Remember the bumper sticker that said, "Please, Lord, give me one more boom. I promise not to screw it up this time"? It might be time to start keeping some promises.

No, of course no one's using the "b" word yet. We're all too cautious for that.
Or are we? The recent Arthur Andersen Oil & Gas Industry Outlook Survey results indicate oil companies are definitely planning to take some risks this year that would have been unheard of last year. "However, both majors and independents are more cautious today as a result of the lessons they learned when oil prices collapsed in 1998," said Victor Burk, managing director of energy industry services for Arthur Andersen in Houston.
It would be nice to think they're learning lessons at both ends of the pendulum arc. But I'm not sure that's the case. When prices were low, oil companies responded by slashing their 1999 budgets and laying off large chunks of their workforce. A mere 12 months later they're planning to throw great gobs of money toward exploration and development projects. And they're ruing the lack of skilled workers.
There are some signs that oil companies are getting better at taking a more long-term view of their business plans. BP Amoco has widely advertised its new scheme to find a way to survive on US $11 bbl oil. Companies like Kerr-McGee claim to have survived the past 18 months by focusing on what they can control, namely business unit operating performance. Chairman and Chief Executive Officer Luke Corbett told a group of analysts in December that the company's efforts had been awarded with a 42% increase in stock value in 1999.
Conoco also is proceeding cautiously. While its capital expenditures budget will see as much as a 30% increase this year, much of the surplus is earmarked for refining and marketing. And Chieftain International Inc. of Edmonton, Alberta, is increasing its exploration and development budget primarily to construct and install new production facilities, a move necessitated by a successful 1999 exploration drilling program.
But not all of those additional funds will be spent on business as usual. Angela Minas, head of Arthur Andersen's North American E&P unit in Houston, predicted the future focus in that sector will be on growth rather than pure cost containment. Growth is not a bad thing, of course; in fact it's rather critical to the survival of a business. But there's a difference between healthy, sustained growth and the kind of cancerous, frenzied expansion that often accompanies a commodity price increase. This industry has a rather dismal track record when it comes to approaching periods of apparent stability with any kind of restraint. I'd hate to see this period of hesitant bliss come crashing to a halt because of one too many stupid, rash decisions.
Seeking reassurances, I pondered this question: Where does one look to gauge the industry's optimism level? What's the barometer, the ultimate indicator, that belies its true intentions? Next year's proposed budgets tell only part of the story. Companies can have many reasons besides unconstrained optimism for increasing exploration budgets, and a 40% increase isn't necessarily a sign of a spending spree when you're comparing it to a wildly curtailed budget the year before.
No, I needed a different kind of indicator, and I found it: a Cadillac dealer in West Texas.
Anyone who's lived in West Texas knows oilmen buy new Cadillacs quicker than you can say "squished armadillo" when oil prices take an uptick. So I called Nathan Gray at Kelly Grimsley Auto Group in Odessa, Texas. Gray assured me that while sales seem to be on an upswing, the adjustment in oil prices came too late to show a positive effect on 1999 sales for the last quarter.
Looks like the industry is keeping its promise. At least for now.