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55 minutes | Jul 2, 2020
Oil & Gas Assets - Luis Rodriguez - The Raisa Energy Model - How Discipline, Science, and Technical Innovative Drive Success in Acquiring Assets
The oil & gas market is intrinsically volatile. The fundamental principles of supply and demand are always testing the agility and financial health of businesses operating in the sector. Two essential products, oil & gas generates over $3.3 trillion dollars* of revenue annually in the E&P space (*IBISWorld). While the Majors control the lions share of that revenue, private businesses can clip off a portion of the market to generate returns to their investors. For the most part (some exceptions aside) downturns like the one we are in highlight the most resilient and disciplined groups in the market. In this podcast we have a chance to sit down with one of the leaders in the private non-operated Oil & Gas acquisition space, Luis Rodriguez from Raisa Energy. Luis and his team are at the forefront of utilizing advanced technologies to predict operator movements and target the best rock in the country. With such focus, Luis has successfully established 3 rounds of funding under Raisa, with a fourth in the works. His technical prowess coupled with his truly humble approach to leadership has made Luis one of the leading names in the non-operated interest space, and one that we will all come to know well in the years to come.We are joined by Evan Anderson, guest-host of the podcast and founder of Oseberg, to help focus in on the key lessons that Luis can share with anyone looking for some extra inspiration in their lives during these turbulent times.TRANSCRIPT BETADisclaimer: Our transcription software is in beta testing mode, using NLP and AI to convert our conversations from audio to text. We openly admit that at present, the output quality is poor, with numerous errors throughout (some of which are hilarious in nature), however, we would like to release this information should it be of value to any users.With the help of time and money, we plan to increase the quality of this output as we build out sponsors that help support the growth of the show.Evan Anderson: You know how you you know, what your journey look like for Well Services to a p back not up minerals fun. And you know what role if any Alex played in that and you know, I've read a little bit about how he's played a mentor to you and I'm curious as to how he kind of shape your professional development.Luis Antonio Rodriguez: True. I appreciate being able to share and a little bit less. Well, I guess Well Services I have to say is is both an interesting place to stop and a tough place to Pivot from I couldn't be more grateful for the opportunity that Columbia gave me. to be able to come abroad from the hardships that were being endured in Venezuela at the time and the fact that you know, they have a very unique system of really creating opportunities and a passport with which to enable a person to enjoy success in any part of the world at the same time, I think as Look to transition from services to you know, the EMP side. It wasn't it wasn't an easy and easy transition because it's really seen as to almost completely different businesses one invests heavily in R&D and is really tied to execution of services. The other one is more of an understanding of risk and underground risk and asset management. Management and so it was a it was an important step for me to be able to go to Brigham and then giving me a chance to in some ways take a small step towards a closer point of contact with the NP and then when I began rise up in late 2014 likes was one of the instrumental persons in giving me a chance both with his time. As well as capital in order to start Riser one. And so thankfully he's been a person not only that took that initial step but has taken many steps to be on that to support us and or hold us accountable to always look to Endeavour above and beyond where we're at.Evan Anderson: Absolutely. What was your what was your investment thesis or you know, what was the bridge between Brigham and and in erisa?Luis Antonio Rodriguez: Brigham was a fantastic place to work and because they were kind of at the Forefront of really systematically investing and minerals at the same time. As I saw the opportunity investing in minerals. I saw the complementary thesis of being able to invest in the fractionalized interest of normal and what specifically intrigued me about normal was the fact that you were able to see Really the the slice of the pie that represented the ownership from the point of view of the operator. And so to me that allowed for both better Investments as as a mineral company, but also more data with which to better understand how to invest in a continuous basis that could be married really well with You know Ai and specifically, you know kind of basic machine learning pieces to advance the knowledge base that that could give you.Adam Cohen: So what got you interested in those type of Technologies? And was that something Central to the way you were looking at Raisa getting that company started?Luis Antonio Rodriguez: Yes, sir. Thankfully I've been exposed to what I would call volumes of data since my career began be it an ExxonMobil in cleaning the production allocation databases to setting up a database and Hardware that enabled Slumber yeas track comes to communicate in a continuous basis to a central database for a group. data scientist or back then statisticians to understand how best to enable them to be managed and or what the cost structure needed to be and so as I got into the empty side, I'd always had this kind of conception of large amounts of data can be turned into a powerful tool as long as you have the ability to dissected appropriately and Cheryl and some ways became really an enabling force in oil and gas to do so because before you were doing one, maybe two Wells and billions of dollars of Investments here was fractionalized interests in the United States at a much smaller scale of capital being done thousands upon thousands of times per year. And so the ability to aggregate that had financial implications that were exciting the ability to have a data available and will be able to be accessed. Also have exciting opportunities with respect to the investment thesis. That was built.Evan Anderson: Absolutely. Yeah, you know, I noticed that that as a private Equity backed pork Co you have a VP of data analytics as part of your management team and it's rare when you look across the landscape of sponsor portfolio companies. You don't see that kind of representation at the management level or it's rare that you do so it sounds as though technology and Data was very important to culturally from the beginning of the creation of erisa. And it sounds like it was very much integral to the design and the strategy when you launch the Endeavors, is that fair to say?Luis Antonio Rodriguez: It was a non-negotiable point at the time that we raise Capital to be able to have a CTO that could empower the vision that we had with respect to what we wanted to do. So, yes.Evan Anderson: What's your view on the industry in the landscape when you think about data and technology and how it can be utilized whether that be on the operations side or on the the the acquisition side of real assets. Do you have a you have a strong opinion or out the industry in general?Luis Antonio Rodriguez: I think that we we have places where especially in hard work and all modeling that with Weaver's and as an industry that have actually been really strong historically at the same time. The I think that the piece that has kept us maybe in some ways as a laggard is the fact that Companies and will generally only gas companies tend to be very protective of what they're doing and how they're doing it less. So in the end with the Advent of shale and what the public information that that represents but I think that between shell kind of democratizing a little bit some of the pieces of information that are out there. And then furthermore the fact that the cost structure of oil and gas needs to be to a point that makes for an attractive investment, which hasn't been so for the past to say decade makes it to where it becomes not no longer kind of a choice it becomes a need and I do think that there are opportunities for technology to really have an influence on that cost structure coming down pretty significantly.Adam Cohen: So what round of funding are you currently in if if I can ask you that?Luis Antonio Rodriguez: For yes, we're currently launching aAdam Cohen: for RaisaLuis Antonio Rodriguez: couple of race riser for those of fund.Adam Cohen: Okay. So how many you know rounds did it take before investors in the past who might have said no are now interested in Raisa and the use of Technologies in the space. And also I think up front how much how much more rejection did you have? If any when you were presenting this to potential investors with technology, you know make a break for you.Luis Antonio Rodriguez: It's a difficult question to answer in that I think the history that we now have in having built something that enables us to have a differentiation and the success that we can show in putting that differentiation to work. I think will enable us to have conversations that are a lot more positive than at any other point. Time in the history of erisa at the same time. I think that as we go into this raising environment, this is probably one of the most bearish or negatively sentiment it environments against all and gas that I've encountered even more difficult than you know, 2014 2015 and the reason being not so much driven by By a bit covid and all macro. He is G positions, but I think the fact that you haven't really done a great job as an industry of returning capital and you have those macro pieces at joining to the thesis. It creates for a sentiment that is difficult