Next month, California independent producer and oil-service legend Fred Holmes rotates off his five-year stint on the executive board of the Association of Energy Service Companies (AESC).

The group, which has 700 member companies in 21 chapters around the U.S., was founded in 1956; Holmes joined in 1968. (It was formerly known as the Association of Oilwell Servicing Contractors.) Holmes was the group's president in 2009, and as such, will remain on the larger board another two years.

Fred Holmes

Fred Holmes

Holmes says he loves the commitment that service implies, for he loves the oil industry—it's been in his blood ever since, at age five, he told his mother he'd rather go out to the field with his father than go into first grade.

Raised on an oil lease 40 miles west of Bakersfield, Holmes is a third-generation oilman whose grandson enters the Colorado School of Mines this coming fall to study petroleum engineering. His grandfather ran a cable tool rig in the early days.

After high school, Holmes spent two years in trade school to be a diesel mechanic, but he worked most every job at Western Well Service, the company his father, Gordon, founded. Years later, he received lifetime achievement awards from the California Independent Petroleum Association and the AESC's Golden Rod Wrench Award.

Fred eventually acquired his father's company in 1982, and grew it to some 250 employees. It was sold to Key Energy Services Inc. in April 2008 for $51 million. Holmes stayed on as a vice president and board member for a while.

In 1971, Holmes also formed Western Drilling, and soon, about 60% of the revenue was coming from drilling and 40% from well servicing. To further shield his employees from the fickle downturns the industry is known for, he founded Holmes Western Oil Co. the same year. Today its 35 employees manage about 1,700 barrels per day of heavy and some light oil production. Each year the company drills anywhere from 30 to 60 wells, all 100% operated. There's plenty to choose from, as California has nearly 50 stacked pay zones.

Investor You must be loving it in California right now, what with high oil prices and low costs for natural gas for those steam floods.

Holmes Yes, that's right. We do consume a lot of gas to heat up that oil. We'd love to see gas prices higher for the industry's sake. Cheap gas is not going to support gas drilling much longer.

I see the rig count coming down every week. When the oil companies don't drill as much, that affects the service companies right along with it. In the Sacramento Valley there is some work still going on, but it's not real economic. If it's associated gas that comes along with oil production, then you're OK.

Investor What is the nature of your production?

Holmes We're west of Bakersfield on the southern end of the San Joaquin Valley, mostly in Midway-Sunset Field. The majors have most of that but we get some of the stuff on the edges, you know. We've been here since the 1920s, so we've accumulated some acreage that would be seen as marginal to a major. We're not in that new diatomite play—wish I was!

We are drilling in the Tulare, which is 12-degree gravity, and the lighter oils like the Caltroleum, which is 25 degrees.

Investor What kind of advice can you pass on?

Holmes I'd say give 100% to whatever you are doing. Just growing up around my dad, it was a family thing and I learned a lot. We gave good service—if someone calls you day or night, you're out the door. I always like to say, Go early and stay late.

Investor You've seen tremendous technology change.

Holmes The drilling is 100% automated now and all this new logging and horizontal drilling—I'm overwhelmed by it. It is so beneficial to our industry. We are finding a lot of oil. Just think, North Dakota passed up California in production five or six months ago!

Investor What are some big issues you deal with at the AESC?

Holmes There is an abundance of rules and regulations right now, and the agencies are overlapping, so it's burdensome. We are not opposed to clean air and water, of course, but all these duplicate rules are just different enough that you have to treat them a bit differently. And, if fracs are stopped, that stops the rigs from drilling, and that stops our members, so their (producers') issues are the same as ours.

We also worry about percentage depletion, on the first thousand barrels a day of production. To a major that doesn't even show, but to little guys like me who drill the stripper wells, that could take capital out of our hands that we'd use to reinvest. That's touted as a big tax loophole, but it's not.

Investor They say you know the industry is doing well if Fred Holmes can't easily get a seat in one of the restaurants in Taft. True?

Holmes That's a good quote.

—Leslie Haines

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