Right now in the energy space, M&A activity is resurgent for several reasons. The first is the global realization that you cannot make an iPhone from a wind turbine and that the ESG investing movement into renewable energy has failed. BlackRock has announced that having oil and gas in ESG portfolios is okay. Well, oil and gas companies have been improving their techniques and practices over the past decades and are cognisant of investors’ demands for returns while taking care of the environment.
At Sandstone, we have been evaluating oil and gas deals, regulations, and the overall markets, and we rely on data. Being able to put disparate data threads and news stories is critical, but having a cool tool makes the job so much easier.
Michael and I just covered Occidental Petroleum’s Permian Basin Acquisition of CrownRock on our Deal Spotlight series. Many people thought that OXY overpaid, but I was looking at the formations of OXY’s wells and noticed their CO2 injection wells and projects. WellDatabase gave us the insights to review details in their press and financials to understand why Warren Buffet increased his investment again.
John Ferrell saw a need in the energy space and created a critical tool for energy companies. We must save the environment and not waste money to deliver low-cost energy to consumers. No “Wildcat Drilling” is going on anymore, and investors want their money back, so drilling a dry hole does not win anyone any favors.
I had a great talk with John and thoroughly enjoyed using WellDatabase as a tool for Sandstone and our clients.
Check out WellDatabase here: https://welldatabase.com/
Connect with John on his LinkedIn HERE: https://www.linkedin.com/in/johnferrellsr/
02:20 – Tell us a little bit about how you got all of this kind of stuff.
05:48 – How long did you how long is well database been?
07:20 – Are you seeing a lot of M&A activity and things going on out?
09:21: Inquiry about strategies for managing diverse drilling activities and formations across different regions.
13:20: Emphasis on industry trends achieving more production with fewer wells, driven by a shift to a more measured and efficient approach supported by data.
15:31: Noting a shift towards a sophisticated approach due to the need for profitability, highlighting the significant increase in the value of data for optimizing drilling efficiency and addressing supply chain challenges.
17:59: Emphasis on a user-centric approach, aiming to improve individuals’ processes by providing better data solutions, with a commitment to prioritizing every user, from family offices to major operators, for collective success.
20:03 – How do I get my investors to know that I’m saving money or my profitability?
23:18 – What about this deal forecasting financial?
25:13 – What’s coming around the corner for you?
26:14 – How do people get a hold of you and what’s the best way? what’s your website?
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– Get in Contact With The Show –
Stuart Turley [00:00:03] Hello, everybody. Welcome to the Energy News Beat podcast. My name’s Stu Turnley, president CEO of the Sandstone Group. Have you ever been trying to do a deal and you have absolutely no idea if that deal is any good? Well, I can tell you if it is or not in the oil and gas space, you got to have the right tools. When you have the right tools, then you can go out and you can go out and check and see if it’s the offsetting wells, if there is anything that is like not been producing anything for years. Oh, I’ve got some swampland with an oil well on it. You don’t want to invest in that. I happen to have the co-founder and CEO of well database, John Ferrell here. And we’re going to talk about the M&A and deals and how we evaluate some things in the oil and gas space. Welcome, John. Thank you very much for stopping by.
John Ferrell [00:00:58] Oh, thank you, Steve. Thanks for having me. I appreciate it and looking forward to it.
Stuart Turley [00:01:01] I’ll tell you what, you get to see the eyeballs of almost every single well that’s out there with your data is some cool stuff. Michael Tanner and I a little inside baseball. We’ve been using your stuff and I love it.
John Ferrell [00:01:14] Oh, thank you so much. No, you’re right. It’s it is something that I couldn’t even fathom what it would be like to actually get in the data as deep as I have and everything from the comical errors in the public side of the data that we I mean, we have code you guys would crack up if you saw some of the comments in our code. How many times you see I don’t know why the Railroad Commission is doing this, but we have to work with it. And so, yeah, touching the data to get deep and, you know, really intimate with the data will say is been an eye opening to say the least. But honestly, it’s super enjoyable and really interesting.