to overcome even with technology. And so before when I first started Riser technology might have been kind of a nice to have But democracy says of you know the interest in Shale in 1415 and the capital that was behind it really helped give it Tailwind. Even if it looked hard at the time. I think now you have kind of a much more bearish macro Outlook people that have lost a lot of capital in the process. And so thankfully, I think we now have a quiver of parsley would be able to reduce some of those barriers by the fact that we can show success in the last four to five years.Evan Anderson: We have got to imagine, you know, so off. My technology is being an afterthought for companies, you know, they stand up their vehicle. They get their management teams in place, then they start thinking about technology and infrastructure and you know given the structure of the private Equity structure the traditional structure. You don't have a lot of g a budget up front to invest heavily in data. Technology. How did you get in the constricting nature of g a budgets relative to that the fun structure? How did you think about funding a large-scale technical effort and balance that with overhead and everything else?Luis Antonio Rodriguez: You know for us a key to be able to do that successfully was one being able to consistently show that we would be imprudent and successful in the Investments that we're making regardless of technology or new technology. And so consistently being able toEvan Anderson: rightLuis Antonio Rodriguez: show that the bottom line returns were there and then the And peace was being able to build from the ground up office and Cairo allowed us to tap into what is a massively talented Market of software engineers and data scientists that we could hire at a very substantial differentiated cost to what you'd be able to hire if you'd be able to hire it in the US.Evan Anderson: Yeah, absolutely in do you think that helped ease might find technology is a route to oil and gas and that maybe a story that resonates a little bit differently this go-round.Luis Antonio Rodriguez: You know my I'm a little bit I guess in my mind the way that I think about it is for me technology is an enabler to better understand how to invest and if I truly believe that we have a differentiated view of being able to invest and be able to create a pipeline of Investments. I'd rather not do it as a service but do it for myself. Right balance sheet if I were toEvan Anderson: rightLuis Antonio Rodriguez: think about it as a service. I find that there might be, you know, some potential headwinds in that I see the the industry consolidating so they should be you know in the long term fewer buyers of technology and then furthermore what I see is you need you need somebody Within These companies he's that is able to both understand the language of the technology that they're wanting to implement and have influence over the people that make decisions as far as capital and andEvan Anderson: Yep.Luis Antonio Rodriguez: And and that's tough. I think some have cracked that code but it isn't easy to you know, talk about machine learning have somebody within the company that believes it understands it can monetize it and show it to the the the Decision makers and make a make anEvan Anderson: rightLuis Antonio Rodriguez: natural decision. And so what I see is is is it's a tough road. Yes potentially less Capital intensive, but no less harder to crack.Evan Anderson: Yeah, I know. I guess my question was I totally agree with you? I guess my question was more on the lines of a Quant approach to private markets as opposed to a service or or simply something that that that augments our enables a team executing on a traditional kind of path. Do you see that story resonating with with with endowments or Pension funds do you see technology as you know, you know in it could be applied to any real asset oil and gas is one of many potentially but do you see kind of a Quant approach to private markets as being a story that may resonate with that audience?Luis Antonio Rodriguez: I think so. I think again, I think that it needs to be towards an end that ultimately brings a differentiated return. And so I think there's a lot of really exciting, you know, exciting technology out there that does a lot of really, you know, different pieces that that I would And I love him and enjoy and at the same time the lack of congruence or completeness and all history of being able to show success in creating value. And when I say value, I mean dollar value that you can show historically and consistently I think makes it to where unless you have that history of success and it's very clearly tied to the technology that you Use them you're going to have aEvan Anderson: Yep.Luis Antonio Rodriguez: hard time selling it or it making a difference to the pitch that you're trying to make.Evan Anderson: Totally great.Adam Cohen:Evan Anderson: So think about those value propositions when you think about the technologies that you guys have built in are utilizing do you tend to think about the acceleration of deployment of capital? And irr do you think roic you think of just being able to to scale your business with less overhead in in asked energy and a budget or all of the above?Luis Antonio Rodriguez: It's really an all of the above. The first one is consistency of underwriting at a discount at multiple of investor cash. So what you said was going to happen did it happen and if it didn't why it didn't it happen and then being able happen and then being able to do thatEvan Anderson: rightLuis Antonio Rodriguez: at scale and thus with you know, the ability to grow the pipeline that you are exercising this underwriting process. With a team that looks similar to what it looks today and where it's not slightly bigger. I'd basically multiples different to the growth that you expect to be able to manage on an asset level.Adam Cohen: So how do you quantitatively assign value to technology when it was in place from the very beginning? So how do you determine what the value of the technology is? And the return that it's provided to you and and investors?Luis Antonio Rodriguez: I think for us we don't even really get into technology and valuation to also technology is an enabler mechanism that we are and that's not really up for grabs. What's up for grabs is the end product that creates and so what we think about when we talk to investors is here's the assets. Here's the pipeline is the history of the results that it has created and how we managed it and So that you know, this is enabled by the fact that we have these things but it's not really what's up for grabs.Adam Cohen: Are there technologies that have performed exceptionally? Well that you would recommend other companies to consider adopting and others that you've either sidelined or removed from your system now that you're in round 4 of your Capital race.Luis Antonio Rodriguez: Nothing that comes particularly to mind. I think that there's a lot of different technologies that are all really have, you know, value-add to me that the important thing that we have is kind of a central thesis of how to invest and the technology enables the breaking of those of the silos of the different groups. To think about the investment and creates consistency in how we do it and accountability in how we've done and so I don't think I'm saying anything that is earth-shattering. I think you can do this through various different technologies that are out in combination. You just need to have a culture that kind of follows through and is consistent in doing so much more so than a technology in it of itself.Evan Anderson: Saint Louis, you said that the technology was a A non-negotiable for you when you started out on your own path here. What was the turning point in your journey that they created such conviction for you.Luis Antonio Rodriguez: You know the I think it came with the understanding or maybe settling to the fact that I'm I have a lot of biases that I can only see by the fact that data is able to discern whether the bias is playing. Effect or not and a person whom I trust that judgment on and we have data on which to base the conversation. I can have a different point of view that makes me step back on any given decision that I'm about to make and so I think at some point during my process of managing frat Cruise implementing statistics to understand the relationship between operations and costs at Columbia business school and then Brigham it all kind of matured to a point where I thought you know people and data together with trust in judgment but being so that bye-bye data was a winning way. Being able to invest at least in the long term, you know, you can have one one shot at luck and and call yourself. Very good. If you're thinking about 10 20 years of consistency, I think...
70 minutes | Jun 18, 2020
Oil Tech & Site Management - Ian Cunningham - Remote Site Surveillance is the Future
The future is shaped by the innovators of today. What is novel and experimental today can become the norms of tomorrow. With a little bit of luck, and a whole lot of hard work and concentration, those with a great idea or product can be the inventors of the future. It’s what makes the democratic system of North America so great, the idea that any man or woman, rich or poor, can forever transform the way we conduct our business. In this podcast, we get to meet one of those inventors, Ian Cunningham. Ian and his team at Wave 9 are working on transforming the way we manage and operate oil & gas sites. With a blend of network-enabled tech, wireless sensors, a lean process, and an intuitive, no stress software approach, Wave 9 just might have come up with the next technology that will be deployed on a large scale throughout Canada and the US.
83 minutes | Jun 9, 2020
Oil Tech - David Forsberg & Evan Anderson - The Future is Here! Automation, Artificial Intelligence, & the Culture Shift.
