Over a barrel.

• Author: Griffin, Judith Fuerst
• Position: Alaska's oil field service firms

OVER A BARREL

Falling oil prices pushed oil field work into a precipitous decline that tested the mettle of Alaska's oil field service firms. Here's the survivors' saga.

FROM BARRELS TO BUCKETS. Work in Alaska's oil fields dried up during 1986 and 1987 as oil companies, reacting to plummeting oil prices, scaled back exploration and production activities. The oasis became a desert, parching the operations of oil field support service firms. All could not survive, and most businesses dependent on oil patch revenues downsized, merged, fled the state or withered and died.

Compounding the slowdown in activity was the failure by many businesses to heed warnings that the halcyon days of the early '80s would not persist. Economists had been forecasting fewer jobs and less spending in Alaska's oil industry as the North Slope's major producing fields began reaching maturity in the mid-'80s. With nosediving oil prices, the fields of opportunity yielded fewer harvests and, in many cases, largely lay fallow.

Firms that had invested in equipment and facilities to take advantage of boom-time business found themselves unable to cover upkeep and debt expenses. They also were unable to downsize nimbly. Not surprisingly, what little work remained attracted so much competition that profit margins dropped despairingly low, sometimes so low that errors or unforeseen costs dragged the victorious bidder under.

There were many ways a business could fail; fewer to survive. Those that did eke out an existence succeeded through combinations of careful cost management, restructuring, innovation, tapping new markets and expanding and diversifying services. Although times still are tough, particularly for construction firms, many managers admit to cautious optimism. There's a sense that stability is returning to the oil industry. As many as a dozen wells may be drilled in the Arctic in 1989.

Another emotion evident is pride. In taking stock of their achievements, the survivors are recognizing that they've emerged from the drought in better shape, that their businesses are leaner and fitter competitors. The proving grounds offer viable opportunities to earn a living, if not the abundant spoils that characterized the oil fields in earlier years of the decade.

Scott Jones, president of a Philadelphia-based consulting firm specializing in the energy industry, says, "After Alaskan oil field service firms were knocked on the mat in '86 and '87, they were back on their knees in 1988." He notes one early sign of recovery is that support industries haven't withered a great deal further.

Although warning that any future activity will be oil price-sensitive, Jones predicts support industries should see "significant and meaningful improvement during the next two or three years-10-20 percent increases in revenues." The improvement will be driven, he explains, by the need to drill more wells to maintain levels of production from Prudhoe Bay's reservoirs.

Because older oil fields require more investment and maintenance-more work to keep wells producing as reserves decline-drilling companies and other "downhole" operators can look forward to work opportunities. Bill Webb, director of membership services for the Alaska Support Industry Alliance, says that's a plus for many of the organization's members.

After dropping from 350 members in 1985 to 80 by the start of '88, enrollment in the Alliance climbed...