-efficient and viable industry. Stockholders, consumers and the nation, as a whole should benefit.]
AND YOU WILL [Text stricken: FIND PLENTY OF] [Handwritten addition: benefit from the new] OPPORTUNIT[Text stricken: Y][Handwritten addition: IES] AND CHALLENGE[Handwritten addition: S] [Text stricken: IN IT.] [Handwritten addition: that arise as a result of restructuring.]
NOW I’LL BE PLEASED TO ANSWER ANY QUESTIONS YOU MAY HAVE.