Pioneers in the energy tech space are challenging the upstream market to modernize through advancements in technologies. Compared to other major sectors of the economy, the oil & gas industry is laggard in its adoption of technology, with huge opportunities for automation and connectivity waiting on the sidelines.Those early to enter with oil & gas technologies are paving the way for others to follow, working on creating a change in culture that is receptive to technological integrations. The biggest challenges these leaders face are siloed data systems, antiquated filing/storage practices, and cultural resistance to change.In this podcast, guest-host Evan Anderson CEO of Oseberg joins the show as we sit down with David Foresberg, venture capitalist and Managing Partner of Ascent Energy Ventures to discuss their outlook on the energy tech space. These two powerhouses are at the forefront of technological adoption in the upstream market, and share their insights into the future of technology in O&G and their journey through the space.
67 minutes | May 29, 2020
Global Energy Outlook – Dr. Scott Tinker – Thoughts on Energy Poverty and a Sustainable Transition
The global energy landscape is complex and clouded by social/political agendas. Simplistic rhetoric classifying energy sources as clean and dirty, good and bad have polarized populations in Western Europe and North America, with a rallying cry for carbon-free energy sources, minimizing the environmental impacts that come from manufacturing and disposing “renewable” energies and batteries.In this podcast, Dr. Scott Tinker, Director of the Bureau of Economic Geology and founder and Chairman of the Switch Energy Alliance takes us around the global to explore how nations are using different sources of energy to power their homes and their economies. We discuss the outlook for hydrocarbon-based energies into the future and the challenges they face in a world filled with growing energy demand and anti-oil sentiment in some political and geographic sectors.We also discuss what we as an industry can do to proactively engage in constructive discourse around different sources of energy, and how hydrocarbons can contribute to the long-term health of nations and their citizens.
75 minutes | May 21, 2020
Global Oil Demand – Mark Rossano – Understanding the Interplay of Complex Markets and the Drivers of Recovery
Global demand destruction is the talk of the town since the spread COVID-19, but the interplay of various interdependent and complex markets presents a real challenge in forecasting the climb towards recovery. Mixed signals coming from the media and heads of markets further complicate matters as we all do our level best to keep our businesses running and our families healthy.In this podcast, Mark Rossano of C6 Capital Holdings LLC takes us on a journey around the world to review key data trends he follows to run his analysis on the health of the economy and the global oil market. An exceptional data analyst at heart with a knack for understanding the big picture, Mark’s unique awareness of the markets is the source of a lively conversation about the present and future of the global supply/demand system. TRANSCRIPT BETADisclaimer: Our transcription software is in beta testing mode, using NLP and AI to convert our conversations from audio to text. We openly admit that at present, the output quality is poor, with numerous errors throughout (some of which are hilarious in nature), however, we would like to release this information should it be of value to any users.With the help of time and money, we plan to increase the quality of this output as we build out sponsors that help support the growth of the show.TranscriptAdam Cohen: Mark. Thanks for coming on the show today.+1 516-***-**59: Sure, it's at thank you for having me. It's a pleasure to be on.Adam Cohen: Yeah, and you and I had a good long+1 516-***-**59: onAdam Cohen: chat yesterday and I think I was just impressed by how detailed you are at, you know looking at all the different metrics that go into the global supply and demand cycle and and where we're at presently in the world.+1 516-***-**59: No, I appreciate it. Yeah, we we definitely ran the gauntlet on some of those different topics and and one of the interesting things that wouldn't when you look at the supply demand metrics, you know, demand is becoming such a moving Target, you know, it's always been fluid but now with covid-19 and and the issues that we're seeing as countries and companies really struggle to restart. We're seeing this this counter balance of well where Supply going. Where should It Go And then who's buying it like, you know, if you think about refiners pet chems as the natural buyers of a huge chunk of this oil. What are they doing? Like what are they seeing on their end? And it's definitely A Tale of Two Cities and it's kind of hard to balance the two in terms of which economic data matters most, you know, which refiners going to make money and then what for finer like what crude is that refine are going to buy which is always a fun topic.Adam Cohen: Yeah, so I just up front here. I just want to let everybody know all the listeners that will be sharing marks presentation that he had prepared for C6 Capital Holdings his company LLC where he CEO and founder and I think it's an incredible piece with a ton of metrics that you should definitely download. If you're even a little bit interested in you know, where we stand globally but Mark, can you tell us just a kid? Off what are some of the most key data points for you on a day-to-day basis like you only have so much time in the day and kind of seems like you're looking at everything what's kind of on your top 3 list of things you like to keep an eye on to to track Trends in the market.+1 516-***-**59: Yeah, it's a great question. And and the thing that I always check on first is the you know, the refinery crack spreads on a global level. So I've been able to integrate that just to have it on one screen and I can quickly look at it and say okay where is gasoline trading or you'll what are the refinery margins for gasoline distillate and by distillate? I'm looking at heating oil gas oil jet. All and just trying to piece it together because you know, we know that there aren't planes in the air and if there are there's way less than there used to be we also know that trucks aren't moving as much we know trains aren't moving as much ships. But you know gasoline is interesting because you have people who have been cooped up for however many months looking to get out. So it's a matter of looking at that basket and understanding your who's who's going to buy more oil to make those products because Cuz they're going to see a margin and that's how I try to get a sense of. Okay? Well, where is the trend going is the trend changing or is it something that there's going to be a headwind in demand over the next call it six 12 weeks or so?Adam Cohen: So look at things right now. Do you think we've hit the absolute bottom in demand?+1 516-***-**59: Yeah II think we've hit a point where you'll we we've talked about it in the past. My initial view was that we were going to get to about a 38 million barrels a day demand destruction, and we could have peaked, you know at about 50 depending on how quickly people started to come back and company started to come back. I think we really take that about 38 and and we've seen some recovery since then specifically out of Europe out of And and then as well out of the u.s. So I think we've kind of come off that bottom. I think the market or you know, let's just call it the financial institutions are sitting there saying that you know, the recovery is here and I just think that the recovery back to normal is going to be much longer than I think the market is anticipating and it's purely because you see this balance. We we had a terrible number and now we have a less. Bet number and there's a view that that's going to continue to go but there's a certain, you know, there's a certain Peak and normalization is people kind of way. Well, the virus is still out there. Do I want to take that risk, or do I want to give it a little bit more time? And what is my employment status? And what is my savings look like and that's where I think you're going to get some of that slowdown in this recovery.Adam Cohen: So globally what who's kind of leading the front here on recovering demand of hydrocarbon products and Whos the furthest behind and you know the slowest to recover.+1 516-***-**59: So here we have China your first in first out type situation where China was obviously the first where this originated and and how it kind of spread so they were that first in component and then you look at some of the others in terms of South Korea, Japan and that Asian component that really got hit hard. So China has come back more, but the problem is and you know something that we were talking about Yesterday there's a big Divergence between Monday to Friday and Saturday Sunday Monday to Friday. I have to go to work. You know, the government is telling me I have to go my company's telling me I have to go even though they're not producing at any real level given new orders exports Etc. You know, you're seeing that there is an industrial slow down, but they're still going to work. So the demand is there on the gasoline level not so much on distillate and Diesel, but then on the Ends when it's their decision you still have a huge head headwind in terms of actual Demand on a personal level. And that's where I think that is a recipe of how things are gonna play out throughout the world where look I'll go to work and because I have to you know, I need the money. I can't I can't be furloughed. I need to get back to employment. But what am I doing with my discretionary Capital? Like what am I doing on my vacation? And and I think that's where You're going to see those headwinds over the longer term. So I would say China was the first out and I think they're starting to peek a little bit and actually come back down in terms of that demand. And even though Europe was one of the second in if you will if you think about how it kind of went from China to Italy I think that you're going to see a lot of headwinds in Europe over the longer term just because they kind of went into this and on the weakest economic footing Ting so it'll take a lot longer for them to kind of dig themselves out and kind of restart their economy to see that demand start to you know, that demand resurgence.Adam Cohen: So when you're looking at the data now and trying to project into the future, you know, I it seems like history historical references are really important. And from what I understand and I could be wrong here. But a lot of the fintech is based on algorithms that take historical case models, but it seems to me in this case, you know all the historical case models that we have for something of this global scale. Gail we don't really have all that great of data. Is that it is that true and if it is, you know, what what can we use as what what can we use as historical us some meaning and looking forward meaning and looking forward into what what might also be some, you know might also be some, you know pitfalls you know upset us and be some potential black salons in the+1 516-***-**59: Yeah, the it is interesting becauseAdam Cohen: salons in the market.