Gloom and Doom: What’s a Landman to do?

doom and gloom

It’s probably safe to say that we have all personally experienced, or had a good friend who has personally experienced some downtime over the last few years.  The United States is swamped in uneconomic dry gas, and even some of the wet gas is not worth drilling.  Historic oil plays have been a place to hide, but by their very nature these plays require a certain amount of skill not all possess.  I’ve seen a ramp-up over the last six months of experienced landmen who are looking for work, and I thought it was time to put some thoughts down ‘on paper’ on the subject.

Everyone knows that we work in a cyclical industry, and we’ve all been told to “save for a rainy day” or “make hay while the sun shines”.  I don’t know how many do just that, but every successive boom and bust cycle converts more to a habit of saving.  An unskilled person can advance to a very respectable annual earning potential in a pretty quick time period (3 to 5 years), and while that means opportunity for those that can grasp it — it also spells trouble.  Is a three year landman at $350 a day that much better than a one year landman at $250?  Is a seven year landman at $400/day more competitive than a 20 year landman at $450/day?  Most of you can see the easy tradeoffs here that brokers and in-house landmen have to deal with.  I don’t know the answer to these questions, but when budgets get tight there is a pressure to get the work done with less.  I made a quick (completely unscientific) chart to illustrate my point:

Landman Crew Pay ChartAs you can see, budgets can get eaten up pretty quickly on an annual basis by dayrate increases.  One could easily see where a trade-off might be made towards the example at the bottom — even at the expense of total time to complete the project.  The example at the bottom, could for instance, allow one to keep developing their acreage position while waiting out the next budget cycle.  I’m completely ignoring the cost savings by hiring local new or inexperienced landmen over experienced crew that requires travel and lodging expenses.

This means a few things.  The first is that as you gain experience you must also gain skills that will set you apart from your lesser experienced counterparts.  No longer will it be sufficient to have 20 years of experience only running title or leasing, to succeed you will likely have to master more advanced levels of land work.  At a minimum, the experienced landman should be skilled in title curative and due diligence in the future.

gasoil1The bigger omen is that we are likely in the midst of a cyclical multi-year downturn comparative to the staffing levels we have seen in the past.  The energy business is largely booming, but landmen are experiencing a disconnect from that boom in much the same way as natural gas prices are disconnected from the historical ratio to oil prices.  The theoretical ratio of oil to natural gas prices should be 6:1 based on the amount of energy produced by equivalent volumes of each fuel, the current ratio is 24.5:1.  Barring an increase in natural gas to bring pricing to a more theoretical level, the most logical thing that we will see continue over the next 18-24 months is a washing out of excess capacity (landmen) in the market through retirement and (plainly spoken) an inability to wait for the job picture to turn around. 

This washing out process is likely not confined to a particular experience level either.  We’ve already discussed how and why every experience level has its place going forward.  If anything, it could mean that as you gain more experience with gaining new skills, it will be more difficult to secure a stable future.  Looking at the situation from a strictly “raw numbers” perspective, there may be more available jobs for lesser experienced landmen than more experienced landmen — while the rarer jobs available for skilled landmen could have higher compensation (and expectations) attached to them.

Of course, all of this is assuming that we don’t discover a new play in an un-leased area that is extremely economic and will spur another multi-year boom cycle.  Unfortunately, putting all those variables together amounts to a “Hail Mary” pass in football parlance.

So what can you do to protect yourself?

I don’t know how many more ways I can suggest that you need to stay relevant.  The landman in the next decade will have to learn new skills, constantly develop new contacts, enlarge their spectrum of education, and combine all those things with a dash of luck.

I’m sure we’ll get some pretty strong opinions in the comments below, but I’d like to hear them anyway.  What does your crystal ball show you for the future of the land business?

Randy Young

Randy Young

Randy is a land consultant with experience in field and in-house land work, land administration, and software consulting with systems used in the land management business. He is an active member of the AAPL, HAPL, and NHAPL and is a regular attendee of industry functions.

Randy’s latest projects have included land data systems integrations, with a focus on Quorum Land System.

  • John R Gaston says:

    I think one of the best things you can do is get a degree. I think I’ve been grandfathered in, but most outfits will not even consider hiring anyone that doesn’t have a degree. That wasn’t always the case. I think until 3-4 years ago, being a landman was the best kept secret. You could sign on with a company and make $50-60k in just a couple of years. Well that’s more than most college graduates make! The secret is out now, I’ve never worked with as many educated landman as I do now. If you have experience that might get you through, but I’m not taking the chance, I plan on finishing my degree in my spare time.

  • Dan Arnold says:

    This is exactly why we have seen E&P clients determining what the mix of landmen will be. They have already crunched the numbers, in a similar way to that which you’ve illustrated here. They tell a broker you can have x number of $450.00 a day landmen, X number of $300.00 a day landmen and the rest must be new recruits or low income landmen.
    Another thing that I see trending is projects where the prospective landmen are told “We will only pay up to $350.00 a day as the top level of pay. Take it or leave it.”
    The industry is constantly changing and those changes can be pretty rough sometimes. That said, I expect that you are correct in that there will always be a demand for landmen who have a variety of skills and experience. Quality individuals who always give it all they’ve got. There is no shortage of landmen (of any age or experience level) who work the system, but the best will always be in demand. Sure, there will be some down times, due to the cyclic nature of the industry, but the reward goes to the diligent and dedicated.

  • Kenny Gunter says:

    Randy

    I agree completely with what you said in your post. I have told landmen for years, don’t be a one trick pony. I made it my mission when I got in the business to learn as much as I could about as much as I could. I didn’t want to be labled as a landman with just one skill set. I wanted to be the best all around landman possible. When companies bring on all around landmen, the client gets more for their money and brokers know that.

    Learn how to lease, learn how to run title, learn curative, learn due diligence, learn GIS. Like you said, stay relavent and make it a no brainer for a client/broker to bring you on.

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