Oil ITJ—Last time we spoke you had just started Energy Virtual Partners (EVP) – what brought you to Input-Output (I/O)?
Peebler—I joined the I/O board in 1999. At the time, although I was aware of I/O, I hadn’t realized the extent of the company’s technology investment. I/O has its own Micro-Electro-Mechanical Systems foundry where the accelerometer used in VectorSeis was designed and built. This was a ‘lure’ for my involvement with I/O.
Oil ITJ—The geophysical industry has been in crisis for the last few years though.
Peebler—Yes, I got
the I/O watch in a period of consolidation and falling crew count. Leaving EVP
and joining I/O as president was a tough decision. But my fellow board members
convinced me that
I/O had a very interesting position in the marketplace—if you believe in the
future of geophysics! I/O is the only independent supplier with a global presence.
It’s leadership technology puts it at the forefront of the emerging ‘full wave’
seismic business. I could not resist.
Oil ITJ—What have you achieved to date?
Peebler— In 2003 we have focused on stopping the bleeding. While our traditional clients have consolidated, we have found new customers such as BGP. We are evolving a new strategy—working on operational issues and fundamentals. We interviewed customers got a view of the business, a view of I/O, and worked on aligning the two. We are now building the new organization to support our strategy (see ‘Folks & Facts’ on page 8). We’ve now got a billion dollar marketing team for a $150 million company!
Oil ITJ—What’s the big picture?
Peebler— Well it’s about changing who we are. I/O used to have a manufacturing focus. Our customers bought the gear and discussions centered on birds and cables rather than the big picture. Our first realization was that I/O is actually in the seismic imaging business. The end user and true beneficiary of our technology is the oil company. This is important when adopting a new technology cycle. Intermediaries may have existing investments to amortize which may slow things down. Our next finding was that we could disaggregate our deliverables to oil companies and contractors. Oils don’t care if seabed recording or a towed streamer is used. A holistic view is needed to optimize cost effectiveness—to improve the image for the oil company—and to improve the economics for the contractor.
Oil ITJ—What is disaggregation?
Peebler—Much of this thinking came from our discussions with Apache Corp. president Steve Farris. Our analysis showed three components: economic cost, business model and time line. The impact of these components differs according to the type of job. For a land contractor speed is the key—to reduce acquisition time. For an oil company like Apache, the time frame is different. Taking the process as a whole—from deciding on a survey to having the data on your desk—only 10-15% of this time is spent on acquisition—most on planning and interpretation. So these facets need work too. We are looking at the process from a systems perspective. Some complex imaging work calls for high density, expensive shooting. How do you optimize costs here—where maybe 70% goes on acquisition? The answer as before is to look at the big picture, to understand and solve the big issues.
Oil ITJ—How big is this market?
Peebler—We figure the total acquisition, processing and equipment market at around $6.3 billion. Our guess is that this will grow to $8 billion in five years time due to a transformation of the industry akin to that of the move from 2D to 3D in the 90s. We term this new market ‘full wave’ seismics. Just as when 3D came in, folks are struggling to figure out what full wave is about. To my mind, it all boils down to what problems require solution—and how to solve them with cost-effective imaging. Plays are getting more and more complex. There is no future in reprocessing old spec data which was shot for cost-efficiency rather than to address a specific problem.
Oil ITJ—How is the ‘big picture’ evolving?
Peebler— To leverage these high-end techniques, there is no place for digital ‘sweatshops’ where interpreters are ‘mappers’—with no time for proper reservoir characterization. We are entering a world of designer shoots—leveraging smart design and proprietary (but maybe multi-client) acquisition programs offering improved reservoir fidelity. Full wave acquisition turns what used to be considered as ‘noise’ into signal. Big issues remain such as anisotropy which is a huge problem with substantial impact on survey design. Also the real world is in depth not time—and depth imaging is still in its infancy. Converted wave studies mandate depth conversion. Finally, cycle times for solving these problems need to be reduced for widespread uptake. VSP will become more and more important. Today it is a crime not to run a VSP.
Oil ITJ—What of the new business models?
Peebler— All these developments will cost—and this is not going to be taken from the hides of the contractors. For instance everyone today prefers sea bed vs. towed streamer for high end acquisition—4D surveys etc. But sea bed is still a niche market with primitive acquisition techniques—miles of spaghetti cables, logistics and safety issues. In five years we will be able to align the cost of sea bed on towed streamer. The seismic business has proved inept at capturing value for itself. About 75% of the business is logistics—high cost and margins of around 3%. I/O is working on changing the ratio—doing less low margin stuff.
Oil ITJ—Apache’s bought the whole deal?
Peebler—We need oil companies involved in what we are doing—we need to solve real world problems. Apache doesn’t do anything for fun! It is opening up its prospect portfolios—recognizing that it can’t ‘crack the code’ itself. It is ironic that a leading independent is active in this program rather than a major. Apache will likely fund some of the technology development. We’d love to re-engage the guys with the balance sheets too!
Oil ITJ—What of 4D – time lapse seismics?
Peebler—For us, 4D is just a component of ‘full wave’ and is likewise still in early adoption phase. It’s surprising how advanced towed streamer is, but there’s still a way to go for routine seabed acquisition.
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