Industry leader John Walker says the abundance of capital available to oil and gas producers should be used wisely. "All of us are optimists. We buy into [that commodity prices are going] up, up, up. At times we need to reflect on where we are," he told more than 300 attendees at the fifth annual A&D Strategies and Opportunities conference in Dallas recently, hosted by Oil and Gas Investor and A&D Watch newsletter. Walker is president and chief executive of Houston-based producer EnerVest Management Partners Ltd., which operates 11,000 wells in 10 states, and he is past chairman of the U.S. industry's independent oil association, the IPAA. "It's been too easy," he said of accessing capital. "This is a hard business...We need to be making rational decisions right now." As retired Fed chairman Alan Greenspan said in the late 1990s that stock-market investors were experiencing "irrational exuberance," Walker said oil and gas leaders could succumb to the same. "I believe we are in a period of irrational exuberance," he said. He noted, however, that stock prices continued to rise after Greenspan's comments and today are higher overall than then. Caution should be exercised, Walker said. "We prayed for this boom. We got it. We're not going to screw it up this time." The industry is awash in capital now. "There is way too much capital chasing too few deals...Our costs are out of control." Engineers are being hired after one interview and being overcompensated. "I'm not even sure if they're checking their pulse." One example of uncareful spending: a producer amassed 100,000 acres in a shale play and discovered there is no shale under the acreage. "They're just south of the shale," Walker said. For more on this, see the October issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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