Entrepreneurial Spotlight with CEO Desmond Anderson

Hi, I'm Ken Miller.

I'm David Erdos.

Welcome to the Erdos Miller New Technology Podcast. Today, we have another great entrepreneurial spotlight for you with Des Anderson. Des, welcome to the show.

Good morning. Thank you.

Our sponsor is Gibson Reports. Check them out at gibsonreports.com. They have excellent MWD and directional drilling market share reports.

Desmond, how did you get into oil and gas?

I got into oil and gas paying off student loans, the story of all of us who went out to the oil field and got sucked into the money and stayed out there. I worked my way up the rigs, got into directional, and here we are today.

How did you get started on your own as an entrepreneur?

I've worked for several of the major directional companies. I was an operations manager for Precision on our last venture, waited out non-compete for a couple of years traveling the world selling directional drilling tools and then decided with a couple of partners it was time to open our own directional company and see what we could do there right in the midst of the downturn. We had to start innovating to get out of that market because it's a lot slower up there than it is down here.

Are you talking about the '14, '15 downturn or the '09 downturn?

The '14, '15-

'15 [crosstalk 00:01:23]-

... downturn, yeah. That's about when we opened up and started hard at it. We've got into cavern storage stuff, so it's helped us keep relative where the oil and gas markets turned down. It's helped out a lot.

That's great. What's kept you glued to directional as opposed to going out somewhere else?

It's the innovations in technology, the challenges with the directional drilling that's always kept me interested more so the MWD side and the ever evolving market. You watch the bigger companies evolve, and there's new RSSs out. There's new MWD tools out, and that's always been an interest of mine just to play with the technologies.

Fair enough. It's certainly a really cool part of the market for technology. I don't think too many other parts of oil and gas has to marry mechanical electronics and software together in quite the same way. I'm sure there's lots of other places that do, but it is a unique challenge.

Exactly and then not only do all of that, put it downhole and put it in a dryer and blend it all together and see how it'll survive.

I like to say that you do all the great white boarding and design you want, but physics is going to be the ultimate test when you put it downhole and see what it actually does.

That's exactly it. You can have a shaker table and think it's going to mimic downhole conditions, but it really doesn't. It's very violent.

Do you ever have any moments early on in your career that's really have stuck with you?

Yeah. The first time we hit 99 degrees-

Oh, yeah.

... it stuck with me. I was a little confused at what was going on early in my career. There's been a few eureka moments. Seeing some of the new dual telemetry tools come out was very interesting. You see the typical mud pulse tools. You see the typical EM tools. I think more so now is watching the innovations and technology start to flood the market now, which is really interesting.

Do you mean 99 degrees inclination? Okay.

You mentioned dual telemetry, and one of the things that really stuck with me is I was involved in a project from EM tool. We were piggybacking off of a mud pulse tool for a test. The system when we got out there, we went in the hole, put the EM on top of the mud pulse, and it was just not working. We just weren't getting any signals. It's an R and D tool. We're trying to figure out what's going on. I was out there. I was the engineer, and I was working on it for probably 12 hours. The whole time I was out there, the company man just kept harassing me over and over. He's like, "Hey, you might as well pack it up and go home. You're never going to get that tool to work."

Eventually after 12 hours, I found out what the problem was, and it was just some simple stuff in the electronics, and I corrected it and boom. All of a sudden we got signal. The tool was working fine the whole time. It was in the surface gear. As soon as we do, I think we're running it six hertz, then you're getting six bits per second just flying through. Everybody comes over and looks at it, and the data rate on the EM is just shocking compared to the mud pulse.

The mud pulse is probably running half a bit per second, and the EM is running like six bits per second. It's like, holy crap. It's just incredible. I kid you not, not like a half an hour later, the mud pulse tool failed, the primary tool under the piggyback. That kept us in the hole, so this tool that he was telling me to pack up and go home with 12 hours prior saved the run. That's one of the things that really turned me onto dual telemetry, which was a really interesting experience.

I mean, that's the name of the game is to keep drilling and always having a safety backup. You see it in the airline industry. You see it in other industries to have that safety. The name of the game is to keep getting some footage in there, and without some sort of backup, you're out to the elements.

It's a really interesting game to try and balance though because you're right, airlines have all sorts of redundant systems. They don't have two sets of wings.

Good point.

You have to pick your battles as far as that kind of stuff comes.

For sure. Yeah, definitely. Some of the things with the EM tools are they've come a long way. You're seeing extended reach stuff with EM tools now, and it's exciting times.

