One way to be smart is to maintain consistency and clarity of earnings, which was one of the main themes sounded at the recent Howard Weil oil-investment conference. "If you can't kick it, you can't count it," maintained Bob Palmer, chairman and chief executive of Rowan Cos. Jim Mulva, Phillips Petroleum CEO, said, "We want to maintain simple financials because life is too short and too complicated already to do otherwise." Financial discipline was also frequently mentioned, but while this is in response to the Enron debacle, many E&P executives privately conceded it was an indication of the scarcity of economic, drill-ready prospects. "It is not high service costs but the quality of drilling prospects that worries producers most, and that can cause further consolidation [as producers try to assemble new drilling inventory]," said Howard Weil CEO William H. (Bill) Walker. "Meanwhile, our mantra has always been, 'management, acreage and balance sheet.'" The conference kicked off with a keynote speech that emphasized the "coming train wreck" between U.S. supply and demand indicators, especially those for natural gas. "Producers are more conscious of maximizing their present value, but that comes at the cost of increasing the average well decline rate to 50% from 35% just a few years ago," said John Seitz, president and CEO of Anadarko Petroleum. "The International Energy Agency projects oil consumption will rise 60% in 20 years, so we in essence need to add 2 million incremental barrels per day, every year, to meet that-or the equivalent of five Saudi Arabias in those two decades," Seitz explained. "But non-OPEC increases will be limited. Mergers have reduced organic growth possibilities and most companies are much more disciplined in what they drill." But Seitz thinks the real debate in the U.S. should be about natural gas policy issues, not about the Arctic National Wildlife Refuge. "We all have heard about many power-plant projects being canceled or delayed. But due to all the construction of the last two years, this summer we will have an additional 45 gigawatts of gas-fired capacity online, and that translates to at least 0.5- to 4 billion cubic feet per day of new gas demand. "Every 1 Bcf burned by the new plants is a Bcf not available for fall storage." At the 2002 Executive Oil Conference in Midland, two speakers issued similar warnings. Jim Lightner, president and CEO of Tom Brown Inc., cited some telling statistics from the U.S. Energy Information Administration. And he wondered if people really fathom the degree to which wildcat drilling in the U.S. has disappeared, and what that implies for security and cost of oil and gas supply. Recall that in 1981 at the height of the oil boom, he said, operators drilled 17,500 wildcats in the U.S. Then in the depths of the drilling depression in 1986, they sunk only 7,156 such wells. "We all thought things could not get any worse-but they did." Throughout the 1990s, the wildcat count remained below 5,000. And in 2000, only 2,076 wildcats were drilled-less than a third of the amount drilled during what is commonly regarded as the industry's nadir. "What has happened to our industry? Where have all the prospects gone?" asked Lightner. "During the last 10 years, most of the gas supply and drilling activity has been from exploitation, not exploration. The problem is this is a finite game." -Leslie Haines