+1 516-***-**59: we've never seen things like Zoom or work from home really kind of roll out in the way. It's being integrated into the everyday life. Now given if you work at a at a car factory or a meat processing plant, you know working from home isn't an option, but for people that are sitting at a desk or that have to take mass transit or sit in an open floor plan all of a sudden The world is changing and there's really like you said that's on precedent. Like we've never had the interconnected nature that we have today and people are actually finding there's a lot of value and there you can actually create more face time instead of traveling as much so I think on a go-forward level I think corporate travel is going to change which is going to be a long-term impact to the airlines because let's be fair Airlines make money on first class. Class not the guy sitting next to the bathroom. Like that's just the way their model works. And if you don't have those kind of tickets being sold that's going to be a huge head wind towards their margin, but also just general demand for airplanes an airplane capacity. So then you kind of drill down and you say well, what are the Algos looking at? Like what are the things looking at? Where can you go back and try to find what the depth looks like and I think unemployment is a big. To look at and the reason why I say unemployment, even though it's considered kind of a lagging indicator because typically you have an event the event creates unemployment. And so you're already behind the eight ball, but I think the magnitude of the unemployment is interesting because when you have this many people who were going from furloughed to all out on employed what's going to happen on the back end and it's I will now accept a lower wage. Wage to go back to work. But if I'm accepting a lower lower salary, but you know Powell and some of the others within the fed or saying oh, but we're going to keep asset prices elevated. Well now my real wage and my discretionary capital is shrinking and I think that is going to be a long-term impact into the way people spend and spending is going to adjust in hyogo. We've we've We've joked that, you know, everyone wanted the newest iPhone. on the newest Air Jordans the newest, you know TV and it's well why and what was the reason because they got rid of a button because it's a half a millisecond faster, like maybe maybeAdam Cohen: Yeah.+1 516-***-**59: Like maybe maybe you don't need that cycle. And I think that's where you're going to start to see those adjustments.Adam Cohen: Yeah, and I definitely I mean I kind of sense that in myself even and I don't know if it's reflected that everybody else. But you know when I'm looking at the things around me, I'm like do I really need this? Is this really and it's something that's always been important to me. I think is just, you know, qualifying what makes me happy. But I think this moment in time has really accelerated that reflection, I mean one because kind of stuck at home and can't go anywhere. So I think that just Inherently makes you look inwards and figure out what's going on. And then also just economically because of the uncertainty of things and because of that just makes you think it's like we're a my really placing value in my life. And is that a good place of value in time and energy or is that just something that I was doing automatically that I wasn't even aware of+1 516-***-**59: II absolutely and that's where I think you get a a stabilization and this and this kind of pull back, you know, pulling this back all full circle to energy. It's if people aren't buying as much I don't need to ship as much I don't need to move as much by ship train rail Air Freight and then if that changes will then also how we're spending patterns changing your am I going to Disney World or am I going to a camp grounds because I don't want to be near people.Adam Cohen: now+1 516-***-**59: And I but I still want to get out and you I think you start to see a changing pattern. But again, like how do you Matt? How do you measure that? Like what is like, maybe some people are listening to us right now saying I absolutely not I'm going to a toolbar the moment. It's open.Adam Cohen: shrimp+1 516-***-**59: It's fine, you know, everything is fine. But other people who I think have small like young families and and older are going to look at this differently and and adjust the patterns in which their spending and traveling and maybe they're tired of living paycheck to paycheck with ten thousand dollars in credit card debt.Adam Cohen: Yeah, so but that must be really frustrating for someone who's so numbers driven to have so much uncertainty I guess and I think that's part of my sense of things. At least what the market is the market doesn't really know how to deal with the uncertainty so it compensates with overconfidence, but I find you to be a pretty humble guy and and I would think that you know, there's You know so much on presidents here as far as what kind of effect. This has on the market that we can't really look forward and project and and that must make it difficult for for you and your position to create a Clear Vision of what the you know, maybe three months is easy. But when you're looking at like year two years three years things start getting pretty blurry pretty quick. I would think+1 516-***-**59: Yeah, and and it's you know, if everyone likes to remind me and and you always see commentary where the stock market is in the economy, and that's fine. It's a fair assessment. The stock market is not the economy. That's that's been the case for over a decade and probably more since we started quantitative easing because the market became a means of liquidity a means of like let's just pump dollars in and hope for the best but now when you talk about Looking forward the stock market and the companies that make up that market or going to have head winds on earnings. So what multiple or you willing to buy a stock at? So when I look at the at the the the today and then trying to go out into the tomorrow and Beyond you have the market that reacts to liquidity events, like when Powell spoke on Sunday essentially saying they have a ton of options. They'll buy ETFs, they'll buy stocks and you're sitting there saying well, why would you do that? Like I thought everything was getting better. I thought the we were on a solid footing or you know, and then you get kind of get these is like, oh no, we're not in unemployment going to get much worse. It's going to be sticky. So we have to prop up the economy the economy, but it's you're not then you're propping up the stock market, which is you know, we're seeing that Divergence. So as we try to see when does One Meet the other it's getting difficult because you know, you'll have the headlines. To react and tried to place a narrative like, you know oil rallies and are and the the everyone says oh, well China's recovering. It's like yeah, they recovered a month ago. Like we saw that and now they're actually slowing down some of their refining throughput because there they actually increased exports of diesel and gasoline to new records because they had such they overestimated their local demand. So now you're going To see those purchases slow which is which to be fair. You need supply and demand to make a price and supply has come out of the market. So Saudi Arabia has cancelled shipments to China that did happen. So you're starting to see a little bit of a normalization on both sides, but then the question comes down to well who's buying us oil, you know is US crude going to find a home in Europe in Asia, and that's when we start going back to crack spreads. When you say okay? Well, let's look at the cracks Burns. Let's look at what are the refiners going to make running one versus the other and when you look at the u.s. Essentially we're finer in Europe running us oil is going to lose $6 and make $4 running Saudi crude. Well your that's an easy decision. And then that's something that is going to going to move the export market and we've already seen, you know coming full circle to well. How is this Predictive, you know last the last two weeks. We've seen new orders of Ships coming from the Gulf of Mexico into Europe going to an eight-month low and that's something that just because of this Refinery margin as we look forward that's going to continue because of I'm looking to buy buy oil right now for delivery in six weeks. I'm not buying us crude.Adam Cohen: So I mean this is big picture question. But what what do you think makes energy so important in you know for casting out everything else all other elements of the market and you know politics and do you feel like energy is is one of those Chief indicators for everything else?+1 516-***-**59: Yes, I know the environmentalists will hate hearing that but you know energy powers the world so you can make an argument saying well energy is everything which is true. You could say it's solar it's wind it's it but you have to think about what is moving the world right now and it's still diesel. I still have a train that runs on diesel. I have a truck that runs on diesel. I have a ship that runs on diesel. So when Looking at these components I need to appreciate that. These'll is going to be a indicator of how is the world recovering it? Is there more or less demand based on my crack spreads and what ports are doing like our part our Port loadings up or down or they flat you know, it meet flat is the new up at this point, but when you kind of go forward and you think about well, what about the derivatives and then that's when you start getting NG it to enter petrochemicals and you think about what I purchase, you know, and and just it's something simple like, you know, we being at home we bought one of those little playsets for for our kids and and you know, I'm looking at the see what is made out of and it's made out of high density polyethylene. Well, that's an indicator. You know, HDPE is going to be an indicator of your what are people buying. You know, that is that was the high margin value on the on the petrochemicals. And everybody likes to talk about covid as you know, well, well it's an event. This event was Black Swan. We didn't see it...
