ignition sequence, start
Let’s rewind the tape. I grew up wanting to be a farmer in the enchanting landscapes of northern Montana, where my grandfather had immigrated from Norway in 1927. Sounds idyllic, emma right? Hold your horses. It turns out Big Sky Country can average a pathetic 11 inches of rain per year, or about as much rain as a houseplant in the Saraha. These were not exactly the ideal conditions for a flourishing agricultural empire. Even still, I would give my left arm to farm dry heirloom beans or tend to an Apple Orchard, even if it meant taking my losses on the chin to wake in the Mission mountains every morning. Ah, the price of dreams.
Hold up. I recently read that the Norwegians have a global seed vault in Svalbard with 1MM+ distinct crop samples like some kind of seed Fort Knox. Props to the Cherokee Nation for being the first tribe to contribute their heirloom seeds to the vault. Talk about preserving your heritage. #GeneticRainyDay #ADHD.
Here’s a twist worthy of a daytime soap opera. I attended Duke University to learn from minds like Robert Cook-Deegan and study deep existential stuff. You know, like the genetic implications on law and policy. The film Gattaca really did a number on high school Evan as did TV on the Radio, M83, high top converse, and the poetic agony of Peanuts comic strip endings. What’s the difference between gene enhancement and gene therapy? You know, I wanted to wrestle with questions like this that I’m sure you ask yourself each morning in the shower – while your children are yelling at you from across the house because they’re hungry. My 12-year-old is grinding me down.
Here’s a universal truth. Technology tends to leave law and policy in the dust, sprinting ahead like Usain Bolt while our legal system stumbles along like your tipsy uncle at your cousin Agnes’ wedding. I would wager that the average person would be terrified if they fully understood what’s possible with modern genetics research and technology. Ignorance is bliss – for realz. With ChatGPT and Generative AI – this is a recurring issue (“I’m so old I remember Blockchain”) – most people don’t realize that we’ve already successfully performed head transplants (at least I believe we have) and grown artificial organs in labs (that hyperlink was written 22 years ago). I’ll tie this theme to oil & gas in a loooooong bit but in short, most people don’t appreciate what’s possible with modern technology.
Mike Tyson famously said: “Everyone has a plan until they get punched in the mouth.”
Life doesn't care
That ^ was me circa 2004. I was on a path to go to law school and wrestle with these dystopian genetic ethical and legal questions. Still, as graduation was fast approaching, my brother-in-law was unexpectedly and suddenly killed in a tragic oilfield accident.
My brother-in-law came from a family deeply entrenched in the oil and gas industry. Chas Harding was the son of Charles Harding – of Harding & Shelton. H&S was an upstream mid-con/Anadarko player that was entrepreneurial – smart, tenacious, resourceful, and opportunistic. H&S unknowingly understood that subject matter expertise (SME) and information asymmetry were a formidable 1-2 punch. Charles knew the state-specific case law, the rules, and regulations for operating in each state and used the four corners of the document to his advantage wherever he could. He epitomized the difference between being a pawn and a chess player but was serendipitous in his strategic approach vs. systematic. In plain speak, that means that he stumbled into opportunities by luck as opposed to using data and technology to create opportunities. “Systematic.” There’s that word again. Let’s define systematic because it will be repeated a lot in my ramblings. Please read this: Systematic.
Charles had this uncanny ability to stumble into a breached lease, an unsigned JOA, or a wellbore-only assignment and wedge his way to controlling the unit and operations. If he got an inch, he turned it into a mile; repeatedly. It was masterful. Leading up to his death, his son Chas had acquired a fairly large number of operated wells on his own, spanning 20 counties in the Anadarko Basin – mostly 640 vertical gas, marginally producing assets. He was optimizing production with smart clocks, timing fluid, performing suicide squeezes, etc., to generate cash flow to propose new drilling locations. Chas also came from the school of resourcefulness and was venting the fluid to the tanks on a well with 2,000 pounds of pressure on the casing when the production line broke and hit him in the head, instantly killing him. I was called to action to help my widowed sister and her two-year-old son, just two weeks from delivering her second child. Life doesn’t care about your comforts.
I come from a family where you play baseball, further your education, or work – and you show up for your family, even if you’re not sure you can do much to help. I was a washed-up ball player, so I called an audible and moved back to Oklahoma to help my sister, but I needed a jobby job.
Charles graciously offered me a gig co-managing the company his son had started. I was thrown into the oil and gas world in Oklahoma City, baptized by fire, with Charles as my mentor. It was a crash course in implied and explicit covenants, gas balancing, negotiating POP gas contracts, and even testifying before the Corporation Commission – everything and the kitchen sink related to upstream/midstream. I even got my ‘tocks handed to me in a title litigation case with Bob Gum (one of my favorite Oklahoma litigators).
As I was reading the Oklahoma state statutes for the Oklahoma Corporation Commission, the Eugene Kuntz law books, and Owen Anderson supplements (light bedtime reading), I started reading in the Economist about this new phenomenon called Big Data. Hal Varian, Google’s Chief Economist, was talking about the ubiquity of data and its need for analytics in all industries. His call to action caught my attention as it related to real assets. I had friends on Wall Street doing advanced work with data and technology trading equities. Data had largely become commoditized in finance, and speed was becoming the focus for creating alpha. Oil and gas seemed to be positioned for a major shift.
Oil & gas is/was a real asset industry representing 6% of US GDP and averages(ed) $200B in annual CAPEX budgets and was still pushing paper and microfiche. Where technology “innovation” was largely limited to subsurface equipment (drill bit technology, completion technology, production optimization, SCADA) and “data” was largely limited to “well data” and “production data” defined by the 70s – the age of the pocket calculator. On the surface, this seemed to make sense as ~$70B of that annual CAPEX budget was concentrated in drilling and completing wells, and production data underpin underwriting- however, every other sub-sector within the upstream lifecycle remained 110% analog. Maybe even 163%. Scratch that earlier comment. “This” did NOT make sense.
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I developed a schmitting errr a vision that the upstream sector of the oil & gas industry would become systematic (computers and data would do the heavy lifting for subject matter experts or SMEs). Underwriting would be automated and only casually course corrected by SMEs in engineering and exploration geology (the art vs. the science). Well planning would be fundamentally driven by the natural language in the underlying contracts that grant the executive rights to drill and explore for hydrocarbons (e.g., continuous development clauses, retained acreage provisions, pooling terms) in addition to GPS or satellite-informed rig availability and well spacing, continuous improvement would be driven by automated feedback loops of structured data coming from three syllable acronyms like AFEs, JIBs, and four-syllable words like telemetry, object detection (five), and data exchange(s). Back office administration would automatically generate DOIs, royalty confirmation would be electronically provided, and paychecks would be auto-populated with prepaid debit cards going out to mineral owners via text links. From the courthouse to the paydeck and everything in between, the energy sector would become the next great tech sector.
“From the windows to the walls..”
Almost…I started seeing companies maximizing computation power and algorithmic accuracy to gather, analyze, link, and compare large structured data sets and…
Time out, time out. Let’s rewind. What’s structured data vs. unstructured data? Next chapter.
With nervous diarrhea (just checking if you’re still reading ;),