Drill, Midland, Drill 
The Manual 2.0 
That’s Oil, Folks!
Everyone said that the wildcatters of Midland had seen their last glory days, that the fields were dry, and that all the best new plays were offshore. But they didn’t count on an unorthodox drilling formula that would help unlock the hidden reserves of the Permian Basin—and give West Texas one more boom.
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The truth is that the Wolfberry play would never have happened unless oil prices had taken off, jumping from $38 a barrel in 2004 to $50 a barrel in 2005 to $64 by mid-2007. And this time around, the price rise wasn’t set off by an OPEC-imposed production cap but by a higher worldwide demand for oil. As long as the price stayed somewhere close to $70, an oilman could drill and frac a Wolfberry well for a cost of about $1.6 million, recoup his investment within three years (assuming the well came in at more than one hundred barrels a day), and then rake in the profits for years to come. Even if a well quickly declined to just twenty barrels a day, at $70 a barrel, that was still $1,400 in daily income. Skim off the taxes, the operating costs, and the royalty payments to the leaseholder, and an oilman would pocket $700 from that one well every single day of the week for the next thirty years. All he had to do was drill enough of those suckers, and he’d be sitting pretty.
Because Jim Henry had stuck to his conservative business philosophy, refusing to bet his whole company on the Wolfberry, he had brought in a Midland-based partner, Pure Resources, to pay for 75 percent of the cost of new wells in return for 75 percent of the profit. If he had simply taken out bank loans to fund his Wolfberry project, Henry would have been able to pay back the loans with ease and become one of Texas’s biggest billionaires, putting Midland back on the Forbes 400 list for the first time in fourteen years. Nevertheless, he seemed perfectly happy with his 25 percent, telling people he was “blessed.” What’s more, he cheerfully gave his blessing to Feavel, LaMonica, and the company’s attorney, Doug Robison, when they decided to start a Wolfberry exploration company, ExL Petroleum. He also wished Johnson a fond farewell when he opened his own company, Summit Petroleum.
Not all the oilmen who launched Wolfberry drilling programs met with resounding success. Some couldn’t find the best pay zones in their leases. Others didn’t get the frac formula just right for the particular area they were drilling. (Because the nature of the limestone varied, a frac job that worked on one lease didn’t necessarily get the same results on another.) Nevertheless, by 2008, so many companies were doing so well that people in Midland once again began using the b-word. Beyond anyone’s expectations, the Permian Basin was seeing another oil boom.
Today people in Midland are still shaking their heads in disbelief. Although the recession in late 2008 dropped oil prices to a low of $35 a barrel in February 2009, forcing many oilmen to lay down their rigs, the other, long-feared b-word—bust—never happened. By January of this year, oil prices had returned to $70 a barrel, and everyone was right back at work. At last count, 73 companies are drilling Wolfberry wells in the Permian Basin, using more than 230 rigs to punch holes into the earth as fast as they can. From a distance, the rigs look like miniature Eiffel Towers rising up in the mesquite-choked fields. Pump jacks are going full speed, their horse heads rising and falling. At the oil field service yards, welding torches sparkle day and night as new equipment is built.
It is estimated that oil companies have so far spent more than $7 billion drilling Wolfberry wells. Johnson, whose new company is swamped with business—much of it from other oilmen who want a partner with Wolfberry expertise—believes the Wolfberry play will eventually produce two billion barrels of additional oil from the Permian that no one believed was possible just a decade ago. Pioneer Natural Resources thinks it alone has proven reserves of 500 million barrels. (In 2000, when it was calculating only its Spraberry oil, it figured it had 212 million barrels.)
True, these figures are a drop in the bucket compared with the 40 billion barrels that can be recovered in the Gulf of Mexico. It would take 600 Wolfberry wells producing 100 barrels a day, for instance, to equal the 60,000 barrels a day that were reportedly leaking from the one BP Gulf well that blew out in late April. But after such a catastrophic offshore oil spill—the worst in American history—and with the Obama administration now pushing for a moratorium on deep-
water drilling, finding oil in the continental U.S. has become sexier than ever. “Sometimes I wonder if BP wishes it was still out here with us,” one Midland oilman said. “Compared to what they’re going through, we look like the guys in the white hats, which doesn’t happen very often in our business.”
Midland oilmen seem determined to keep it that way. Although some have bought private jets and others have bought million-dollar weekend homes at Horseshoe Bay or swank condos at the Ritz-Carlton Tower in Dallas, they haven’t gotten wildly carried away like oilmen of the past. This time around, no Rolls-Royce dealership has arrived. None of the oilmen’s wives are wearing gold necklaces with diamond-studded pendants shaped like drill bits. “We’re playing this boom with great caution,” said Mayor Perry. He paused and looked out the window of his twelfth-floor office. “But I have to admit, it looks real. There’s so much traffic downtown that it’s hard to find a place to park. The good thing is that no one’s all that worried about getting parking tickets. They know a lot of our cops have gone off to get jobs in the oil fields.”