63 minutes | May 14, 2020
Oil Capital – Reggie Robba – House Cleaning in Energy Lending & Opportunities in the Distressed Upstream Marketplace
Overleverage companies are working with their bankers to adjust their balance sheets and weather the storm. Capitalized groups are gearing up to acquire distressed assets in the marketplace. With pain comes opportunity for those who have the dry powder.In this podcast, Reggie Robba takes us through his experience during the last down cycle as an O&G lender for BOKF, and gives us a sense of the conditions likely unfolding now between companies and their lenders. In the latter half of the podcast we explore how the release of assets from overleveraged upstream companies will create a feeding ground for investors with capital.DisclaimerBy accessing this Podcast, I acknowledge that Oil Intel makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in this Podcast. The information, opinions, and recommendations presented in this Podcast are for general information only and any reliance on the information provided in this Podcast is done at your own risk. This Podcast should not be considered professional advice. Unless specifically stated otherwise, Oil Intel does not endorse, approve, recommend, or certify any information, product, process, service, or organization presented or mentioned in this Podcast, and information from this Podcast should not be referenced in any way to imply such approval or endorsement. The third party materials or content of any third party site referenced in this Podcast do not necessarily reflect the opinions, standards or policies of the Oil Intel. Oil Intel assumes no responsibility or liability for the accuracy or completeness of the content contained in third party materials or on third party sites referenced in this Podcast or the compliance with applicable laws of such materials and/or links referenced herein. OIL INTEL EXPRESSLY DISCLAIMS ANY AND ALL LIABILITY OR RESPONSIBILITY FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT OF ANY INDIVIDUAL'S USE OF, REFERENCE TO, RELIANCE ON, OR INABILITY TO USE, THIS PODCAST OR THE INFORMATION PRESENTED IN THIS PODCAST.Show TranscriptAdam Cohen: Hey Reggie. Thanks for joining us here today.Richard Robba: Yeah, I appreciate it Adam. Thanks for thanks for having me on.Adam Cohen: So I think let's start this pod cast off here with you giving us a little bit of background as far as where you're coming from and where you're at today.Richard Robba: Sure. Yeah, so currently one of the partners and vice president Finance for a union Rock Partners where a direct investment platform in the oil and gas space Upstream space really focus mainly on non-controlling interest. So royalties minerals and then also from the leasehold side from a working interest side. Yeah previous to that was that be K Financial Bank of Oklahoma for some of the viewers might know them did energy lending their left the bank down in 2017 early 17 and and join copper trail that has now morphed into a we're at now which is a union Rock partners.Adam Cohen: Great. So what brought you into the oil and gas space?Richard Robba: Yeah, so I guess I'm second generation a little man gotta put a funny spin on it. My dad was a geologist. So I grew up around grew up around the industry. My first experience in oil gas. I was six months old and and it was my dad's biggest well and geologists are kind of like baseball players and pretty superstitious. So ever since then, I think I've been out to every single pad site or drill site because he's never had a dry hole when when I was there. So that's how I originally started around and then my mother's side of the family or is a ranchers in Kansas. And so we've always had production from a kind of a lan Lan holder side as well.Adam Cohen: So what drove you into the financial aspect of this with your father having a background in geology and you spending a bunch of time in the field? You know, what drove you to more of the economic model side of things.Richard Robba: I've always been been kind of a I guess a numbers guy in a way, you know, enjoy the details enjoyed understanding not only how things work. But but how they were financed and so came out of school really just focusing wanting to either be a part of an EMP or go the banking or out and ended up being going the bank and route for the first four or five years of my career at be okay? And I guess lucky or unlucky started with them in 13. So so 18 to good say 18 months of good oil price and then then it kind of all fell apart and late 14 through 15. But yeah, that's that was kind of how go all got started.Adam Cohen: So what you know when you came in you were just entering the the tail end of the boom and and then, you know slid into that low commodity prices environment, you know, being new to the space. What what was your first reaction to to that transition?Richard Robba: You know, the first reaction was well, of course, it's going to go back up and I think that's something that keeps happening continuously even now as we're sitting at I believe above twenty dollars, which is over the last couple weeks is impressive price, unfortunately, but yeah, I think I think the first reaction was definitely. Oh well, we'll be back at 80 90 hundred dollars in no time and Little did I know when we were sitting at 75 $65 that would go fine. The mid-20s. Not too far after that thought and I really remember one of them big mentors to me. He's a gentleman by the name of Mike Logan. We're all sitting in this meeting at at the bank and he goes guys it's not going to get better and it's time time for us to start focusing on our clients and trying to help and work. With them to weather the storm because this seems like it will be lower for longer and you know at that time he was in his 60s and had seen a few of these not only from the banking side, but also from being an industry.Adam Cohen: So what what type of direction did Mike give you at that point and and the rest of the team as far as how to move forward from the banking perspective?Richard Robba: Yeah, it was totally a work with your clients idea. You know, it's it wasn't a we're going to come and take all their assets and and and take over. You know, I think that's the last thing even now it is that that a bank wants to do is ever operate a set of assets for the most part. They don't have the experience or the wherewithal to do that. But no, but I mean Mike's main point was Find a way to work with our clients and I think that's why he was he was a pretty respected guy because not only had he had been through this from sitting on the other side of the table as a finance professional and EMP, but but also is the bank and so yeah, it was just work with your clients figure out a way to make it work, you know, luckily for me. I we had 60 or 70 clients and and I got to see 60 or 70 different case studies of what good good. Guys did what? Okay companies that and what bad companies that and and but yeah, I mean that was that was probably one of the best experiences that all end up ever have any in my career is just really really watching what all these different companies did and how they behaved and unfortunately for some that that ended up in bankruptcy and and four others that that ended up then prospered adding additional acreage acquiring some of the G will defunct companies but yeah, I mean, I think I guess to finish that thought. I think Mike's really main point was just work with the guys that want to work work with you and then for the clients that wanted to kind of stiff arm and deflect those were always the ones that ended up in more difficult conversations.Adam Cohen: So when you go back to those case studies that you had during the last downturn the how much of it's a factor of where companies were at going into it versus how they reacted in responded after you know, the downturn occurred and they started, you know, re-evaluating internally, I guess how would you break, you know, the pre pre collapse post collapse? Ends and and the effects that it had on companies and their future coming out of it.Richard Robba: Yeah, well, I think there was definitely a good good chunk of companies and that you know call it from o9 time frame up to 13 14. The balance sheets were just out of whack Capital was cheap. Shale. something and beginning of that Wells were really just becoming period And so a lot of groups were were pushing the envelope, so I guess to answer the first Part of that. I think most important part is to always have a good clean balance sheet, you know, if that means losing, you know 5 to 10% on from a optimal Capital stack standpoint, then I think it's well worth it all day to you know, stay in that one and a half, you know, the sub 2 times leverage standpoint, but I guess to fully answer your question there. So one it was the groups that were Were moderate to had at least a moderate balance sheet the the second group is groups that had an okay moderate balance sheet or a good balance sheet and then how they reacted and the groups that that would let's say we're kind of in that 2 and 1/2 times 2 3 times ratio. So fairly levered three times their annual cash flow or ibadah is normally how the bank As your it those were the groups that you really saw the difference and I think is where your question was going is they reacted quickly or at least the good ones. Did they react too quickly? They start paying down debt they able to get out ahead of some of the price collapse and sell some assets to pay down debt. Unfortunately made some top end cuts from a from a salary and G and a