What the industry expects in 2007

Steady investment stream drives healthy equipment service sector

William Donald (Donnie) Harris III, CEO, Forrest A. Garb & Associates, Inc., Dallas

The most important variable that drives our industry is oil prices. While oil prices hit a peak last year and have since declined slightly, we are still well above historical levels. We have enjoyed a very busy year with our existing clients, plus the addition of quite a few new ones. Most of the new ones are smaller companies just getting into the oil and gas industry, and they need a lot more help with the understanding of how reserves are reported.

Although oil and gas prices have fallen and have taken some of the glow off planned investments, price stability going forward will be important, so that existing, upbeat trends are not damaged. We expect oil prices to maintain a $50-$60/bbl range in 2007 and the near future.

Equipment/ service sector prospers. The equipment/ service firms have also seen a very high demand for their services. A high demand for drilling and workover rigs, etc., does put the focus on current needs, which are being driven by high product prices. Yet, the industry has had many slow years for research, so R&D for new drilling and workover technologies should not have suffered. There are always problems to be solved in any application, and there will always be someone with an idea on how to make a better mousetrap.

Forrest A. Garb & Associates, Inc., has enjoyed a very good year, both operationally and fiscally. While we have increased both staff and clients, we have also tried to decrease our costs like everyone else. We are still attempting to hire more personnel, as are most companies in the industry. We have also continuously updated our computer programming and processing capabilities. With these advancements, it has become more economical to perform reservoir simulations. In the past, it would have been uneconomic to attempt such an undertaking on smaller fields, and we can evaluate many more properties in a shorter time frame.

Our clients continue to come from all over the world, and they own properties, or would like to invest in some, all over the world. With the higher oil and gas prices, there has been a resurgence of investment in US fields, due to the stability of the country and the availabilities of local demand, which lessen the cost of transportation. The busiest, most promising activity areas this year have been in enhanced oil recovery projects in mature fields that were once considered to be uneconomic. Although US investment has increased, this has not deterred companies from investing in overseas opportunities. Most international investments have a much higher financial commitment and, therefore, have a higher reserve base.

Personnel concerns. As I mentioned above, we are always seeking qualified engineers and geologists, but they are hard to come by these days. Last year, Texas A&M University graduated only 52 petroleum engineers, and within two months, 49 of them were employed. We will hopefully see more college students choosing petroleum engineering as their major. I just got married recently and, hopefully, one of my daughters, Samantha or Sydney, will attend Texas A&M and help us with our shortage of engineers.

THE AUTHOR
	W.D. (Donnie) Harris III is CEO of Dallas-based Forrest A. Garb & Associates, Inc., where he first joined as president in August 1998. He is responsible for the firm’s daily operations and the supervision of engineering projects. Mr. Harris began his career with ARCO Oil & Gas as a reservoir engineer. He also was a vice president at DeGolyer and MacNaughton, where he prepared and supervised engineering and reserve studies, plus appraisal reports for fields in many countries. He holds a BS degree in petroleum engineering from Texas A&M University and returned to school in 1998, earning an MBA from Southern Methodist University. Mr. Harris is a member of SPE and is a registered professional engineer in Texas.