As part of Quorum Software’s Modernizing Oil and Gas initiative, we’ve had the opportunity to speak with a number of senior-level executives across the energy industry to gather their perspectives on how their teams have adjusted to working remotely and what digital technologies they’re adopting to run their business.
With the volatile environment and industry reports/metrics changing week to week, it’s hard for executives to know which graphs or predictions to trust and how to interpret all of the data to apply it to their next move effectively. Now more than ever, it’s important to stay connected to your peers to share knowledge, insights, and even war stories on how to survive this disruptive time. One thing’s for certain – the energy industry is a resilient one, and there’s a general (cautious) optimism that the broader market will start to improve as the demand side opens up again.
When it comes to connections, no one is more tied to high-profile industry players and the daily market changes than Maynard Holt, CEO of Tudor, Pickering, Holt, and Company. Maynard and his team have been providing regular updates and insights since March with their C.O.B. Tuesday series. So our CEO, Gene Austin, met with Maynard for a webinar to ask all the pertinent questions about the macro view, digital trends, and modern energy companies.
The following Q&A has been edited for length and clarity.
Gene Austin (GA): Maynard, you’ve had the opportunity to interview U.S. Senator, Dan Sullivan, Dan Yergin, and the Commissioner of the Railroad Commission of Texas, Ryan Sitton, during your C.O.B. series, what’s your perspective of the macro these days? Is there a recovery underway?
Maynard Holt (MH): It’s been interesting to watch things improve. As I reflect on the last 10+ weeks and when the deal happened between the Saudis, Russians, and OPEC+, I think people underestimated what it would mean down the road because of the immediate pain and the day we saw the negative trades. Looking at things today, it’s certainly improving. At the firm, we did an exercise where we polled every oil and gas price estimate, and the average for next year is $46. To me, that’s like saying we’re all going to be at the Four Seasons – it’s so fantastic to think about. Overall, our team thinks that the over/under by the end of the year will be around $40.
In my opinion, there has never been a better time to invest in oil and gas. My partner, Dan Pickering, has a great expression – “oil and gas in three years will be fantastic, but you have to be present to win!” Some people are throwing in the towel, and this environment definitely raises questions about survivability, but it is better than it was.
GA: Like you said, the last 10 weeks have been really disruptive for our customers, especially when everything had to change overnight when the COVID wrecking ball happened. We’ve really had to help our customers think through digital transformation and challenge the pace at which the industry was moving. How have your customers adapted to working remotely?
MH: Well, we just hosted a virtual steak dinner event, and one of the poll questions we had asked our audience was, “are you more or less productive than you were previously?”
50% said no change, 15% said more productive, and 35% said less productive. At TPH, we were already digital, and 80% of us feel a lot more productive since we’ve eliminated travel and other things, so I was struck by the 35% of those in the industry who said they were less productive.
I do think there are a lot of oil and gas companies that still need to work on automation, adjust to a remote environment, and move towards a digital platform. An economic downturn like this might reduce all spending for your IT and technology, but it’s actually important to look at how you can use technology to improve your margins right now.
GA: Speaking of technology spending and adoption in this macro, an interesting headline from E&P Magazine indicated that “only 13% of oil and gas industry leaders believe that they are adopting new technologies fast enough to succeed.” What are you seeing as themes or trends around tech adoption during this time?
MH: A technology journey really requires the total buy-in of the CEO. There are a lot of distractions for CEOs right now – balance sheets, reporting to their boards, and the safety of their people. Most companies are on a digital path at some level, but those who are further along are certainly noticeable.
Here are some key themes I’ve seen:
- Organizations will always find a reason not to adopt technology, but only the CEO can say “we’re doing it” and “I’ll take the risk.”
- We have examples of CEOs who are big enough and forward-thinking enough to have invested in analytics, software, and digital capabilities, and who are operating very successfully during this time.
- Some of the most difficult decision-making happens at the larger companies – just think of all the variables, assets, and risks they have to manage. Technology is helping that.
- Smaller companies typically make less investments in technology since they have less resources and operate more manually.
- The more advanced your digital system or strategy, the more bandwidth you have for other problems.
GA: How does this market change your view of what an oil and gas company will look like 2-3 years from now?
MH: Well, it’s enhanced my view that there is an oil and gas price recovery out there, and companies need to be agile, nimble, and digital for this next climb. I see a number of characteristics for oil and gas companies who will be successful in 2-3 years, including:
- Sizeable companies who have unique people working for the company – not just petroleum engineers or finance people – but hiring people who are digitally-minded, diverse, and connected to other industries or areas, like Silicon Valley.
- “Self-aware CEOs” who can be measured by the length of time it takes them to realize a problem. There is a difference between recognizing a problem in one hour versus three weeks, and the premium associated with that information and knowing where the problems are is going to increase, especially when there are lots of decisions being made every day.
- Cultures that handle information quickly and have great economic alignment across the organization will be in a winning position.
Overall, I expect there will be more “energy” companies, rather than “oil and gas” companies who operate responsibly, think differently, and work digitally. Those who experiment with different ways of doing things and understand their impact will be the most successful.
Learn more by watching the video.