What are some trends in the market you're seeing right now that are peaking your interest?

A lot of the surface gear is peaking my interest because there's a lot of redundant backup, people starting to combine multiple systems together. Communication systems with the top drives is interesting. Some of the Motive stuff where you're starting to get more of the remote command center drilling. We're starting to see a lot more of that down here. Canada, we've been doing that for a long time. It's nice to see more eyes looking at the information

Maybe I'm out of the loop, but I find the Motive technology and the other directional drilling guidance systems to be extremely innovative and cool. I haven't seen them become as prolific as I would have thought I would by this year. Maybe they just need some more time, and I know they're coming along, but I figured by now it'd be on every single rig.

I agree. That's some of the things that you look at and wonder is it being used properly? Is it all encompassing? Do they have the right information? Maybe it's because it was bought up and is with one company now. Maybe if it was out to the general public, you'd see a lot more of the information getting across.

I know a lot of the ongoing conversation for years has been manned versus unmanned. What's your take on that?

I think you always need somebody out there. It's like having a car drive around with nobody in it. Eventually at some point, unfortunately, electronics fail, and you need to have somebody to correct that. I think as a safety, getting less people off of a location is better. Gumming around your building and seeing what you guys are doing, the surface systems are getting smarter, so I think you can bring people off of a location and not have to worry about it because you do have the checks and balances that it needs.

If I maybe take a step back from the technology, you've had a good portion of your career as an employee working for different companies, and now you've had a good portion of your career as an entrepreneur. Can you maybe just highlight some of the difference?

Well, the entrepreneur, I think you're pushing yourself harder. If you're working for another company, you have your goals you set to do that. Whereas entrepreneurs, it's my wallet. If I want to innovate something, I simply just will focus on it and spend it. The nice thing is being an entrepreneur, I don't have a bunch of people to check with, if we're going to do that spend, if we're going to continue with the project, or we're just going to cut it short.

The decision-making is a lot quicker, a lot more efficient, I think with smaller companies than large companies. I've been in R and D groups and large companies, and it's very slow and hard to get things to do. I think you're going to see stuff like you guys are building coming out of a smaller group of people that are more nimble and more efficient at getting technology out.

What are some things that have surprised you about being an entrepreneur that you didn't expect going into it?

I thought I'd sleep more, but I don't. Everybody thinks that it's nice to be an entrepreneur and, "Oh, you're not at work," but the thing is you got to balance your personal life, I have children, and your work life. I find that I work too much in too long of hours, whereas nine to five job, you shut it off and you go home and do your thing. Whereas being an entrepreneur and an inventor, I'm always on. I'm always thinking about things. I'm always doing research, whereas just being an employee, I never did that.

This is going to be really embarrassing for me, but one of my escapist fantasies when things get really tough as an entrepreneur is having a nine to five job sounds really nice sometimes.

Definitely, so appreciate it.

Yeah, then I realize that I would never be happy in that situation for more than two weeks. If someone hired me, I'd probably get fired in six weeks or something. I guess it's just my personality. I can't stop.

Yeah, and entrepreneurs generally have that kind of the same background. I'm driven. I want to do a bunch of things. I get complacent at a nine to five, if I'm handcuffed in, and I can't invent something, so I get bored very quickly. I think a nine to five would be my downfall as well. I think I'd get fired.

We have a panel coming up called MWD in the 20s. What we're talking about there is what's going to be happening with MWD and technology over the next 10 years, 2020 to 2030. Give me some of your predictions. What are your thoughts on what's going to pan out in the next 10 years?

I think because we're drilling faster and deeper, survey accuracy is going to come to the main focus. I believe that the ellipses have to tighten up. Survey points, we're selling surveys realistically is what we're doing. I don't think there's enough checks and balances. We're going to see new innovative tools like you guys are building come to the forefront where you can go deeper, faster and more accurate. I think once that information is up, there's going to be a lot more checks and balances and better communication.

I'd like to see some of the analytics come into play, and communication get a lot better on location. We're seeing that everybody wants to drill really fast, drilling practices, they go out the window. If you can get that balance with good information and those checks and balances, so we can actually say to the E&P companies, "Hey, we're beyond operational limits here, and the accuracy is going to suffer for it." I think we're going to see a lot more of that in the future.

We keep talking about longer and longer laterals.

Correct.

How far can it go, just reasonably?

As far as physics will let it. At some point-

Is it not some point of diminishing returns when you're drilling a 30,000 foot lateral or something?

