#001: The Oil and Gas American Dream with Allen Gilmer, Co-founder and CEO of Drillinginfo

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Houston, Texas is the home of oil and gas in the United States. Last week, it became the second home for 17,000 strong. People from across the industry descended on the George R. Brown Conventional Center for the North American Petroleum Expo, a.k.a. Winter NAPE 2014.

The Expo floor was a sight to behold. It had everything from a young crew of crazies bringing bitcoin to oil and gas to Drillinginfo’s virtual reality goggles that gave you a 3D view of the subsurface.

There was even a dude who detailed my sneaks!

#001: The Oil and Gas American Dream with Allen Gilmer [Podcast]

Introducing the Oil and Gas Digital Marketing Podcast!

But, one experience stood head and shoulders above the rest – recording the first episode of The Oil and Gas Digital Marketing Podcast!

The Oil and Gas Digital Marketing Podcast

Allen Gilmer, CEO of Drillinginfo, joined me for a fascinating conversation. Allen told some great stories from the good ol’ days of trying to push massive amounts of data over a 56k dial-up connection. He also shared phenomenal insights on wealth creation, the future of the oil and gas industry, and even gave my business card a hearty endorsement!

Moving forward, we will release a new episode of the show every week. I have a wish list of potential guests, but if you have any recommendations or thoughts about the show, please leave them in the comments!

Enjoy the show!

Click Here to Listen Now


Tribe Tweetables

This world is about how to make bigger pies and the competition to make the pie bigger. – @AllenGilmer (tweet this)

Technology, still to this day, represents the most radical leverage that anybody can have. – @AllenGilmer (tweet this)

(Drilling is) not moving one nickel from one place to another. It’s creating new nickels. – @AllenGilmer (tweet this)

The fact is you can build 1,000 relationships at once if you do it right on the Internet. – @JamesHahnII (tweet this)

Transcript

James Hahn II: Welcome, ladies and gentlemen, to The Oil and Gas Digital Marketing Podcast. I am your host, James Hahn II, the Founder of Tribe Rocket and this is THE podcast for marketers in oil and gas and B2B marketers across the globe.

And today I am joined by a very special guest, Mr. Allen Gilmer from Drillinginfo. He is the CEO of the company and he founded it in 1999. He’s also founded several other oil and gas companies, he’s a geophysicist by trade, and in my opinion kind of a genius. But, I’ll let him defend himself on that one. Allen, welcome to the show.

Allen Gilmer: Thanks James, it’s a lot fun to be here. Congratulations on Tribe Rocket.

James Hahn II: Thank you, honestly it’s … I’m having a blast. So we’re here at NAPE 2014 – Winter NAPE – and you can really actually tell it’s Winter NAPE this time. Last year I was talking to some people saying, “I’m from Michigan, I have to remind myself it’s Winter NAPE because it’s 70 degrees, but it’s actually winter this time.

But, I guess, we’re a podcast for marketers – we want to start there and we’re at, obviously, a huge marketing event and one of the first things I wanted to ask you was what made you crazy enough to think that digital marketing could work in oil and gas.

Allen Gilmer: Great question. You know, the oil and gas industry is not the fastest adopter of technology. But, even us. Even us oil guys will be followers of things that clearly are working and, you know at the end of the day, digital marketing is all about putting the right people together at the right time, and how can you argue against that?

James Hahn II: Right, right. And, do you think the industry is making progress right now in that regard?

Allen Gilmer: Well, I think clearly. You know, I’m really glad to see, you know for instance a company like yours emerging like this and that’s a testament that at least some see there’s opportunity to go do that.

James Hahn II: Yeah, well, it wouldn’t be happening without you, so I have to thank you for that. But, speaking of NAPE in general, they’ve been very supportive of digital marketing. Obviously, they have the hashtags every single time that you come here and Drillinginfo has been at the forefront of adopting that kind of technology and so forth from the show floor; can you talk to me about the evolution of Drillinginfo as a company, as well as how that sort of grows with the NAPE company as well?

