Tuesday, July 20, 2010

Struck by Lightning

Big Billy had an Oklahoma oil company during the late 70s, early 80s oil boom. Like many others during that era, his went belly up when the economy flopped and oil prices collapsed. He moved to Texas and started a restaurant, visiting me years later in Oklahoma City after I ran into him in a dark Dallas bar. I had some leases in Noble County along with a geologic idea. I showed it to him and he bought it from me, intent on drilling a well.

The prospect was a reentry of a previously drilled well that had “shows” that were never tested. Big Billy had money but to say that he was cheap would be an understatement. Even though he could easily have afforded a Jaguar, he drove an old Chevy until the wheels practically fell off. Sometimes, when you are drilling, it doesn’t pay to go with the cheapest bid.

Big Billy somehow dug up an old drilling contractor with a cut-rate price and very old rig to drill our well. The wash-down that should have taken three days was only 250 feet deep after a week.

I told him what I thought. “The bit is out of the old hole. You’re drilling a new hole and with this piece of junk you are drilling with, it’ll take forever.”

Big Billy was stubborn but he wasn’t stupid. Taking my advice, he released the dilapidated old drilling rig while we scratched our heads about what to do. We soon decided to perforate a shallow zone already cased behind surface casing. Big Billy’s good luck hadn’t gone far away and we completed the zone for lots of natural gas.

The well turned out to be a prolific producer and spurred the drilling of another ten shallow wells offsetting it. There were numerous, potentially productive sands in the area and I finally talked him into drilling a well to test this possibility. We called it the Big Boy.

We drilled the Big Boy to a depth of about three-thousand feet. Ed G., a friend of mine since Cities Service days, and also a cracker jack well-site geologist, watched the well as it was drilling. Before reaching total depth, we had recorded “shows” of natural gas in two zones. Ed and I both recommended that Big Billy set pipe.

“Do either of these zones produce in offset wells?” he asked us.

I shook my head but explained, “They calculate productive on the electric logs and we had positive shows while drilling through them.”

Big Billy wasn’t convinced.

“I can’t let my investors set pipe on a wildcat zone.”

Ed was irate. “With that kind of logic, there would have never been a productive well ever drilled. Someone has to be the first.”

Argue as we might, Big Billy decided to plug the well. He did so with a temporary plug, thinking someone might come along later in the area and find production in the two zones. He didn’t have to worry about lease expiration because shallow production held them. Everything would have been hunky-dory, except for Old Mother Nature.

A year or so later, Big Billy got a late-night call from the Corporation Commission, Oklahoma’s oil and gas regulatory agency. The temporary plug he had set on the Big Boy was leaking natural gas to the surface. During a spring thunderstorm, lightning had struck the surface plug and set it on fire.

“Plug it or produce it,” the Commission ordered.

Big Billy grumbled, but complied with the Commission’s order by reentering the well and completing in the same shallow zone as all of his offsets, still overlooking the two untested deeper zones.

Natural gas prices languished for several years, during which time Big Billy bought out all of his partners. He called and told me that he intended to sell the little natural gas field, buy a sailboat and retire to Washington with Kathy, his significant other.

“You’re too young to retire,” I said.

Unable to convince him, Ed and I found a buyer for the property.

Because of depressed natural gas prices, Big Billy sold the wells for $100,000. Ed, still enamored with the prospect, bought ten percent of the producing property for ten grand. He shortly had a pleasant surprise.

The price of natural gas, like all commodities, is controlled by supply and demand. When the supply is high, the price is low. When it stays low for a lengthy period, gas operators stop drilling. Since all wells decline, the supply always, sooner or later, drops below the demand. If no new wells are drilled to take their place, a shortage occurs. This is what finally happened the month after Big Billy sold his gas properties, bought his sailboat and moved to Washington. After realizing the imbalance between the supply of available natural gas and the demand for it, marketers began bidding in earnest. The price suddenly soared, returning Ed’s investment in a single month.

Big Billy either didn’t care or else decided not to let it bother him. He and Kathy lived on their boat, docked near Seattle, for several years until they both became bored with retirement. The oil and natural gas boom was still going strong so they sold the boat and moved back to Texas. His luck was still good and he and Kathy managed to amass yet another fortune during the ensuing Texas land boom.

Stubborn to the end, he never acknowledged being wrong about not testing the two deeper zones in Noble County.


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