Insights from oil service firm Weatherford.

Some interesting insights from an article on Weatherford, one of my favorite oil service companies.

Forbes: Oil Gleaners.

Quotes:

The petro-giants own the oil, but they rely on service companies like Weatherford to drill for it, study it and build wells and pumps to extract it. As the average untapped oil reservoir is to be found in ever smaller, deeper and tighter rock, service companies have come up with ever more innovations. And they’re charging for it. According to research firm John S. Herold, since 2000 the inflation-adjusted cost of finding and producing oil and natural gas worldwide (not counting taxes or royalty payments) has climbed 80% to $9 per barrel.

“It reflects all the symptoms of an aging of the reservoir base,” says Bernard J. Duroc-Danner, 52, chief executive of Weatherford, the fourth-largest oil service company (after Halliburton (nyse: HAL - news - people ), Baker Hughes (nyse: BHI - news - people ) and Schlumberger), with 25,000 workers worldwide. The older these fields get, the more help they need, and that’s good for Weatherford. In 2005 net income was up 42% to $470 million on $4.3 billion sales.

Worldwide, capital expenditures on energy exploration and production have risen 15% in each of the past two years to $170 billion, according to Herold. The number of drilling rigs poking holes in the world is at a high not seen in 20 years--up from 1,200 in 1999 to 3,000 now. Yet the oil supply, at 84 million barrels a day, has expanded just 1% since 2004.

....

Like biblical gleaners extracting more wheat from long-tilled acreage, Duroc-Danner is revitalizing oil flows from aging fields once thought to be largely tapped out. That means he is turning his back on the kinds of large-scale seismic testing used to prospect for elephant fields--a high-margin business dominated by Schlumberger. “Frankly,” he says, “we don’t think there’s a lot of big reservoirs left to be found.”