Magazine Forecasts Recovery
In Oil Exploration Activity

(Editor's note: Cattle prices are improving, but much of Texas remains mired in a devastating drouth, and high calf prices don't mean much to the producer who has no calves to sell. In past periods of strain, oil and gas leases have helped many an operation squeak through; even a dry hole in a dry pasture is better than no hole at all, because it brings with it lease money. That avenue of relief has been lacking lately as well, however, with the oil patch sharing the ranch country's misfortunes. The following article suggests a change in that situation, which could be welcome news to some landowners.)

HOUSTON —(AP)— The oil industry should enjoy rather typical exploration and production activity in 2000 after riding a two-year boom-and-bust roller-coaster, according a trade magazine forecast released Friday.

Based on a survey of producers and predicted price stability between $25 and $28 per barrel, World Oil magazine researchers forecast a worldwide drilling increase of 21.9 percent, to 60,343 from about 49,500 in the bust year of 1999.

U.S. activity is expected to see a more robust recovery, rising 30.6 percent to 24,416 wells drilled from 18,700 last year. In Texas, the magazine forecasts a 31.9 percent increase to 1,573 wells drilled from 1,193 last year.

While the forecasted drilling activity would be a great improvement from 1999, World Oil publisher Lanie Finlayson cautioned that this year likely won't approach the boom levels of 1998.

``With the worst drilling year in more than half a century behind us, operators around the world are returning to more typical E&P activity levels this year,'' Finlayson said.

Last year wouldn't have been so bad if companies reacted more quickly to oil prices that doubled when foreign oil powers agreed to cut production, Finlayson said.

``The consensus explanation is that the earlier price collapse was so devastating ... that many firms needed nearly a year's worth of increased profits just to repair the balance sheet damages,'' Finlayson wrote in his annual oil outlook report.

Bill Gilmer, chief economist for the Houston Branch of the Federal Reserve Bank of Dallas, added that operators blistered by the price plunge in 1999 wanted to wait and see if the current high-price environment would persist.

``I don't think anybody is going to bet their company on an oil price forecast,'' Gilmer said.

He added that confidence remains shaky that the Organization of Petroleum Exporting Countries will keep up its months-long production drawdown, especially with the lure of healthy prices.

``Fundamentally, there hasn't been a whole lot of evidence people are buying into higher oil prices. Rig counts have remained flat,'' Gilmer said. ``Gas has been the driver for this market, helped by oil. People are more willing to trust the fundamentals of the natural gas market.''

Internationally, the magazine forecasts revived activity in Canada, off the Brazilian coast, and offshore in Africa and Australia.