By: Geoffrey Morgan – Financial Post – CALGARY – While companies drilling for oil and gas have shrunk in recent years, RS Energy Group has grown dramatically by mining a different type of commodity — data – and selling it to banks and the oilpatch.
“We’re running 4,000 processes a week to capture all of the data that we need to do analysis from the publicly available sources. Within our system, we’re talking about billions of data points — clean, analytics-ready data points,” RS Energy Group co-CEO Manuj Nikhanj told the Financial Post.
Nikhanj and co-CEO James Jarrell have built a company focused on data acquisition, analytics, software offerings and research in Calgary, where it has bucked the recessionary pressures in the city and grown massively from a 42-person operation in 2015 to a 350-person research and technology company today.
“Two thirds of our team is focused on data and technology,” Nikhanj said, adding that in a city best known for drilling engineers and geologists, he has no problem hiring computer programmers and software engineers. “We’ve been pleasantly surprised at how deep the bench is here and we’ll continue to hire and we’ll continue to build out here because the skillsets are pretty amazing.”
In fact, while the company initially viewed Calgary as a difficult place to grow a high-tech team, the two CEOs now believes it’s an advantage. “Our attrition rate – I don’t want to jinx it — has been very low and that’s not the case in places like Austin, Texas or Silicon Valley,” Jarrell said.
True to form as a technology company, RS Energy Group’s headquarters is an open office adorned with ping pong tables, snack bars and high-end couches rather than rows upon rows of cubicles, which is more typical in the heart of Calgary’s oilpatch.
Originally founded in 1998 by two Peters & Co. investment bankers, the firm spent the first 16 years of its corporate life delivering oil-and-gas focused research reports to major institutional investors such as BlackRock Inc. and OppenheimerFunds.
The company still publishes research reports but in December 2015 New York-based private equity giant Warburg Pincus bought the firm with the aim of creating an energy research platform built on the latest technologies.
In the years that followed, the team developed tools to collect data on oil and gas production in various North American plays and a software platform to easily visualize and analyze that data. More recently, the company has added artificial intelligence and predictive software to its offerings, allowing producers to use those tools to analyze its data.
Jarrell said the company realized engineers and geologists at oil and gas producing companies were spending an inordinate amount of time collecting and cleaning data. Now, with RS Energy’s Prism software platform, the data collection and cleaning is done for them, freeing up those same engineers and geologists to spend more time analyzing the numbers.
But, when asked how quickly oil and gas producers are adopting the software, Jarrell, Nikhanj and David Howard, the firm’s executive director and co-head of research and advisory, pause.
“The trend is accelerating,” Howard said, though he notes that oil and gas companies have historically been slow to adopt new software and new technology.
That could be beginning to change, however, as a recent survey from accounting giant Ernst & Young Global Ltd. found that 89 per cent of the world’s oil and gas companies plan to spend more on technology in the coming year.
“We have been a little slower in the Canadian context to deploy new technologies,” EY oil and gas leader Lance Mortlock said, making Canadian oil and gas producers particularly slow adopters in a slow-adopting industry. He noted, however, that there are pressures on Canadian oil producers to adopt technology more quickly to reduce costs.
“I think it’s important now because of the challenges that we’re under with market access issues, regulatory issues, cost issues, differentials — all of these things. There’s just a far greater emphasis in the last five years since the downturn started in managing efficiencies,” Mortlock said.
Similarly, Jarrell said his energy clients in Calgary and Houston have been focused on trimming costs wherever possible and don’t have excess cash to spend on building software programs of their own. “The energy companies have learned they’re not software companies,” he said.
The company is also adding more and more oil and gas producers as clients. In 2015, Jarrell said, 90 per cent of RS Energy Group’s clients were institutional investors looking for better research on the energy sector. Today, 60 per cent of the company’s clients are oil and gas companies and he said the proportion is continuing to grow with its technology.
“We have some clients that have 500 users (of RS Energy’s platform) across their organization,” Nikhanj said, adding that younger employees at major oil producers are driving wider adoption of new technology. “You’re starting to see a changing of the guard a little bit. They’re really hungry to start leveraging technology.”