Allen Gilmer: Sure. You know, we started Drillinginfo 14 years ago in an industry that was considered to be a twilight industry. Over mature, not a lot of things going on. Major oil companies were really drilling maybe less than 10% of the wells in the Unites States – most of those offshore – and were producing about, you know, the majors were producing about 30 – 40% of the production. So this was an industry in which smaller and smaller independents were emerging, and people were really looking at it as being the end of the hydrocarbon age.

Fast forward 14 years and the United States has reached bottom and turned it around and has added more production in the last 5 or 6 years than has ever been added by any country in the history of time of energy production in that short amount of time based off the fact that some very smart people in this industry figured out that they could extract natural gas and then oil from rocks we could never get before, which completely transformed this industry.

The good part about this industry today is it’s bringing in young people. And the young people are driving a lot of things forward. This is an industry also that didn’t hire anybody for 25 or 30 years, and so for anybody entering the industry today with a technical professional background, they are replacing 2-3 people with 30-40 years experience, and with a backlog of drilling that’s never existed.

The number of proven locations yet to be drilled in the United States has never been higher in the history of the oil and gas industry. And that responsibility is going to be lying on the hands of people that are coming out of college today, and these wells are 10 times more expensive and 10 times more complicated than the wells that their predecessors had to drill.

So it’s a real interesting, very exciting time for the US oil and gas industry. And the rest of the world, for the first time, is actually looking at the United States because the United States has emerged as a geopolitical power based off of its low cost of energy.

And the rest of the world is also trying to figure out how in the world could they possibly access some of the benefits of that. We’ve had manufacturing uptick in the United States for the first time. Well, that’s because natural gas – the core energy for industrial use – is anywhere between one-fourth and one-seventh the cost of any industrial competitor in the world.

So there’s never been a country in the history of the industrialized world that’s had a better benefit with regards to one of the two important parts of manufacturing. You have manpower and you have energy, and we have a huge benefit in energy.

If you thought the Chinese had a huge benefit with regards to manpower because they could pay people a tenth of what they paid people in the United States, the energy side here we’re paying a fourth or or a seventh of that. So, we’re balancing off that and you’re starting to see shifts of jobs back over here because we can now afford to hire people into these jobs because the benefits, the economics, are coming out of the energy side.

James Hahn II: Did you see any of that coming in 1999?

Allen Gilmer: Heck no! I think we were very early to recognize the importance of what we saw of wells being fracced in the Barnett Shale, the stuff that George Mitchell and his team were doing. And I think we were the very first to actually … I remember I gave a very controversial speech in the Permian Basin Oil and Gas Expo in which I said that this was just the first of what was going to end up being several plays that were going to emerge from this, and it was going to completely transform that.

James Hahn II: When was that?

Allen Gilmer: That was in probably 2002 or 2004.

James Hahn II: And people thought you were crazy?

Allen Gilmer: It was … Had a lot of questions after that.

James Hahn II: So, y’all were just at a confluence of the right place at the right time and took advantage of the right opportunity, right?

Allen Gilmer: Yup.

James Hahn II: It’s the American Dream.

Allen Gilmer: Yup. As J. Paul Getty said, “The secret to success is wake up early, work hard, strike oil.”

James Hahn II: Strike oil! Absolutely. So, how has NAPE played into that growth?

Allen Gilmer: You know, NAPE is uh … Even before we started Drillinginfo, I came to the very first NAPE when with was in the Galleria, so I’ve been to pretty much every NAPE since it started. The first NAPE had about 200 or 300 attendees and it was over at the Galleria, it was fun. Everybody was a lot younger then. Same faces you see today, but they were a lot younger. Which means that they could stay up all night and it was a 3 or 4 day – about a 3 day deal then. And there were stories that were probably not to be repeated in any kind of public venue, but they were great.

NAPE has continued to grow and be an important part of it. When we rolled out Drillinginfo for the first time, NAPE was the show in which we really got our first viral buzz going because of what we had done. So, NAPE was a place to connect with decision makers. And we made a decision right then and there that we were going to participate in NAPE and we were going to support NAPE.