Stuart Turley [00:01:48] Well, it will database when we’re looking at we also use a little you know we use combo curves. So we take your data, we evaluate the offset, the amount of stuff that’s just raw stuff in the formations. You can sort by formations, you can sort by company, E&P operator, you can sort by just about anything you need. And then all of a sudden, oh, wait a minute, orphan wells come in, there’s some ESG things going on and everything else. And I’m like, Tell us a little bit about how you got all of this kind of stuff. And we’re going to start going into the markets here in a little bit. But there’s layers after layers. And one other really cool thing that I love is Michael will work on the deals and then he’ll share the project with me because I’m too stupid to sit back and take a look at that project and go read it while he’s even in real time. He shares with me the project and then I can go in deeper later and go drill down. But anyway, sorry about that. No questions. I just simply.
John Ferrell [00:02:57] I’ll start with three. Number three. No idea. The final battery. Yeah. There’s so much data out there and it’s really been kind of an organic way that we built our product and in on hand. That’s a great thing. But the organic way really worked on it. People would come to us and say, Well, I need to see a tight curve by operating like, okay, well that’s, that’s easy enough where you aggregate the data, make a tight curve by operator, that’s cool. And someone says, okay, we need to normalize it bilaterally, okay, we can do that. And then like, well, let’s break this down by geo are let’s look at the different fields in this area. I mean, different people are everywhere attacking the data in every direction. And so after like a number of times that we kept like kind of adding feature feature, we like, okay, let’s take a step back and let’s get all of our data. And we already had it in a really clean data model. It was, you know, they like term analytic ready steps. We had it all normalized, all claims and all that thing. So anyway, what we ended up doing was building basically the ultimate tool that allows you to kind of control your view. So if you want to group by fields, if you want to group by by operators, you want to group by that well type that we defined based off of gas or ratios, then you can do it and then get all of the views that, you know, again, people like, I want to see a type curve by operator that I might want to see production by gas ratio. But now we just do you get all the toggles at your hand, so you pick how you want to group it and then take your visualization and you’re off to the races. And we started with production, which is still one of the biggest things people talk about. But as we kind of grew our dataset more and more, we started getting people wanting to look at different permitting activity because permits are, you know, people turned it around, show me the permits. The permits come in different flavors and for different reasons and different I mean, there are new wells, there’s workovers, there’s re completes. I mean, there’s a million reasons to permit. So again, depending on what you’re looking for, you need those same toggles. You need to be able to flip these things on and off and see looking at different directions. And we expanded into the completions, into frac data. We got into injection so that water, if people are working at water floods, can do injection things and try to compare that with production. And then even on the issues that you brought it at the disposition side where the flaring falls into, again, we’re looking for all the same type of visualizations, just a different data. And so what we did when we step back is that we basically made this platform. It would break down the data any way you want. And then the collaboration part was something I think was sorely lacking in this industry, being able to to take different kind of different areas of interest. And you do your job and like this is job and but still you put it in a project and everybody can see everything and it’s great. So no, I appreciate your kind words, but it definitely was an evolution. It was really interesting that it didn’t exist in this manner in the past, and it still does outside of, well, the database.
Stuart Turley [00:05:48] How long did you how long is well database been in I guess morphing or evolution.
John Ferrell [00:05:57] That’s a good story. We actually started our first line of code in 2008, so it’s been a long time ago, but we were heavily built on automation. We didn’t want to have a big headcount like, you know, hundreds of people on a data team. And data. We wanted to automate the processes. So we spent years, I mean, literally years building back in systems and not having a public facing product. And so it was a labor of love. But so that was 2000, eight, 2012, or at least our first customer facing product. And 2015 is when we did that kind of start of the analytics engine that you see today. So in reality, 2012 was our very first release. 2015 is really when we kind of went in the current current iteration. So it’s been some time.
