HOUSTON—Theoretical physicist Albert Einstein has been quoted as saying: “Anyone who has never made a mistake has never tried anything new.”
Learning from mistakes and failures can lead to bigger and better things. The oil patch is no exception.
Sanchez Energy CEO Tony Sanchez encourages its crew to sometimes break wells.
“But don’t break too many,” Sanchez said. “Break a few. If you’re testing a reservoir for a certain completion design, take it to a level to where a certain set of wells, a small set, is broken, because in the unconventional world you’re not going to get zero. You’re going to get something; the question is the rate of success.”
His words were spoken during a session on accelerated technology adoption at Rice Alliance’s Energy and Clean Technology Venture Forum last week. Sanchez and other panelists seemed to agree that having a risk-taking culture was a key component.
Companies must build and embrace this type of culture as the oil and gas industry works to overcome obstacles—including extending the production life of shale wells—to meet future energy needs.
“We’re in the first inning of this unconventional revolution. It’s just starting if you really think about it,” Sanchez said before referring to the industry’s first shale wells in the Barnett.
The 6-year-old E&P, which is focused on developing resources from the Eagle Ford Shale in South Texas and the Tuscaloosa Marine Shale in Mississippi and Louisiana, grew its production to 73,341 boe/d in second-quarter 2017, up about 43% compared with the previous quarter. Along the way, the Houston-based independent has added acreage, including about 318,000 gross-operated acres in the Western Eagle Ford from Anadarko Petroleum Corp. from a $2.3 billion deal it closed earlier this year with partner Blackstone Energy Partners.
The acreage is near Sanchez’s Catarina asset (formerly known as Harrison Ranch Eagle Ford), which it purchased in 2014 from Royal Dutch Shell, amassing a treasure trove of data—which can be considered building blocks for any technological advancement.
Using that data to test new techniques is critical to moving to the next chapter in the shale game. Yet, sometimes new techniques fail. True, it’s not a good thing, and it should never be the goal, nor should be consistently making mistakes.
Kirk Coburn, venture principal for Shell Technology Ventures, was also a panelist. He recalled his time working in procurement before joining Shell and the risk-averseness of some of his procurement colleagues.
“They were not willing to make the changes to drive true cost savings because they were afraid,” Coburn said. “They want to keep their jobs. … A lot of this technology does not get adopted quickly because people are afraid to take the risk.”
Sanchez shared similar sentiments.
“There’s an inertia to the company that is very hard to change. People don’t want to lose their jobs,” Sanchez said. “They think they’re going to lose their jobs if they make a mistake, while at the same time the boss is saying ‘try new things.’ They’re saying: ‘I don’t want to loss this job if I make a mistake.”
And who could blame them? Everyone saw the layoff tally rise as profits plummeted during the latest downturn and the one before that and the one before that.
Sanchez added “you have to be able to encourage them to continually try. You’re not going to know where those limits are of what they’re trying until a particular project fails.”
But risks and experimentation are worth taking—within reason—to learn and grow. Perhaps that Silicon Valley mantra needs a little tweak: fail fast, fail not so often, fail forward.
Having the right culture for innovation could set the long-term leaders apart from the laggards.
When Sanchez gives town hall talks to company employees, telling them it’s OK to test, he said he can see it in their eyes. “It’s almost like they are unshackled,” he said.
Allowing employees to reach out to other companies at conferences like the one at Rice University, which featured energy and clean technology from startups, creates a good environment, Sanchez said, as the company looks for new technologies and products.
Velda Addison can be reached at firstname.lastname@example.org.
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