Oil prices are beginning to climb from their lowest levels in years, trading around $50 per barrel earlier this week.

However, several months of dropping prices have caused some oil and gas companies to rethink their budgets for new projects in the first quarter of 2009, industry experts said, which will have an impact on the Teche Area’s oil and gas service companies.

Larry Walls, public relations representative for Mid Continent Oil and Gas, said service companies that work with existing wells will continue their current level of operation — busy, though, he said companies that specialize in servicing new wells will see less of a need for their services in the coming months.

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“Oil companies have been through good and bad times and most are prepared to weather this storm, as well,” Walls   said.

“We will see changes in the size and scope of new projects for independent companies, and we will see the majors continue with new projects, though I think they will put some projects in the early planning stages on the back burner.”

Don Briggs, president of the Louisiana Oil and Gas Association, said the service sector will start to feel the pinch soon.

Briggs said his association recently surveyed one of the most active exploration areas — the Haynesville Shale in North Louisiana, and found the rig count in the area will most likely stay at current levels.

He said many of the oil companies with interests in the shale are going to keep their projects going there by spending less money in other locations.

He predicted there will be a slowdown in rig activity in South Louisiana as a result. 

Briggs said offshore and deepwater rig activity will remain relatively stable though, one bit of good news for local service companies.

“These are long term projects and consequently aren’t affected by short term prices,” Briggs     said.

Several months of record high barrel prices and major oil company profits have provided these companies with a large amount of capital in their reserves.

Briggs said this will probably not increase their drilling activity but will have a positive impact on the service sector, providing more workload stability.

Walls and Briggs said they believe oil prices will begin to stabilize in the coming weeks due in part to the inauguration of a new president and the beginning of a new administration.

“(President-elect Barack) Obama will certainly have an impact on prices. Which direction or how much, I’m not sure,” Walls said. “We are already starting to see some slight improvement and stability in the market. As that happens, confidence in the industry will improve. There will be significant changes in store in the next two or three weeks.”

Walls speculated oil prices could stabilize between $60 and $75 per barrel in the coming months.

“Low enough so the consumer doesn’t get the sticker shock and high enough that oil companies will still make a profit,” he said.

Briggs said companies in the U.S. can make a profit with prices higher than $60 per barrel.

“Oil is getting harder and more expensive to find,” he said. “The finding cost to make a profit for companies was $60 a few years ago. But, these companies look at long range predictions, and any company making $70 per barrel is doing well.”