Stuart Turley [00:06:46] You know, and Michael Tanner is absolutely a hoot. He’s he’s well aware of your product. He’s used it for he’s a bit of a freak. And I, I would love to just do a Vulcan mind melt on him and take all of his technical knowledge. But I would actually like to leave all of his personal stuff there. I just watch that stuff. Now, that being said, the amount of deals that we’re actually reviewing in other NPR operators you’re asking us to do is phenomenal. I mean, M&A, are you seeing a lot of M&A activity and things going on out? And it seems like when you got Exxon over here doing billions of dollars, investing in the Permian where total energies or total energy, as we say, and in Texas, is investing in natural gas plants in the in Texas, a lot of money changing hands in Texas right now.
John Ferrell [00:07:45] Oh, yeah. And those are the big ones. That’s the thing about it. Like the M&A activity, we always kind of homed in on the big ones that happen. But in between that, you’ve got, you know, small deals happening for, you know, bits of acreage here and there. And it’s it’s the treadmill is a constant treadmill of deal activity that’s happening even in slow times. It’s more than people realize. That’s good. That doesn’t necessarily make it headline every every you know, every deal that happens. It’s so yeah, it’s honest. It’s a huge part of what we do. M&A activity, as you guys have seen in our platform is is well suited to to evaluate that to help surface insights especially from offsetting wells and operators that try to basically determine and help you identify the strategy of each operator and the wells they’re drilling and what you can expect from your offsetting acreage. Yeah. Yeah. But M&A activity is it’s a nonstop and it’s only this year has been a kind of a crazy year honestly. But we had kind of a lull from the big deal situation for a couple of years there. And so this is playing some catch up. I think.
Stuart Turley [00:08:50] You know, John, with the world the way it is, we need our oil and gas more now than we I think we ever need it in the past. And I think that nobody’s saying anything different than we have Cop 28 going on right now. And the president of Cop 28 says there’s no reason for climate change and if you get rid of fossil fuel, will go back to the Stone Age. Okay. I think that’s pretty clear. Yeah.
John Ferrell [00:09:21] Yeah.
Stuart Turley [00:09:21] It’s pretty clear. We’re going to have a lot of drilling going on. And I was impressed to see the difference between that, the plays as well as the formations when we’re drilling down on deals and you’re saying, you know, and it’s just anywhere and in Canada and everything else you guys got at home down.
John Ferrell [00:09:43] Absolutely. And it’s you’re exactly right. It’s it’s I can’t say you never know with the media exactly where where people’s heads are when the talking heads especially but the political side where it is. But the simple fact that that you know, it’s not going anywhere and it’s a necessity for us to be where we’re at. And that being said, you know, we’re also running fewer rigs overall. I mean, we were up from 2020, but still, you know, you think back to the days where around 2000 rigs. Oh, yeah. And our production is higher today than we were running 2000 rigs. So the efficiencies and what we’ve done have gone through the roof and almost kind of under the radar. We spent a little bit of time kind of backtracking on some of our bad forecasting deals. The the the investment started to get a little quiet because of some of those things. But we’re now that we’ve quietly are running record production record profits and we’re doing really well with fewer, fewer rivers running. And you know, I think the biggest challenge today is going to end up being around the market dynamics the way OPEC and things we want to do, because America continues to kind of displace and screw up with their plans. But fundamentally, though, I mean, renewables functionally are this fine idea when the technology can keep up with the demand that we need. I don’t think anyone in the industry is sitting or saying we don’t want renewables in any way. I think we all are cool with it, right, If you get to ten. Technology in place where it functionally can give us in the same. Same place we are now. One of the examples I like to use is the way back when it’s. It probably didn’t show my age, but still the theses and. Aerosol cans. You remember that whole thing back in the hole in the ozone layer situation happened and oh yeah, it’s such a big deal. Well, it’s it went away because there were alternatives. There were viable alternatives that were put in the market. People adopted them. Just find the problem resolved itself with the Bible. Alternative is key there. People are completely okay with with changing their methods as long as it’s a. You know puts you doesn’t cost you anything. Right. So anyway, long long story short, when the renewables get to a place where they can actually be a viable alternative for the scale of energy use as needed, then this will be a real distraction to very it’s just posturing, if you ask me.
