Once the refrain in the search for opportunity was "Go west, young man." Today, panelists told attendees at the semiannual Oilfield Breakfast Forum in Houston not to limit themselves to the Gulf of Mexico. Instead, they should seek oil and gas opportunities globally.
Noble Corp. CEO Jim Day said the drilling sector has posted reasonable profits over the last few years despite losing about $6 billion in market equity. These numbers, he said, are far ahead of the service industry's loss of about $12 billion in market equity.
These results suggest the market places thinks the sectors have done a poor job of operating their businesses. Additionally, he said, it will be important for companies to be geographically diverse.
"It's going to be difficult to stay in business if you're only operating in the US Gulf of Mexico," Day said. "There's not going to be an improvement there over time."
The North Sea, he said, is showing a continued, steady rig count, as is the Persian Gulf, where there are steady production levels and large LNG projects beginning in Qatar and Saudi Arabia. Off West Africa, he said, semisubmersible demand is increasing while jackup demand is stable.
"It won't be just the majors going overseas," Day said. "It'll be the larger independents, too." Those who don't go international, he added, will likely face consolidation.
Marshall Adkins, managing director of energy research at Raymond James & Associates, expects to see $5/Mcf gas sustained while operators and service companies run the treadmill of technological advancements versus the declining prize pools under the seabed. Companies today are drilling for reserves that are 1/20th or 1/30th the size of what they sought five decades ago, he said. And if gas prices are expected to remain steady, so are oil prices, he said, as long as OPEC stays in control.
"These guys are doing a brilliant job of managing a monopoly," Adkins said. "If OPEC wants it, they're going to get it."
Adkins said he expects oil prices to remain around $28/bbl for the next few years.
James Payne, the president, CEO, and chairman of Nuevo Energy, concurred.
"The answer to oil prices is OPEC, OPEC, OPEC," he said.
The demand for hydrocarbons is going to continue increasing while supplies continue to diminish, despite technology, said Marathon President and CEO Clarence Cazalot.
"We've seen these decreases despite pretty terrific technologies that have rejuvenated some areas for a while," he said.
Reserves will continue to be tricky to replace, he said, noting that companies can not simply replace reserves through purchases of other companies or exploration.
"Exploration is important, but exploration is not going to solely replace our reserves," he said.
Weatherford Senior Vice President and Chief Technology Officer Stuart Ferguson said the value in technology is in using the technology and that it is important to keep the services from becoming a commodity.
"The problem with having a poor value-pricing message is that you get into the hands of the procurement people,' he said.