It’s been a fantastic venue for us throughout. Second to none. I think it’s a great venue. And I’ve been honored, the Society of Exploration Geophysicist nominated me to be their representative on their part of the NAPE coordinating committee, to be their representative in their NAPE board of advisors.

James Hahn II: Fantastic. I want to know more about that first year. What year was that?

Allen Gilmer: That we started the company?

James Hahn II: The first NAPE.

Allen Gilmer: The first NAPE? Oh boy, that was … Well, probably 1992 – 1991.

James Hahn II: So, the first NAPE was 1992 or 1991 for you, or for Drillinginfo as far as having a booth?

Allen Gilmer: No, no, no, for the first NAPE ever.

James Hahn II: First NAPE ever. What about the first NAPE for Drillinginfo, where you go that viral buzz going?

Allen Gilmer: I think the first NAPE for Drillinginfo was 2001. It was January or February 2001. We had released the product in August of 2000, that was our first release date; August 21, 2000. And we had our booth here at NAPE and we were swamped. And what was interesting at the time, it was a 3 day event rather than a 2 day event.

James Hahn II: Because people could handle that back then?

Allen Gilmer: Yeah, because our livers were in better shape back then. And so, what happened was that people that came by the first day – we had a nice, steady flow the first day. And then the second day we were swamped because what happened is that guys that had seen us the first day, they went out to dinner with their buddies and all that stuff, and were clearly talking us up. So we were just swamped the next day. We were like, “Wow! This is just awesome.”

James Hahn II: And the product at that point was?

Allen Gilmer: You know, it was production, permits, completions and some leasing activity in Texas.

James Hahn II: How much? Where? In a couple counties, or … ?

Allen Gilmer: Well, leasing was limited, but everything else was statewide. But it was the first time anybody had seen this information over the web, you know it was a dial-up connection out here too. So, we were hooked up on a dial-up connection and you could go out there and see things that you hadn’t been able to see before. It was a radically new concept at the time. We had to build all sorts of technology.

Clark Archer, Allen Berzin … Our original technology team built the first pieces to be able to go do that because, first of all, you couldn’t move a lot of data over these limited lines. You couldn’t have mapping. There was no ESRI mapping online or anything like that. We had to kind of scratch-build all those things, and thank God we have a bunch of smart people helping us go do that. But, we got in there early and we put it out there.

More importantly, it was all of us that started this company, we were all independent oil and gas guys. So, as we tried to describe to people a we were raising money – unsuccessfully – they didn’t understand what we were trying to do, and finally several years later one of the guys came to me and said, “Well, I understand finally what you guys do.” And I said, “What that?” He goes, “Y’all are dogs selling dog food to other dogs.” And I said, “I think that’s about right.”

James Hahn II: It’s mind-boggling to me because when I think 1999, I can see myself at my Mother’s computer at my Mom and Dad’s house with a dial-up connection, using … I don’t … Facebook wasn’t around back then, smartphones weren’t around back then.

Allen Gilmer: There was no such thing as social media.

James Hahn II: Social media wasn’t around back then. There was no such thing as Software As A Service back then. But, that’s what y’all were essentially doing.

Allen Gilmer: Yeah. And we were told … We had … The money guys told us – the ones that, you know, the ones that chose not to invest in us – said we had to be either an application service-provider or a data-provider, we couldn’t be both. And I didn’t understand why we couldn’t be both because, honestly, software is nothing but an empty bucket. It’s driven off the gasoline of data. And for us, we were trying to build answers. We were trying to build software to provide answers to people, and that required data to be in there. So, rather than have people go put their own data in there, we thought we should just basically load it up ourselves. For the first two years, you couldn’t even extract the data out of Drillinginfo. It was truly the black box.

James Hahn II: That growth curve has been pretty steady over the last 10 years. How are y’all sustaining it and moving it forward into 2014, and well beyond?

Allen Gilmer: I read our original business plan. And our original business plan has been amazingly accurate with regards to the things we thought would open up if we were able to achieve certain milestones. And we have really gotten to the point now where we really are in a situation where we can very positively affect … We’ve already had a big affect in the oil and gas industry in terms of how people do things. And we have strongly influenced others that were in tangential markets to ours. Either on the data side or the software side. We’ve strongly influenced every one of those players by what we have done, what we originally did.