Stuart Turley [00:12:05] So it’s like Saudi Arabia is using all their profits from went from oil and gas to fund their hydrogen and their transition to the renewables and everything else. Right. Not a bad way to do it. And John, when we take a look at Texas, God bless Texas. We got more wind than California and we got more so than just about anybody else. We’re about to pass them. We got half the energy cost as we do as California or New York. And Governor Holcomb said the other day, I know people are tired of me, but I thought it was funny when you said all your energy costs are going to go up 20%. I’m like, Oh, nice. And then she said, Oh, by the way, next year your energy costs are going to go up another 20% and by within three years you’re going to be 100% more. I’m like, So that’s 100. And I went to Oklahoma State and that’s 140% now, you know, so but they want to get rid of fossil fuels now. And just what about trying to create out of your iPhone, out of a windmill? I am figured that one out yet you got to have petrochemicals in order to get your iPhone to work.
John Ferrell [00:13:20] Yeah, no, I think you need a hammer of some kind to make it out of a windmill. Now you could take it down and repurpose the parts or. Yeah. And it’s not really feasible anyway. It’s it’s a silly notion, but you know, it is cool though. The, the efficiency gains and all of these, we’re going to see a lot of that and well database you know they kind of break down the type curves over time. It’s remarkable. There are very strong trends that show that in areas in not just the Permian but all over, we are getting more out of less. You know, fewer wells are producing more production. And all in all, honestly, if you look at the profile of the two completions, the fracs there, they have on a per foot basis that are kind of normalized in this, you know, 5,000 pounds a foot kind of situation, and you get a little bit of variability in there. But you you’re seeing people focusing on efficiency. And that’s a really strong thing. It’s something that’s good for the industry because there was a time we were a little willy nilly. We were we couldn’t lose when oil was $100, if you remember that. And we were just, you know, poking holes in the ground and getting what comes out. And we couldn’t care less about the science because you couldn’t lose. Now we see a little bit more of a measured and efficient approach to things. And again, the data shows it’s really nice to be able to see it.
Stuart Turley [00:14:44] You know, the supply chain problems you’re on, the evergreen just went sideways in the Suez Canal. That was kind of bad.
John Ferrell [00:14:51] When.
Stuart Turley [00:14:52] The supply chain broke and the operators all of a sudden got real. You know, a $15 million well went to 30 million. I mean, it was crazy what the Biden Biden nomics did for that bad I mean, excuse me, the supply chain, just like you did and so will database and thing other tools got really really important because if your pipe costs go to double you better save some money somehow.
John Ferrell [00:15:23] Well, and that’s it. Yeah. The whole aspect of data science in general in the industry was a little bit overlooked for longer than it should have been. And where people did tacos and where kind of just for to say they did it and it’s a machine learning projects and they have projects and things like that. But you know, we were kind of getting in a car and had the horses. We had never gone down and done widespread, you know, just sophisticated analytical work. Sometimes it was these operators not utilizing the data, but as time kind of and I said, you know, we had that period where we had these kind of crazy forecasts that the even the investment groups weren’t getting the returns on because they weren’t coming back. And all of a sudden when all that stuff started drying up and people like, okay, wait, we actually have to make money now. We need to drill and be efficient, We need to be doing well. And we’re using it right now to. In the in the tax cut and in the tech sector where the layoffs are. I mean, I think I read today over a quarter million jobs have been laid off in the tech sector this year. And they’re focused on profitability. You know, Spotify today dug into data podcast, but they just laid off a sixth of their workforce again, because they weren’t hitting revenue projections or profit projections, not revenue projections, profit, which is news to tech industry profits. But anyway, that same notion, it took time for it to catch on. But once it did data the value of the data, it didn’t double or triple it quintupled. It was hugely valuable. And then beyond that, like you said, with supply chain and the costs and everything, you know, you need more data. And honestly, you can’t you can’t, you know, expend huge amounts of capital on it. And so that’s where that’s where we come in.
