Oilfield rush to high-tech helps smaller companies thrive

Bloomberg

A wave of next-generation upstarts is hitting America’s oil patch,
offering high-tech solutions aimed at an industry in flux following
the worst crude-market crash in a generation.
At a time when the five biggest oilfield servicers — still smarting from the price rout — have cut almost $1 billion from their research budgets, companies such as Ambyint Inc. are stepping into the breach. Ambyint uses iPhone-sized computers, digital signals and complex algorithms to control the flow of oil from older wells, boosting output and avoiding downtime.
The old guard is taking note. This month, Halliburton Co., the largest provider of fracking services, bought Summit ESP, a company armed with 44 patents for technology to improve production.
That followed by two months Helmerich & Payne Inc.’s acquisition of Motive Drilling Technologies Inc., with 14 patents, another dozen pending, and software
in hand that can robotically steer drill bits located more than a mile underground.
“We had the land rush to buy
up acreage; now the land rush is going to be to start buying up
intellectual property,” said Mark Mills, a partner in CVP, a digital
oilfield venture fund. “The oil industry hasn’t been like that for a long time because it’s been locked into an old structure.”
While the oil industry has largely recovered from its three-year rout, prices have settled far short of the $100-a-barrel levels seen prior to the plunge. At $45 to $50 a barrel, explorers are looking for every bit of help they can get to keep costs under control.
In some cases, the new innovators offer unique software systems. In others, they’re fine-tuning existing hardware to smooth out the rough edges. And with less access to funding than their bigger rivals, the smaller companies have tended to focus on one issue at a time, allowing drillers to pick and choose the individual fixes they need, rather than being locked into a larger contract with one of the big servicers. “The shale revolution is changing America,” said Kevin Shuba, the chief executive officer of OmniTRAX, a railroad logistics provider, in a telephone interview. “There’s a great opportunity for smaller companies to enter this space because of their flexibility and because of their ability to move quickly.”
Ambyint, a Canada-based provider of software and devices, was launched in 2014 by Nav Dhunay, previously known for his development of a home-automation technology system to control thermostats, lights and music remotely from mobile phones.
His latest technology is designed to remotely control oil flow from miles away in wells that have slowed with age, and on a variety of systems. In changing his focus, Dhunay said he moved from “more of a consumer-tech, Silicon Valley-type of culture where it’s all about innovation and fast-paced change to an industry that is quite a bit slower when it comes to adoption of technology, quite a bit slower when it comes to innovation.”
Many of the biggest players are “just continuing to do step-changes to what they’ve already got,” Dhunay said in an interview. The successes of these smaller companies comes at a time when the biggest service providers have been retreating on their own in-house innovation. When Baker Hughes Inc. blasted techno music and splashed lightning-fast graphics over a movie screen to a room full of energy analysts in a suburb outside Houston three years ago, the world’s third-biggest oilfield-services provider predicted its newly unveiled invention would someday replace the most iconic symbol
in the century-old oilfield, the
nodding donkey pump.
Today the Baker Hughes technology, called LEAP, has hardly been discussed on earnings calls, and has failed to displace the
traditional oil pumps in any significant way. In the meantime, Baker Hughes cut its research spending by 37 percent, to $384 million in 2016 from $613 million two years earlier.