standpoint. It's so So they I guess the answer your question then yet. I mean, it's you that's where you I guess you really saw that dividing line was the groups that kind of if you will put put their head in the sand and going back to my earlier point, you know, we'll be back in Eighty ninety dollars in no time. That's where you really saw the difference.Adam Cohen: Were there any case studies that you felt really surprised you and the way they came out of it, you know looking back and maybe their management structure or their position or their you know debt to equity ratio. Were there any that you know, just kind of blew you out of the water and and impressed you with their their ability to move out of adversity and into a strong positionRichard Robba: Oh, yeah. No, absolutely. I think luckily for us. The bank was always really good at finding good clients and good prospects and we had a conservative way of underwriting things. So yeah. No, they were definitely groups that came out ahead and really Thrive and although This price collapse of the last month due to covid and also due to the kind of Russia Saudis Feud is you know way more severe by at least 10 bucks. Then where we were in late 15 or early 16. I have no doubt that those companies are still still some of the better ones out there.Adam Cohen: Yeah it and it's it's impressive how you know adversity pushes people and exposes the strong and you know, obviously does not favor the week. So what do you think right now are some of the things that that banks are going through when and looking at their their their companies that they're they're working with and that they financed and what What's the process at this point when when moving them forward?Richard Robba: Yeah, I think I mean that's a lot of its price spent an hour talking about that but I guess high level, you know, really what they're looking at is we're in the midst or borrowing base Seasons. Typically every six months kind of starting late March and ending ending the end of this month in May. So we're in the middle of it right now or the banks are luckily. I'm no longer. But so really what that what they're looking at is they're running their reserves. They have a price deck. Unfortunately. I have a feeling that Engineers have had to run run the reserves a few times because of most price tax have sensitivity levels that if price moves down by 5 to 10% if I recall correctly. They have to re update the price deck but so they're looking at the reserves looking at first reserves, right? because that gives you a baseline what's my present value whether or not it's pv8 to PV 10 depending on the bank that gives you kind of your foundation of knowing what you can borrow against which is typically in the 50 to 60 and sometimes 70 percent range of that PDP value and then you'll pick up a little value for your pdmps and your pods and a market like this where when you look at your puds and they're probably uneconomical at At a sub $30 price deck then you're not going to be picking up any value there. So first we'll start with that. That's kind of the main main piece of the cake and then really it's going into their forecasts and to the company's forecasts and looking at their cash flows not only historically but going forward and so there's a lot of sensitivity analysis ran around the company's forecast. You know that I think we've seen or we've seen a tremendous amount of layoffs lately so that all gets kind of factored in and then really what you're looking in that is okay in 6 months when I'm back here in October November time frame. What is this look like, you know, can we can they maintain that volume base that we already have our do they need to start making payments to get get me where we'll be or get us where we will be. Come come October come the next borrowing base redetermination. And so again big Staples the present value of the company, but really what's even more oppressive. Right now is how much cash flow do they have and are they able to continue to maintain their their leverage ratio? So they're their debt to e but a ratio and if that looks like that is going to start to creep up or creep out of limits, which is used to be when I first started my career as a four times multiple now most banks are at a three and a half times leverage multiple. So they're looking at that and saying look, you know if they're sitting at three times and then we get talked oberer and okay now they're pushing up against three and a half times. If they don't start paying down debt, you're going to see the bank's kind of quote unquote going to their black box and say hey you guys need to make a 10 or 15 or 20 percent reduction and your volume base and you have six months to make those payments.Adam Cohen: So how well do you companies typically respond to pressure expectations from the bank. Is it a pretty Mutual relationship where everybody wants to work together? Is there one side that has more pressure in the relationship or you know has to obviously the borrower has a lot more performance issues than the lender butRichard Robba: Sure.Adam Cohen: You know when it comes to that that relationship how much weight does the bank typically put against the borrower and and also, you know, does that change based on the nature of the the m&a market for for these companies to be able to liquidate and create some possible cash flow to repay their debts. Does that way into the equation?Richard Robba: Yeah. Yeah, no, that's really does. I mean I think the way most credit Agreements are set up or kind of standard is basically if there's a bar and based deficiency. There's kind of three options. There's option number one, which is you provide us additional collateral. That's not in the borrowing base, which then pushes pushes that bar and base up most of the time that's most of the time a borrower usually has thrown all the collateral at the loan to get their original bar. Base the second option every what we call MRC payments which are monthly commitment reduction payments those allow for six months to six months to basically take that deficiency divided by 6 or traditionally by 6. If the forecast shows that you have more cash now than it might be, you know, a higher payment decreasing to a lower payment, which is really can turn into kind of a vicious cycle, especially if you end up Six months from now on is similar or lower price deck. And then the third option is that you just come up with the cash and you pay that deficiency right off, right? And so usually it's a combination of two and three of how the bank's get back to get back to whole but I mean, I guess from a pressure standpoint the idea is that hopefully your clients understand where they're at and it isn't the bank coming to them and saying look you're borrowing base is way out of whack. I mean the most clients I would assume all clients at this point should understand if you're going to even be in a loan situation or have a rbl. You should understand how that's at least within reason calculated. Right? And so you should have looked back at the beginning of March or end of March when things started to really fall off here and said look, I have a borrowing base coming up here in a month. What is this going to look like and you should be preparing to set yourself up and ideally it's the client coming to the bank and saying hey. We have an issue here. This is what we're going to try to do the solve it we're making G and a Cuts where we're not drilling these Wells rather drill, these Wells we're going to use this Capital pay down the line and that's the ideal world. But I mean, I guess the answer your questions you have everyone and then that whole spectrum and or at least that's what I saw was you had people that stuck their head in the sand and then you had groups that were outselling things. And so it's the Finish then on your ma comment. No, ideally you're able to meet those reductions by cash flow would be the ideal situation. I think. What happens I guess at the end of this say six months period is if you're not able to make a payment then what typically happens in this could have changed by now, but typically we would that's when you start to work out the loan and when it goes into work out the terms and ideas and the flexibility all changes it gets a lot harder to get good ideas done in because you don't have someone that you know your relationship Banker. That is those pushing for what's trying to do not only best for the bank first and foremost, but also what's best in the client and when it ends up and work out then, you know, it's just what's best for the bank. But so what I'm trying to say here is I think luckily groups that are going through these barring basis right now and that have that that borrowing base commitment reduction is they'll have six months to kind of figure out what they're going to do. And so the bank isn't going to push for you to sell something. As soon as you get into that but within 6 to 12 months, I do think you will start to see some distress sales that are being pushed by the Banks.Adam Cohen: So that's really interesting because if you think about historically I mean the Shale Revolution is only you know, one one and a half decades old and it you know, the the decline curves on those Wells is significantly steeper than anything that we've seen historically from a production standpoint. So if these companies are withdrawing a lot of their Capital away from New exploration new development and funneling it towards repaying their debt. You know, how does that play out over time in a situation where commodity prices may stay...