Stuart Turley [00:17:03] That’s you know, the fun thing is with the family and offices and more people. You mentioned ESG investing, and that is now changing. I mean, we had Bill Gates come out and say, oh, by the way, climate change is not real. I would have never expected that one. And then Larry Fink, the head of BlackRock, came out and said, oh, by the way, oil and gas and natural gas, oil and gas are okay to invest in our ESG funds. You know, John, I think it’s a little amazing when you lose $1.7 trillion in the first half of last year, suddenly oil and gas investing and I’m talking to so many different folks that are investing in oil and gas. The family offices love your stuff. I mean, it is important for even the smaller notes. I mean, smaller offices. You’re you’re is not just a Exxon product.
John Ferrell [00:17:59] Absolutely not. No. And that’s something that, you know, fundamentally, this is a funny thing to say, but I’ve grown really to lean on it, that we sell our product to users. And yes, we sign an agreement with companies and that kind of thing. But we’re really focused on the individual, the single person and how we can improve their process, their life, give them better answers, better data. I mean, honestly, when I talk to people when we’re doing demos, they’re just so frustrated that they have to spend so much time maneuvering, jacking with data, trying to make it work right so that they could start, you know, even get started with their job. I mean, it’s a joke. That Fidelity, I think, released a paper saying to take seven days to do their standard evaluation based off of a survey of the members. And half of that time was spent getting data in a place to where their job can be done. So you spend half of your time as a data tech analysis, ridiculous. And you kind of take that step back to to working for the people. That means that whenever we’re working to make an individual’s life better than the one person to person, people at the family office are just important to us. As you know, the major operator, because we’re not really talking about ExxonMobil, we’re talking about Dave, the reservoir engineer who needs this data so that he can do his job. That’s where our focus is. And what we found is if we do that well, then the results bubble up and the company wins by virtue of all of its employees winning. So it also means that we can pay attention to the little guy, the consultants, the companies, service companies, anybody. You know, it makes us more viable across the board.
Stuart Turley [00:19:39] You know, it’s kind of goofy is, you know, I get see, you know, being the CEO of my company, I let the employees push me around like my wife did I say that? So, yeah, no, we don’t want them either. But when you sit back and take a look at whether or not how all of this plays in as a CEO, you take a CEO and he’s sitting there, I got to save money. How do I get my investors to know that I’m saving money or my profitability? You have done a great job with being able to make those land men, those geologists, those people evaluating deals more profitable with their time in making money for that executive and their CEO. So when I talk to other CEOs, they’re sitting there kind of going, well, you know, and they’re there. I’m hearing them say these decisions and my information in order to make that decision are taken too long.
John Ferrell [00:20:38] So, you know.
Stuart Turley [00:20:40] Your data is critical.
John Ferrell [00:20:42] No, you’re exactly right. And our platform is geared for that. I think we had a great testimonial from a customer the other day was awesome. I think he was on a train. He was in Europe working on US assets, but he was on a train and his stop was like five minutes away. So and he got an email for like an emergency. It’s very small, like five wells. What does this look like? You know, we need to know in now. We have no time. This is a he said he opened a well database while on the train. Use the connectivity that was there that he could get. I don’t know if I’m trying and it’s been a long time on trains.
Stuart Turley [00:21:18] And been real good.
John Ferrell [00:21:19] So he pulled up those wells. He ran in his quick type curve on them, did a quick economics look on them. Just that back of the envelope. It was he looks on off that well to make sure he wasn’t missing anything. He looked at any permits outstanding and he said he composed an email with the results, screenshots, everything he needed and a go no go answer. And he closed his laptop before it was time to get off the train. So that was amazing. But the A definitely. That’s the thing about it. It’s, it’s, that’s.
Stuart Turley [00:21:52] That’s what gets you out of bed in the morning. John I can tell the way you were talking about for our podcast listeners his eyes kind of glued you know lit up a little bit. That’s what gets you out of bed in the morning in it.
John Ferrell [00:22:04] No, it’s great. It’s the thing that I actually beat my head against the wall quite a bit when I talked to some some potential users, I was like, okay, what are you trying to accomplish? Because they will be jumping through all of these hoops when all they really want is into your or something like that. And I was like, All right, if I can, I can show you my database. We can do that in two clicks rather than like six exports and five Excel spreadsheets and combine it. I mean, you’re just jumping through hoops because like, you didn’t have these options before and now you do. So let’s rethink the way we’re doing this. And once once you can get them the step back and tell you exactly what they want and you show them, then it can be done in two steps versus 20. And we you don’t lose a deal in that situation. And again, like you said, it all blows up If we make everybody at a company more efficient with their time, quicker to make decisions. The company as a whole wins, you know, but.
