I had always thought that an offshore rig sorted of floated around and could be moved when a well dried up. Not Irene. As described yesterday, she sits 4.5 miles off the California Coast, somewhere between Lompoc Penitentiary and Santa Barbara.

I had also thought a rig had some sort of anchoring columns at the corners, and then a pipe more or less in the middle going down through the ocean floor deep into the oil formation, from whence flowed the oil. And maybe that’s vaguely how Irene started out. But in the 11 or so years since, she’s grown to include 28 wells. They all go straight down to the ocean floor just a few yards from each other, but then, under the sea floor, they angle down and out in different directions. This is very weird, if you ask me — how do they get a mile-long drill bit to go around corners? But even though we saw not a drop of oil, smelled not a whiff of gas, in the hour we were Irene’s visitors, about 3,000 barrels of “natural resources” had flowed from beneath the ocean floor, through these various pipes up to the rig, and then through a pipeline to the mainland for processing (through more pipes) and then through more pipes to trucks to tanks to hoses to nozzles to YOUR GAS TANK.

About 80,000 barrels a day through Irene alone, consisting of oil, gas, water and assorted other junk, netting about 12,000 barrels of oil (half a million gallons). At $20 a barrel (to take a round number), that would be close to a quarter million dollars a day, close to $100 million a year. No wonder someone had invested $160 million in Irene.

Of course, the costs of operating Irene, and retrieving the occasional hard hat blown overboard, are not insignificant. But standing there above the Pacific, contemplating it all, looking at the barnacles and rust (painting goes on constantly), it was fascinating to try to connect the real (an unseen steady stream of dirty gasses and oil and water, including the occasional release of deadly hydrogen sulfide) with the financial (footnotes and discounted cash flows and oil futures). The steady flow that leads from under the ocean to your gas tank (and then into the atmosphere) . . . and to the $15.60 dividend check perhaps you get every quarter.

OK, OK, I’m getting carried away. But I was like a third-grader out on a field trip to the Wonder Bread bakery. A lot of us never see much of the real world. (I was sixteen before I saw my first real cow.)

When the wells flowing into Irene are depleted, new ones will be drilled. So far, none reaches more than a mile or so toward shore, so as not to trespass within 3 miles of the coastline and, thus, into California State waters. But if a deal can be struck with the state, drill bits will one day pass that imaginary line beneath the ocean floor, and new reservoirs will feed Irene.

“What about an earthquake? What about a big wave?” I asked, worrying that the folks who built Irene might not have thought of these risks before putting $160 million into the enterprise. I should probably be more worried if I caught a whiff of rotten eggs, our safety officer, Jeff, cheerfully advised — that would be a hydrogen sulfide release. A tiny concentration would quickly kill us, which is why the sensors all over Irene would wail hysterically at the first sign of keeling canaries (as I understood the technology) to warn the crew. Within moments (holding our breath), we were to locate one of the five-minute air packs placed all over Irene, don it, move “upwind” (the wind itself would quickly disperse any hydrogen sulfide emissions), and then into one of the 52-person orange safety bubbles suspended like Christmas tree ornaments from Irene’s main deck. Fortunately, there were no such emissions while we were visiting. They are quite rare.

We finished our filming, boarded our helicopter, and flew back to Santa Barbara (Goodnight, Irene!), consuming another 70 gallons or so of jet fuel in the process — about 12 seconds’ work for Irene, if I calculate it correctly.

Will any of this make me a better investor? Savvier about picking oil stocks? I think not. But it did remind me that someplace beyond all the Value Line rankings and p/e ratios, there is actual steel and mud and guys getting lowered in twin-engine motorboats in rough seas to retrieve a hard hat that’s blown overboard.

And all of this — not to mention the computer consoles in the control room that monitor it, or the 10 phone lines the crew have available to call their sweethearts from the rig just as easily as you or I would call home — has been invented in the last 150 years.

Can you imagine what the next 150 will be like?



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