And our vision for the future is one that we’re still marching towards.

We see all sorts of things that we can do. The acquisition that we made of Transform Software last year accelerated our development plans by about 3 years. The acceleration of the things that we’re rolling out are world-changing. The major oil companies are starting to recognize this … Lots of meetings with them because they recognize the things that we are doing are completely different from whatever they’ve done in the past. And completely transformative of the work processes in a world that we’re going to have to do more with less.

Technology, still to this day, represents the most radical leverage that anybody can have. Just think about Google, for instance, and what an impact it’s had on our industry. It’s free. It’s a beautiful little piece of software, and nobody thinks of it as software.

But, I hired a geologist a couple years ago to do some work for us – to do some international work for us. He was a brilliant guy, Ph.D. and what have you, and in three months he came back with crap. And I fired him. And I was able to replicate everything that he did in about 30 minutes that he had spent 3 months trying to put together. And in a day, I had been able to do about 30 times what he had done, and what I found out was he refused to learn how to use a computer. So, I looked at that and I thought – OK – I was now about 1,000 times more productive than this brillant Ph.D. based off of not a sophisticated understanding of computers.

It really started to hit me at that point. Then I started looking around and thinking this is an industry that’s going to have to do more and more with less and less in terms of the people side. This is an industry that’s very comfortable hiring consultants to do things, and we’re going to have fewer of those consultants. And what happens with a consultant is you pay them a lot of money, they give you one piece of information or give you one help on one asset, and then they walk away knowing everything you know about that.

James Hahn II: Except Drillinginfo.

Allen Gilmer: And then they become a competitor of yours.

James Hahn II: I was going to say – I said except Drillinginfo. I meant, except Tribe Rocket.

Allen Gilmer: Except, Tribe Rocket. Well, I’m just saying from a technical professional point of view. And so, the whole issue there is that Drillinginfo is this neutral thing that helps you create organization knowledge. It allows you to go out there and make decisions far faster than you could before. And then if you wanted to go out there and be 3 or 4 times, or maybe 10 times more productive than you are today – instead of hiring 3 or 4 times as many people taking up 3 or 4 times as much office space, being able to make sure that everybody integrates and works well together – because we are a peckish sort in this industry.

James Hahn II: Right.

Allen Gilmer: We provide an ability to go do that for the cost, depending on the size of the company – from the cost of a geotech to the cost of 3 or 4 technical professionals in an organization of 10 or 15 or 30 thousand people.

James Hahn II: To that point, though, I’ve heard you speak and write recently about that they’re not even going to have that option as far as hiring.

Allen Gilmer: Yeah.

James Hahn II: Can you talk about that?

Allen Gilmer: Well, there’s not those people out there anymore. We’re keeping people in this industry right now longer and longer because we’re paying them more and more. So, salaries and consulting wages have gone through the roof because that’s the way we always ran things. We could always bring manpower in to go do that. And we thing nothing about spending money on manpower. And yet, when we start spending money on technology we all get freaked out.

So it’s really interesting to me to watch the psychological impact of people when they’re talking about buying a software or a service for a year, and then all of a sudden turn around and not thinking twice about hiring 4 people to go out there and be a geotech on this thing. What makes me laugh is watching that whole paradigm of how people relate to that.

Now, the beautiful part about it is the guys that walk in here that are in their 20’s and early 30’s, they don’t have that same phobia of technology that people of my generation do and did. The reality is is that guys in my generation, 10 and 15 years ago we learned how to use the software that drove our businesses. These completely piece of crap softwares. They were complex, difficult to use, and made sure that we never wanted to spend any time learning anything else. And darnit, we’re gonna hold onto that until the very end.