Stuart Turley [00:22:53] The investors win and all stakeholders win.
John Ferrell [00:22:58] Right? Yeah.
Stuart Turley [00:23:00] One of the other things about, well, database is so well done. The APIs and the hook ins on this, a shout out to combo curve because they have a strength with financial forecasting. So that goes back to my other CEO come in when he’s over there beating on me for saying, Hey, wait a minute, what about this deal forecasting financial? Well, wait, what if this and what if that? So you have a plug in and we go to a well database with combo curve. Are you coming in over here, pal? I’m like, so if you’re on a five minute train and you’ve got a CEO with a spear in your back, you might be able to make dinner.
John Ferrell [00:23:42] Right now, that’s all credit the combo curve because we we as technical people, as our cerebral database, we reach out to every popular software. And you want to integrate. Do you want to integrate? Do you want to integrate? Our goal was just to integrate with as many software as you can, and we hit a dead end after a dead end. This industry is not really used to wanting to collaborate in people with good faith. I just want to make my data go into your platform. That’s it. I don’t want anything else. Right? Yeah. It’s kind of beat your heads against the wall. And so over time, we’ve been able to make inroads in a lot of software package. Dealing was another one that was good to do because I was the first one that jumped out and was like, Yeah, let’s build connectors, let’s do this, let’s do that. And now is that, yeah, if you got combo curve, you have the connector that rolls in. If you’re using well database, you can export directly to a combo curve that the file that will import in the combo curve. And that’s just what our users need. Like you need to be able to do the job. You need to do whatever it needs to be done. You don’t need handcuffs, you need freedom to move around. So now it’s my hat’s off to Booker for, for spearheading that, that kind of API connection and we need more software doing that.
Stuart Turley [00:24:51] And if he if you got a software issue out there and you got I got freaks that work for me that are just absolute they enjoy the headache of disparate business systems. So I mean that’s the kind of fun thing that’s out there. And yeah, you got to have the right tools and that’s why we picked the right tools. Well, John, we got about another minute or two here. What’s coming around the corner for you? I hear you may be at night, so that be cool.
John Ferrell [00:25:19] Absolutely. Now, looking forward to tonight and some of the you know, I’m hoping to see a resurgence in some deals out there so we can look at them and maybe get some evaluations and then see some more activity roll out. Remember the day old days and they put big posters on every booth. So it’s like people putting sold signs on their maps. And I want to see some of that again. That was fun. But yeah, we kind of in an age, we’ve got a lot of stuff brewing, some more economic tools to kind of make your job easier, where we’re working on a data marketplace where we can start allowing you to get some third party data stacked on top of the public data all in one platform. It’s going to be super clean and easy. So next year is going to be a really, really fun year for us.
Stuart Turley [00:25:58] Oh, isn’t that great? I’ll tell you what, I do love your staff and I want to shout out to Aaron for helping put this together. So you got some good people working for years now.
John Ferrell [00:26:08] I don’t know how I got lucky. Yeah, especially with Aaron. She’s amazing. So. Yeah. Shout out to Aaron for that.
Stuart Turley [00:26:14] Well, John, how do people get a hold of you and what’s the best way? We’re going to have your LinkedIn information in the show notes. But what’s your website?
John Ferrell [00:26:23] It’s well database.com. It’s that easy one word well database and we’re on LinkedIn We obviously stay pretty active on LinkedIn and even even our ex these days we still post there. And then yeah, if you want to reach me directly, you can shoot me an email for a well database.com. I know you’re probably not supposed to give out your emails on podcasts, but I don’t care. I like talking to people. So anyway.
Stuart Turley [00:26:46] How fun. All right. We are going to have a lot of blast. And my name’s Du Turnley, president CEO of the Sandstone Group. Thank you all very much for listening to the Energy News Meet podcast. And we will see you guys soon.
