A recent Wall Street report highlighted how oilfield service pricing has declined since the Financial Crisis in 2007. It showed how the price reduction trend has resulted in all the economic benefits from improved oilfield service industry productivity and new technologies have been transferred to its customers. This transfer is why the oilfield service industry has been devastated in this downturn. There was no profit margin available to absorb reduced activity following the oil price collapse. The report was revealing in the magnitude of the wealth-transfer that has occurred, something we are sure producing companies are happy to continue to accept. Why has this happened? More importantly, what can the service companies do to change the trend?

The success of shale and deepwater projects has demonstrated the value of the new and improved drilling and completion technologies. Improved project economics has proven critical for the petroleum industry to continue to operate in this low-price environment. These new technologies have also contributed to improved oilfield economics by reducing the number of employees necessary to deliver services. Fewer people mean improved worker safety and company profitability, something desperately needed by the service industry now.

Since the oil era began, workers have attempted to find new and better ways to access and extract hydrocarbons. New deposits were identified via better geologic knowledge, and then through the application of seismic and downhole electric measurement technologies. A major drilling breakthrough was the development of the rotary drilling process, which was followed by many productivity and safety enhancements. Well completions moved from only flowing wells to ones needing stimulation. That technology improved as the industry shifted from using dynamite and nitroglycerin to hydraulic fracturing technology. Drilling and completion advancements led to the production of hydrocarbons from tight geological formations, usually found at deeper depths. All of these improvements enabled the petroleum industry to tap deposits once thought impossible, let alone even known to exist. These new resources were found and developed profitably – at least for producers.

The oil business is all about taking calculated risks, but always with a definitive goal in mind. That goal is extracting more hydrocarbons, safely and cheaply. New techniques and technologies will always play a role in the evolution of the oil and gas industry. Those that generate positive economic results, or reduce the risk from continued use of older services or products, will gain market acceptance. Eventually, these new services become the industry standard. Transitions from old to new technologies often occur during periods of low petroleum prices, such as now. The challenge for the oilfield service industry is to make sure its customers understand the advantages of these new techniques and technologies and are willing to pay for them at levels commensurate for the value they contribute. Only then will the oilfield service industry be able to begin clawing back the value it has contributed to the producing sector.

For this Company Spotlight, we interviewed Deep Imaging’s President and CEO, David Moore, about how they are deploying technology that changes the way operators make completion decisions in the field. Deep Imaging’s technology allows operators to monitor subsurface frac fluid in real-time during hydraulic fracturing operations, which enables customers to make better completion decisions and significantly reduce costs. For more information about Deep Imaging, please visit www.deepimaging.com.

Brief Market Backdrop: In recent years, E&P operators have been focused on improving drilling and completion techniques to maximize well production and reduce costs. While these advancements have significantly increased drilling & completion efficiency and well productivity, operators understand that the current growth model (i.e. continuously increasing lateral length, proppant pumped, etc.) is not sustainable, especially in today’s low oil price environment and ongoing market pressure on capital efficiency. As a result, operators have turned to innovative technologies, such as Deep Imaging’s offering, that will allow them to continue realizing enhanced well productivity and operating efficiencies, without requiring continued expansion of well complexity.

Introduction to Deep Imaging: Deep Imaging offers frac fluid tracking technology that allows customers to monitor subsurface frac fluid movement during hydraulic fracturing operations, enabling decisions to be made “on the fly”. By understanding frac fluid movement in real-time, operators are able to identify the following downhole problems …..READ MORE

DarkVision has developed proprietary acoustic-based imaging technology primarily focused on downhole oil and gas well applications but which also has opportunities throughout the midstream and downstream sectors. DarkVision’s system is able to image through opaque fluids that have inhibited the widespread use of cameras and optics as a downhole diagnostics tool.

Flotek broadened its end market exposure into the midstream and downstream sectors with the acquisition of JP3 (valued at $34.4 million). JP3 provides a field-deployable, real-time, in-line optical analyzer for both liquid and natural gas measurement.

Silicon Valley Bank (SVB) provided a $15 million debt facility to expand GoExpedi’s warehouse capacity throughout North America and hire additional software developers. GoExpedi recently completed its $25 million series B raise in November 2019.

ThoughtTrace is an AI-powered document intelligence platform that enables users to digest, search, and navigate complex documents efficiently. The financing was led by McRock Capital, along with Chevron Technology Ventures and existing investor, Altira Group..

Energy Technology Musings

Is Technology Key for Better Oilfield Service Industry Pricing?