But the guys walking into this business don’t have that same phobia. And they look at the quality of software that we have in this industry and they can’t understand how THE biggest industry on earth has been so reluctant to adopt technology. So, I really think it’s an exciting time for us. That’s why when you look around Drillinginfo you see a lot of people in their 20’s, you see a lot of people in their 30’s. You see the people that are going to be running the industry in the future. And they’re going to be the stewards in carrying forward the things that we had the good fortune be able to start.

James Hahn II: That’s really interesting that you talk about leverage. You talk about all of these things that speaks to exactly one of my big … I feel like we’re at an inflection point with technology, as well as marketing. It all kind of goes together, right, the whole Web 2.0 interactive part of it. And I’ll talk to even some younger guys here … youngish, mid-30’s or so and they say, “Oh, it’s all about building relationships. I’ve gotta shake hands and get to know people.” And the fact is you can build 1,000 relationships at once if you do it right on the Internet.

Allen Gilmer: I’ll give you an example today. I created a relationship, actually through a lot of the efforts that you did when you were at Drillinginfo, with a fellow who’s in the royalty relations side of the … you know, royalty business and there’s some tangential business that we have.

We’ve traded emails, we’ve been Facebook friends and I had never met him. But I got to know him through these things and we met physically for the first time here in order to go see if we could do some business. That is, I think, what you’re talking about … That capability … Getting introduced to somebody at a deal and shaking their hands, well certainly you’ve met them at that point.

But how do you maintain a relationship? How do you maintain a relationship when you’re in different towns and you’re in different parts of the country in terms of trying to do those things. And I think that’s why the whole web has actually brought … it brings the opportunity to bring this tribe, so to speak, together in a lot better way.

James Hahn II: And how are you positioning that … For instance, we talked about … You talked about … What is it 5,000 that are retiring in the next 5 years?

Allen Gilmer: What it is is for every person that’s retiring right now, they’re replacing 3 to 4 people that are retiring over the next couple years.

James Hahn II: And the only way that really the industry can do that is leverage, right?

Allen Gilmer: Yeah. You’re thinking about it saying, that person coming in with 0 years experience is going to have to take the place of 2 people or 3 people with 30 or 40 years experience. So, those consultants aren’t going to be around very long. And to be perfectly honest, the world that we’re living in is changing so fact that the knowledge that a lot of those – the 30 to 40 years worth of knowledge that those consultants are bringing to the table – is becoming increasingly more valueless.

James Hahn II: How do you mean?

Allen Gilmer: Because we’re challenging the way that we always did things before. So, geology, for instance. Geology right now is going through a sea change because there’s 10 million books written on clastic reservoir geology. And for every million books written on that, there’s one book on shales. Because that was throw away rock. Those were rocks that didn’t have economic consequence. Well, guess what, all of those rocks that had no economic consequence are today the most economically consequential rocks on earth, and no one understands them.

James Hahn II: And that’s exactly the problem that y’all are solving, though, right?

Allen Gilmer: Absolutely. It’s a problem that the whole industry is solving and we just get to be in a great position to be to coordinate those experiments and let people see what the results of those experiments are.

James Hahn II: It’s really just about helping people.

Allen Gilmer: Absolutely.

James Hahn II: That’s what amazing. I’ve had a couple different conversations. A couple guys said to me yesterday, “Allen doesn’t have to work.” Just walking around the floor, “He just loves to do this. He just wants to help people. He just wants to see the industry flourish. I think that’s really the only way you can be successful, right?

Allen Gilmer: I think you do what you love. I got into this industry right out of college. I worked for these two older guys and it was the first time … You know, coming out of college I was just as much of a dumb little socialist as anyone that’s coming out of college. And the thing that I noticed was what was really interesting to me about it was this was a business that created new wealth. That people got together, they took risks together, and they created new wealth.

Fundamentally, when you drill something and you find something it’s brand new, it’s new wealth and it makes the world a better place. It’s not moving one nickel from one place to another. It’s creating new nickels. And there was like an “ah-ha” moment to me, and it was what a completely noble thing to do. You’re creating not only new wealth, but that new wealth is coming from energy. It’s coming from the things that power better qualities of life.

