Producers are doing more than hoping for a recovery in demand later this year. "We've been through down cycles before and know it will turn around. The trick is to position yourself, because this is a point where money can be made," says Bruce H. Vincent, executive vice president of corporate development at Swift Energy Co. The independent has historically focused on influences that can be controlled, such as costs, he said while at the UBS Warburg LLC annual energy conference recently in New York. "We believe this is a year to focus on acquisitions and on exploiting and developing oil fields." In Swift's case, he added, one example is its Lake Washington Field along the Gulf Coast, which offers longer-lived oil to offset the company's normally short-lived gas reserves. Newfield Exploration Co. president and chief executive officer David A. Trice says, "It's actually a good time to drill. We intend to take advantage of lower rig rates to look at our deeper prospects. Costs are about a third of what they were a year ago." William G. Hargett, president and chief executive of Houston Exploration Co., says the company's position as operator of most of its properties allows it to defer production until prices improve. "Being an operator of so many properties allows us to high-grade our prospects." Pioneer Natural Resources Co. anticipates four key projects during the next 18 months will increase its production from about 110,000 barrels of oil equivalent per day to up to 175,000, according to Timothy L. Dove, executive vice president and chief financial officer. "We have the people. Many of them came from the majors. They like being in an entrepreneurial environment and seeing their prospects drilled." Ocean Energy Inc.'s 2002 capital program was based on $21-per-barrel oil prices and gas averaging $2.75 per thousand cubic feet. "Since then, people have asked where we might cut back because we could outspend cash flow under current prices," says William L. Transier, executive vice president and chief financial officer. "We really don't have many areas where we can. These are projects to help us meet our production goals. We could make up the difference from unused debt capacity, which would be paid down immediately once commodity prices and cash flow improve." Meanwhile, Murphy Oil Corp. is thinking "acquisitions." Claiborne Deming, chairman, says, "We've found that the best time to make acquisitions is when this industry is lying on its back. A North American gas acquisition would fit Murphy well. If gas prices stay around $2.20 for the next six to 18 months, we might see some opportunities. But we would take a close look at reserve life because so much North American gas comes with high production rates." EOG Resources Co. has enough undrilled prospects in its portfolio that it expects to keep its 2002 production close to the 2001 level without having to acquire, says chairman Mark Papa. But the company has a strong enough balance sheet to make a move if the right opportunity emerges, he adds. "We're keeping our powder dry. I'm not saying we'll make a move. But we certainly are more likely to do so now than we were a year ago. What we're seeing in the first couple of months of 2002 are increased opportunities to farm into some very good prospects. These are companies that faced reduced cash flow and possible capital cutoffs." He adds that the first properties to be put up for sale will be low-quality. "The better ones probably will show up during the second half of the year. That's when we would make a move, although our game plan doesn't require us to do so." Anadarko Petroleum Corp. is sticking with its 2002 strategy of developing more overseas oil and evaluating its long-term domestic gas prospects. "There are a lot of properties on the market. We haven't seen any that we like. If we did, we could reduce drilling and come up with as much as $200 million," says John N. Seitz, president. -Nick Snow