87 minutes | May 8, 2020
Oil Tech – Professor Turgay Ertekin – Artificial Intelligence Applications In Reservoir Engineering—Are We There Yet?
Artificial Intelligence is a major catalyst for change in the upstream sector and will provide a strong competitive advantage for early adopters. In this podcast we interview Professor Ertekin, Professor Emeritus and prior Department Head of the John and Willie Leone Family Department of Energy and Mineral Engineering, the George E. Trimble Chair in Earth and Mineral Sciences, at Pennsylvania State University to discuss his 4 decades of research in reservoir engineering.Professor Ertekin shares his experience and research in deploying technologies like artificial intelligence and machine learning to enhance and accelerate to solve problems in reservoir engineering. He also identifies which technologies are the most mature and tested to provide high confidence intervals to those that wish to deploy them.We also explore how companies and academia can work together to accelerate the deployment of these technologies to create predictable outcomes in the field. Ultimately, it is the innovators in the space that are willing to deploy these technologies that will gain a significant competitive advantage.TRANSCRIPT BETADisclaimer: Our transcription software is in beta testing mode, using NLP and AI to convert our conversations from audio to text. We openly admit that at present, the output quality is poor, with numerous errors throughout (some of which are hilarious in nature), however, we would like to release this information should it be of value to any users.With the help of time and money, we plan to increase the quality of this output as we build out sponsors that help support the growth of the show.Adam Cohen: Hello Professor Ertekin and thanks so much for joining us here today. It's an honor to have you.Professor Ertekin: It's my pleasure. Thanks Adam.Adam Cohen: So I know you seem like a very humble man. So I'm gonna give you a quick introduction here for all of our listeners so that they can understand a little bit about your background in the extent of your experience. So today your head of the John and Willie Lyon family Department of energy and mineral engineering at Pennsylvania State University. you've been a professor at the school since 1978 and have had a tremendous amount of impact on students and the petroleum industry as a whole found a few quotes here on the internet from leading Executives speaking, very highly of you one is from Dave Stover who refers to you as a leader and innovator and and someone who is always inspired him in his career. They're also Martin Craighead who's CEO of Baker Hughes. He says that dr. Erdogan has enriched so many lives including mine his passion and knowledge for Reservoir modeling and Reservoir engineering helped lay the foundation for my future career and his wisdom and guidance helps me build on that Foundation. I think that's reflected strongly in what I found on your Personal bio here that for you you want to strengthen students thinking and their analytic powers and though you are demanding person. You you push your students towards success and that's that's something that you value in your relationship with your students. You know with that introduction. I think one more Point here that I'd like to make before we get more of a background from you as far as your career. In this space is the the recent article that you've released back in 2019. And in that article artificial intelligence applications and Reservoir engineering a status check you give a very detailed and thorough overview of how AI is is going to impact the space of reservoir engineering and I'm looking forward to getting into that conversation with you here today.Professor Ertekin: All right. Thank you very much Adam. I also thank you very much for that. Very generous introduction. And yes, I've been at Penn State for a long time and I had the I was the lucky person having so many wonderful friends. I promised udents who work with me together over the course of years. We have the same in Turkish. We say that it's not possible to clap with one hand. So If you make some sound bites, I think we did them. And so that's what I have to I did them together with my shoes. underline this perspective as a fact. I am I left 12 engineer by education. I did my undergraduate studies. And also my Master's Degree at the middle the state clean diversity in Ankara Turkey and came to to Pennsylvania State University in 1975 is a PhD student. I work under the guidance of who was also very top who still is by the way that time he decided to move to Canada. And I they approached me and my wife that they would like to say we thought that the area Beaver was a wonderful place to raise a family and we stayed here and we've been here since then. Throughout my teaching and research career. I worked in the area of reservoir engineering and my phone bill training is Reservoir engineering. And so I taught courses in hard Computing classical Reservoir engineering and then mid-nineties 95 96 we stopped work in the application of artificial intelligence in Reservoir engineer and at that time when we started I want to combine or synthesize the conventional or hard Computing techniques with soft Computing techniques such that I could go and I could go and fix exploit the advantages offered by 2 is approaches and that's how we started. So it's been now almost 20 25 years we've been working in this artificial intelligence area is the technique is applied. So there's our voltage drops.Adam Cohen: so that's pretty impressive that you know, right when I guess personal computers came on the market you you started using them right away to to use them in the models and applications that you were running for your and Reservoir engineering case studies and researchProfessor Ertekin: One day this is correct. We'll close the the years that we started. We were doing most of our computational work using mainframe computers and personal computers were not available at that time and it was a much more difficult undertaking just running a complex simulation problem and The storage was limited computational time involved was much much larger speed was not there. So therefore I think myself and my friends my contemporaries we came through that grinder more or less and then when the electronic explosion took place starting late, I would say call it meet 80s late 80s, then we realize that the things that you want to implement could be implemented in a much easier way much faster way and in a much more effective way more importantly.Adam Cohen: So it sounds like a lot of what you've done has gone hand-in-hand between Reservoir engineering from The Human Side and Reservoir engineering from the computer side. Would you say, you know kind of looking back was there? What did the way that the future moved forward from that from when you really started using that technology in the 80s in a more academic setting did you see the industry doing the same as far as running side-by-side with technology As Time Advanced or was there a Divergence away? What was the difference between the relationship I guess is my question in a more academic setting versus. Out in the actual business space where those similar where those different.Professor Ertekin: Well III, I think it was quite similar writing quite a number of years ago when Reservoir simulation commercial Reservoir simulation techniques starts to appear in the Horizon and the Implement and there was some kind of education and and some colleagues were looking at the technique with a young boys. I should say and and then this continues for a relatively long period of time I still can get maybe about until maybe 15 years ago 20 years ago. I used to hear. Well, I really do not need these sophisticated models. I can still live with my material balance equation and then solve the problem using a simple tool. Black material balance for example, but I think if you look at the material don't balance technique, and also if you look at the reservoir simulation and sophisticated formulation, then I can take or anybody can take any Reservoir simulation equation and can collapse it into a much simpler form, which is mature adult a question, but during that process when collapsing it into it's very simple tool. You have to manage many assumptions and you need to simplify the problem. And as you simplify the problem, there's always a danger that you'll be moving away from the field conditions from the problem. Actually that you are trying to solve. So therefore it's a very thin ice that we have to walk very carefully if we are going to move in that direction. Action because it can really take us in a certain way that we solve a problem in a simple way but complex problem in a simple way, but it has nothing to do with the original problem that we are trying to solve. So it's someone said at one point in time complex every simple complex problem has a favorite every time. The complex problem as a simple solution and but they are all wrong. So that's something that we have to keep them. Keep that statement in our minds always.Adam Cohen: And imagine that becomes more and more true as technology advances right as technology becomes more complex and more capable in its abilities to solve complex problems. It requires even deeper understanding of how the computations behind those Solutions are operating in relationship to the original problem. And I imagine, you know, just thinking this through in this was actually a conversation. I was having earlier today is you got to start with the problem first and then