If you take a look at the world and you look at GDP relative to energy consumption, energy powers the betterment of mankind. Now, that’s not to say that there’s a huge place for being as efficient as we can be with what we’re doing. I certainly don’t believe in inefficient use of energy because that’s wasteful. But to be as efficient as we can be with the energy that we have, the more energy we have the better the world is.

James Hahn II: So what advice would you give to that socialist that might be listening to the podcast that just graduated or is maybe looking to get into the field?

Allen Gilmer: The world is not a single-sized pie in which the competition is how to divide it. This world is about how to make bigger pies and the competition to make the pie bigger. And if you’re able to go successfully make that pie bigger, you’re going to have a subsequently bigger piece of that pie. But by doing that, you’ve made everybody’s life better.

And so, for instance, if you have a problem with wealth creation, look at the guys that own Google. Sergey Brin and the other … I always remember his name because it’s always the interesting one. But, the two guys that founded Google; they are multi-multi-multi billionaires today. And somebody would look at that and say, “They are taking … They’ve taken more than their fair share of the money in the world. But think about the efficiencies that they have brought to you. I gave you that example of that geologist, that it made me 1,000 times more productive than that geologist. And that productivity came to me, and there’s been a lot of studies about that.

So, if you take a look at the amount of wealth that they have created in the world by allowing people to do more, they’ve taken a tiny fraction for themselves of that wealth. And they’ve let the rest of us have the benefits of 99+ percent of that.

James Hahn II: And if you want to push-back on the energy side of it, if you do one Google search – the power, the energy that it takes to do ONE single Google search, you can take a cold cup of coffee sitting on this table right here and bring it to room temperature. From one Google search.

Allen Gilmer: That’s fascinating. Well, there’s a reason why gasoline is … It wasn’t some massive conspiracy amongst oligarchs to make oil valuable. It was the fact that a gallon of gasoline can move 2,000 pounds of metal 30 or 40 miles. The amount of energy that’s stored in that and the fact that you can actually move that energy from here somewhere else with a minor amount of loss of the energy to be able to go do that. No other energy comes close to the efficiency of that in terms of storage capacity.

You know, it’s just amazingly, amazingly condensed energy that’s easy to move. And that’s why it’s the most important energy on earth. That is the challenge.

I think if your listeners here, if they’re really interested in energy and they’re really skeptical about oil and gas as an energy source, I would encourage them to watch Scott Tinker’s movie “Switch”, which is an analysis of the scale issues that have to be overcome in order to switch, and his timeframe for moving to a carbonless society. I think it’s a very well thought-out, very scientifically-grounded look at that that actually avoids all of the hysteria of politics.

James Hahn II: That’s amazing, and I do encourage people to watch “Switch.” It’s a fantastic … Even if you just to their website, I think it’s switch.com (EDITORS NOTE: Correct address is – http://www.switchenergyproject.com/), they have tons of clips on there and things that you can just learn and download quickly.

We’re wrapping things up here because we’ve been going for a little while here. I really appreciate all of your time. I guess the last question that I wanted to ask you is really … We talked about the (advice) for the college kid coming out; what’s your advice for the industry in general?

Allen Gilmer: Don’t be afraid of change. Change is happening to us very quickly and this is an industry that typically has resisted change, not adopted change very well … Not to be afraid of change … This is … The change that is coming is going to benefit mankind in a huge way. And learn how to not be fearful of it, learn how to be adopting of it.

James Hahn II: That’s fantastic. Well, thank you so much for your time today, Allen. I really appreciate it. I know you’re very busy here at NAPE, and I’m going to go out and hit the floor and hand out some more of my business cards. If you run into me on the streets – obviously you’re going to listen to this after NAPE – then I can (noise of metal on the table) thump it down for you. So, thanks so much for your time.

Allen Gilmer: (Laughing) Make sure you grab one of James’ business cards, guys. Especially for those of you that like drinking beer.

James Hahn II: (Laughing) Perfect. Perfect. Well, once again, you have been listening to The Oil and Gas Digital Marketing Podcast, I am James Hahn II, the Founder of Tribe Rocket. You can check me out at TribeRocket.com.

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