In fact, there has been such a need for oil field workers that wages for some entry-level jobs have jumped to between $15 and $20 an hour. Restaurant dishwashers, prison guards, maids, and even teachers have headed for the oil fields. At one point, Keith Dial, the manager of Midland’s most prestigious hotel, the downtown Hilton, had to scrub toilets in the guest rooms because he couldn’t retain enough housekeepers on staff. A new Cracker Barrel, unable to find employees, had to delay its opening for months, finally hiring a company that imported Eastern Europeans to fill the jobs. The flood of oil field workers into Midland and Odessa has led to a surge in mobile home sales. In the blue-collar neighborhoods, aboveground pools now glimmer in the backyards and new F-150 pickup trucks sit in the driveways.
And for the first time in three decades, a steady stream of young geologists and engineers is moving to the city. (The larger independents are offering college graduates with petroleum engineering degrees a $100,000 salary with a $20,000 signing bonus to work in their Midland offices.) There’s now a Midland Chapter of Young Professionals in Energy, a social organization that has seen its membership rise from twenty in 2007 to five hundred today. And yes, some of those members are sons of Midland oilmen who once swore they would never return. “I was living in Spain, trading commodities, married to a beautiful Spanish girl I had met on the beach, and suddenly it just hit me,” says Bryan Sheffield, the 32-year-old son of Pioneer’s Scott Sheffield. “I told her we had to move back to Midland because I just had to see what I could do.”
Even some women have arrived to make their mark. In 2007 Leah Thomas Rudnicki, a 34-year-old attorney, gave up a promising career at Houston’s Akin Gump and moved to Midland with her husband, also a lawyer, so she could work at her family’s oil and gas company, Trey Resources, where she’s executive vice president and general counsel. Sitting one afternoon in her office, wearing heels and a stylish black-and-white dress, she finished a phone call with a landman, swiveled around in her chair, and chatted happily about her life. “All day long, it's the oil business,” she said. “Then on Monday night, I have a Bible study, Tuesday night is Junior League, Wednesday night is home with the family, Thursday night is the kids’ swim lessons, and Friday night is dinner at the country club with other young families we know. I’m more active here than I ever was in Houston.”
What’s also happening is that the higher price of oil, combined with new fracking and drilling technology, is opening up other plays in the Permian Basin. Remember David Arrington, Midland’s onetime boy wonder? This year he’s back, drilling $5 million wells in Ward County that go down 12,000 feet and then out horizontally 4,000 feet. He’s using a technique he developed in the Barnett Shale that he hopes will get him 1,000 barrels of oil a day and level out to 100 to 200 barrels over the next year. Irrepressible as ever, he’s bought a four-story bank building downtown for his new headquarters, with every office containing a pricey Ansel Adams photograph. He’s also had a sign made to be put on the roof of his building that reads, “DIZ MUZ B D PLAZ.” “I want everyone to know that Midland is still a place of hopes and dreams,” he told a visitor one afternoon. Then, while his visitor looked on in open-mouthed awe, Arrington, who is 49, leaped into the air, stretched out his arms and legs in a perfect Herkie move, and shouted, “Yipeeeeeeee yeeeee haaaaaw!”
One morning a few months ago, Dennis Phelps, the man who got the whole thing started, walked unnoticed into the Main Street Diner, a hangout for the oil crowd just south of downtown, took a seat in a back booth, and ordered the $5.09 special: eggs, bacon, and grits. The great irony of this story is that Phelps has never made a dime off the Wolfberry play. When he first came to Henry Petroleum, he made it clear he wanted only a daily consulting fee so that he could go to East Texas whenever he wanted to be with his wife—and that’s exactly what he got.
“It doesn’t bother me,” he said with his usual shrug when asked if he regretted not getting rich like just about everyone he once worked with. “All that is hindsight. God is taking care of me, not some oil wells.”
Phelps, who is 64, still drives out to the Permian every few weeks. Like so many others who have spent their lives working in the Midland oil business, he just can’t let go. He’s now a part-time consulting engineer for one of the city’s most famous oilmen, Don Evans—yes, that Don Evans, former Secretary of Commerce and close friend of George W. Bush’s. “I come into my office, study logs, stare at charts, and do everything that I’ve always done,” Phelps said. When pressed about what exactly he’s up to, he said, “Oh, you can write down that I’m studying another idea.”
Then he put down his fork and smiled. “I guess you can also write down that it’s a pretty good idea.”
View a slide show of workers and oil rigs in the Permian Basin and read a Q&A with Skip Hollandsworth.
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