work your way backwards, but there's got to be a point when the the one who originates the problem in this case the engineer goes back and interacts with the data, but you know, maybe the engineer doesn't have that programming background to where they know how to communicate with was the computer. And what's the systems and then you end up in a pretty complex scenario where there may be a language barrier between the two that prevents growth. Is that is that would you say it's an accurate kind of summary of where things are at today andProfessor Ertekin: Exactly what I tried to say in the translation of the problem from the field to to a computer to a Computing machine device. We want to make sure that some important things are not lost in the translation so such that we can stay very close. The problem we know that the it's very difficult to be to replicate the entire problem with every demand in every Dimension which every single entity but still we should make every effort to stay as close as possible to the problem. There are sometimes Problems by the way, we really do not know exactly which mechanisms are playing which what are the Dynamics Is that are controlling governing the entire entire State of Affairs within the reservoir? So therefore there's something that we need to we need to be very careful. I only think that I always think that this is true for some other professions as well in Reservoir engineering. They are always working with a very huge jigsaw puzzle and just imagine a jigsaw puzzle with me. Be a hundred thousand maybe 1 million pieces of Twisted which hit many pieces and then and you are trying to assemble the puzzle. We are trying to put all these pieces together in a meaningful way, but it's a difficult task that but if you also think that Some of the pieces of the puzzle maybe out of 100,000 pieces maybe 5,000 of them are missing then the problem becomes even much more complicated but we are talking at that point. They are talking about what we call an ill posed problem what it means in simple words. Number of unknowns XE exceeds the number of equations that we need to solve the system altogether. So then it is the reservoir to assign responsibility. First of all to identify these pieces are missing and then Again, individual heads to create those pieces and then put them plug them in in the right place. So that's where the creativity of the human. It's okay to talk to engineer did you know scientists will come into the picture and if you don't have those that you mentioned the human dimension in place, you may have the most sophisticated computational devices systems and the we do not or whether we can subscribe our results. I mean ourselves to the results generate. G by D by dose device. So therefore again, it is something that we have to make sure that all the balances and checks are in place at every stage of the analysis and complications.Adam Cohen: Yeah, a really common, you know phrase that to use throughout technology spaces garbage in garbage out. If you don't have good quality information to put into the system, then you're not going to get good quality output. And that's an interesting kind of concept. I think when you're talking about, you know, what you're talking about here is the oil and a conversation that's been happening a lot. Not recently with tech innovators in the oil and gas space and that is that the future of oil and gas may be more about tech companies running oil operations rather than oil it operations using Technologies. And the reason why I think it's relevant here is because the traditional Wildcat methodology while you know, while while has proven out, Out all of most of the oil that we have in this country, you know, when you're dealing with a hyper conservative Capital Market that doesn't want to spend in that those wildcatting Ventures. It really changes the landscape of what the oil and gas sector looks like and so I think it's it's interesting because a lot of what started oil and Us as an industry in America if you read the history, it's all about hunches on the lay of the land and you know hunches that there's oil deeper down. You just got drill deeper those kind of Concepts that are more human in nature and you look to the Future to today where you have a tremendous amount of data around fields that have already been proven out where technology makes a lot more sense and especially Ali in an environment like today where the capital is way more conservative than it has been before. so what you know to that point is there is there space for AI in true exploration wildcatting for Reservoir engineering how much data do we need to have enough pieces to put together that jigsaw puzzle or is it more of an in offsetting, you know development strategies or in fill type strategy situation or where you have a bunch of Cora logs to base your models off ofProfessor Ertekin: Well again, we should see the AI applications is that other tools that the car in front of us as long as we use them in the right way we can try to expand the applicability of the technique from from the wild. It occasion from the exploration stage and later full development and that Maybe not maybe much more easily into impulse drilling programs. I mean, we need to make some critical decisions. So therefore again, as I said earlier a i self is going to be another tool in the engineers and geoscientists toolkit to make decisions. So therefore it's a decision-making tool and then we are using the machine to accelerate that decision and make sure that that decision is made in New York. Very large volume of data is the data becomes larger. Then the applicability of say I will become even much more effective. So that's something that we need to keep in mind as well typically typically in in our Reservoir engineering calculations use deterministic models something like a times B is equal to C and A represents the characteristics theater. Presents the project design parameters and T represents the response function a times B is equal to C. So therefore how do we make it population? So in order for this calculation to be accurate precise first of all, the characteristics the entries for a should be correct and then most probably we have Understanding about the project design parameters that you are implementing. So therefore most probably we are good with that design parameters as they are in place and then it's becomes simply multiplication. But just imagine if the entry certain entry in a are not correct then the response function which is typically either too. All rate or pressure. Okay certain location at a certain time as function function will be wrong if the response function wrong and if we take that response function, which is not correct and then try to use it in an economical analysis package there is going to take us towards the deep end. So that's four. have to be careful is that for AI can help us in assembling this large and categorizing these large sets of data and then sites that we can come up with much with a very large number of scenarios and try to create a number of different scenarios and then look at the results look at the confidence intervals and then hopefully maker Right decision at that point in time. So therefore it really strengthens the hand of the engineer or scientist who's making the analysis towards making the right decision.Adam Cohen: So how much you know before we start moving into the really technical piece of this conversation, you know, we're an engineering background is probably pretty helpful to fully understand the the topic that will topics that we'll cover, you know from just a again a high level perspective here. How much of How much I guess Systems computer systems programming background does one need to work intelligently with the Advanced Technologies that are coming out right now. Is it something that you need a comprehensive background on in order to use today's Technologies or are there enough pre-built packages out there that it's a plug-in play like scenario that as long as you have good data. That you're confident in there's a platform there that you can plug into to generate results.Professor Ertekin: I think in Artificial intelligence application, for example if he takes a special news networks as a told that we want to use then there are extensions of certain computational software. You can call that artificial neural network extension and then use but more importantly still before the Software takes the problems and then Grimes the numbers and that works with it and comes up we can resolve it is important that someone has to structure the topology or of the old architecture of the net and so at that point. It is very much important that you know, what are the input parameters? What are the output parameters? And...
50 minutes | Apr 29, 2020
Oil Tech – Geoffrey Cann – Using Digital Technologies to Transform Your Career and Company
The oil industry is in a state of flux. Both companies and industry professionals alike are searching for new ways to become more efficient in a low commodity price environment. While it may not be the first place they look, new technologies may provide an unexpected opportunity to cut costs and increase productivity.In this podcast Geoffrey Cann, renowned oil & gas advisor and technologies expert, provides keen insight into how companies and oil & gas professionals can deploy new, cutting edge technologies into their workspace without too much risk to their checkbook. He gives us great ideas for where to get started and the resources we will need in order to be successful.
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