Yeah, and it's going to be how well can you clean the well, how straight is it going to be, what's the ROI? It comes to that. Is going out that far going to make you that much more money?

I can tell you that just an extreme example of 30,000 foot laterals, something just totally ridiculous, tripping would be pretty miserable.

Yeah, I'm an old rig hand, and I tell you, you'd have some dead arms after that, the old numb arms where you don't feel them. Yeah, tripping would be miserable and then storing all the pipe, the rigs are going to be bigger.

It'd be interesting to predict where the long laterals might top off and hit a natural point of diminishing returns because what I've learned is that a lot of the lateral links right now are just dictated by how much lease space they have. They're just trying to go as far as they can within the lease space in one straight shot-

Yeah.

... which is really interesting.

I think a lot of reentries are going to come to the forefront too going back and seeing what the old equipment did because I don't think many of those wells were very accurate. I think if they get back into doing some of that, they might be surprised at what they can reinvigorate.

You know that 60% of all statistics are made up. Having said that, which is also a made-up statistic, somebody told me the other day something like we've only been recovering 10 or 20% of the viable resources in a lot of the wells we've been drilling. Going back and doing that kind of work and tapping those resources is both really exciting and really terrifying because we can already flood the market with shale oil anyways.

True, yeah.

How much more is there to get?

Is that referring to the wells drilled today or older wells?

Even today I think.

Oh, wow.

Certainly the older wells too. I think there's a lot of untapped resources there.

I think that comes back to survey accuracy because sometimes if you don't really end up where you are, where you want to be, you can leave a lot in the ground.

Yeah.

Well you got to remember, directional instruments are only half the story because you have the new geosteering. Your local changes in the field, your directional sensors aren't going to help you find that out. You really need to have more advanced geosteering instruments to then find your way around locally within what you're trying to do. Des, I have a bet on longbets.com. This is a website where you can put a bet on the internet, and everyone can see it, but it [inaudible 00:13:49] for a really long period of time. I said by 2030 more than 50% of the wells being drilled will have a telemetry system on there capable of in excess of 10 bits per second mud pulse or EM so another 10 years of development. I'll ask you your take, a bet against me, would you bet over or under?

I would bet even. I think you're pretty accurate on that reason being is once we get reliability under our belts, the data can come up faster. There's a lot of innovative companies that are doing stuff like you guys are that is going to get us to that spot. Technology is keeping up. We're looking at stuff that you can do with your iPhone that you never would've thought you could do. Now that we're seeing that creep into the directional market, anything is possible.

It's interesting you say once we get reliability under control. It's an ever changing game, isn't it?

Absolutely.

We make the MWD better, and then the bit gets better, and the agitators get stronger, and then we had to make the MWD better again. It's just this never ending game to play.

That's right, but there's a lot more eyes, I think, on the MWD systems, again, like you guys, us, we're taking off one little bit of reliability to innovate and focus on. We know we can't do a whole bunch nor do we want to do a whole bunch. We want to focus on our little niche part and add that to the market where you guys are doing so much more on the electronics end. I think once these start marrying, we can keep up to what's going on.

Well, it's an interesting question, is the future integrated or modular? Do you think one group can make a more reliable system overall with an integrated design, or do you think it's actually going to yield more reliability to have different groups focused on their different expertises and then bring that system together outside of any one company?

I think one company is going to bring forth the majority of it. It was like GE in the old days, here's the old tensor tool. Then you saw little branches of companies bringing things out, and was it better? You know, not really. There's some good stuff that came out, but there was a lot of real misses on that. I think one company as a core if they have enough funding and enough intelligence behind them is going to bring a lot to the table. There may be a couple of groups that complement those innovations. You never know. That's the thing with innovation. Somebody just may walk up with the next best thing that none of us were looking at.

Blow you away.

Yeah. That's the beauty of technology.

Well, any other thoughts to share with us before we wrap up?

No, I just really thank you guys for having us down and appreciate the tour and kudos to what you guys have going on. I encourage everybody to come check it out.

Well, thanks for joining us on the podcast.

Thanks for having me.

I'm Ken Miller.

I'm David Erdos.

Our guest today has been Des Anderson.

Thanks for having me.

Des, remind everybody of your company's name.

Standard Directional Services.

Standard Directional. Check out our sponsor, Gibson Reports, excellent MWD and directional drilling and market share reports, gibsonreports.com. Thank you.

Thank you.