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Building Our Case - A White Paper

Updated: Aug 25, 2022


1. Background

Since the beginning of the pandemic in 2020, the oil & gas industry has experienced a continuous and rapid state of investment decline. Many over-levered companies simply folded up and sold out to larger companies with more stable balance sheets. Thousands of professionals with decades of knowledge and experience were incentivized or forced into early retirement, some leaving our industry altogether. Professionals worked through drastic reductions in operating budgets which significantly stifled exploration projects. Companies were forced to significantly reduced their general and administrative expenses, slashing worker compensation incentives and training programs, just to survive this demand destruction cycle. Companies also reduced their investments into new discoveries of potential hydrocarbon reserves, eliminating scientific programs before completion. Technology and software can replace certain processes and augment certain types of expertise; however, our industry has seen billions of dollars in knowledge and skills evaporate in a relatively short period of time. Limited opportunities now exist to recapture some of these intellectual capital losses.

Consider the Library of congress, does any person truly know how much information it contains? Is there anyone who has studied all of its contents? How does someone determine if relevant information exists? Is the reader capable of understanding the significance of this information? Does anyone really know how much of the information remains valid today? Asking a fresh engineering or geoscience graduate new to the oil and gas industry for a deep dive understanding into any dataset, having little to no exposure to the data itself, is not going to deliver meaningful results.

Investors should be asking these same questions to energy companies, energy investment firms, and mineral owners. Investors should understand how much relevant physical information is leveraged prior to making any capital investment in the oil and gas sector. Archivists likely can’t report much back other than a number of gigabytes on their servers.

The traditional data resource model required expertise working with certain data types, but many experts with knowledge of this information have long departed our industry. How does the next generation of explorers find disparate information relevant to their projects? How do investors de-risk future capital investment decisions for their company? How do new investments capture historical information that has already been generated? We believe some investors and energy companies don’t know important information resources exist that would help them make better decisions with their capital.

2. Problem

A need exists in the energy investment industry for a commercial subsurface data library curated with distilled, current, relevant, and accurate reservoir information. To achieve capital efficiency, decision makers must evaluate a continuous stream of relevant information to reduce exposure to risky capital investments while also growing future opportunities for capital deployment. Energy investors would leverage this library to strategically target future capital investments and focus their own teams on filling information gaps in the library for specific investment projects.

3. Experience

This problem of strategic oil and gas investing was first observed working with one of the largest private equity companies on Wall Street. This PE companies data resources were anemic, and much of the information had not been processed prior to making some of their initial capital investments. Much of the flow of capital at the time was based, in part, on competitor observations from surrounding operators. This reactive information capture strategy is still propagating through our industry with the likes of expensive engineering focused service companies selling one off production type curve models. In some cases, these have proven the negative on production areas that actually work. Basing investment decisions on some offset operators’ bad decisions were also catastrophic to our investor’s early performance.

Building a clean, accurate, and high-performance data driven model of Earth for understanding hydrocarbon production is not exactly an easy or a well-established practice. Generally, a model of this type is not readily available to investors when they make financial decisions, often because new information has to be incorporated into the dataset. In fact, brain surgery might be an easier task since the anatomy of the brain is well established during medical school. Investors continue struggling to find and successfully extract hydrocarbons at a profit, and this seems analogous to making critical decisions about their investments just below the skin while performing brain surgery.

4. Solution

We’ve established a process for obtaining and consuming data while building our data science program. Tools and guides are easily created for the investor to quickly capture minerals, royalties, and leases with a solid understanding of the risk to their capital. Our “Big Data “solution for oil and gas investors establishes a curated library of subsurface information that doesn’t require a specialized engineering or geoscience education to understand. It works with proprietary analytical models, it works in most business intelligence software, and it is proven to simplify the investment decision-making process. This dataset is processed by engineering and geoscience specialists, maintained current with key information for de-risking oil and gas prospects, and grows independently of operator activity cycles.

5. Results & References

Our partners with $750 million dollars in capital investments generated over $1 billion dollars in profits using these solutions.

Blackstone’s Permian Producer Guidon Reportedly Exploring Sale | Hart Energy

Diamondback Energy, Inc. Announces Closing of Acquisition from Guidon Operating LLC | Diamondback Energy, Inc.

Diamondback Energy’s Viper Closes Swallowtail Royalties Acquisition | Hart Energy

Viper Energy Partners LP, a Subsidiary of Diamondback Energy, Inc., Announces Midland Basin Acquisition | Viper Energy Partners LP


I'm Derek

After 20 years of exploring our planet for oil & gas, I have a secret to share about my success.

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