Weathering the Storm

The Eighties were marked by wild ups and downs — the best of times and the worst of times. For the entire energy industry, it was a decade that opened in boom times, but soon found itself in the most gripping depression of an unprecedented bust.
No Way To Go But Up
"For the better part of a decade there had existed a virtually global belief that the price of petroleum and everything that depended on it would go no way but up." So writes Mark Singer in his chronicle of Oklahoma's Penn Square banking debacle, Funny Money. Singer was right and the "global belief" of the Seventies he describes was dead wrong.
In the two years following decontrol, the number of wells drilled in the United States nearly doubled. Almost 100 rigs were being built each month during 1981. Ultimately, the U. S. rig count peaked in December, 1981, at 4,530. In Oklahoma alone, 882 rigs were working. Supply companies frantically expanded capacity to meet demand, but they still had more than $1 billion in back orders for pipe and equipment.
From the sober standpoint of the Nineties, it is almost hard to remember the feverish, gold-rush frenzy of those days. It was a frenzy that can hardly be exaggerated.
Hans Helmerich joined the company in those go-go days and remembers: "People were standing in line in small county courthouses to buy leases on 'hot' land. Brokers would often 'flip' their positions the same afternoon and nearly double their money."
In more normal times, oil and gas wells are carefully, strategically located, fanning out one-by-one from proven spots to determine the true shape, depth and content of deposits, to minimize risks and maximize returns. By the end of the boom, hairdressers and dentists were in on the action, drilling wells littered the landscape, and any sense of order had long departed.
Frantic, high-risk ventures became the rule. And why not? Prices were at an all-time high and headed skyward. "Prices had gone from $15 a barrel to nearly $50. Why couldn't they keep on going up — to $80, maybe even $100? A lot of people thought they would," Hans Helmerich recalls. "When expectations are soaring like that, it's hard to keep a business-like approach. That was part of the problem."
What was overlooked, in the "certainty" that expansion would continue, was the fatal precariousness of the industry's situation. If prices fell, if demand dropped, the entire industry would crash.
By the end of 1981, the end had already begun. Prices and rig counts began to fall..