Monday, February 16, 2015

NAPE 2015: Euphoria in the Year of the Vulture

Welcome to a Road Trip of the Mind, as you accompany me in a visit to the North American Prospect Expo (NAPE) 2015, which took place in Houston, TX  (February 9-10, 2015).
NAPE 2015 in Houston, TX
Background:
NAPE is the North American Prospect Expo, and it takes place the second week in February in Houston. Although the event is organized by the AAPL (American Association of Petroleum Landmen), it's also attended by geologists, engineers, and people involved in finance. NAPE is the place to buy and sell oil and gas properties, mineral rights, royalty interests, and to find partners and financing. Properties range from tiny little packages in East Texas to massive resource plays that can involve hundreds of thousands of acres.  The properties are onshore and offshore, and there are booths from companies and even countries all around the world. It's an action-packed two days at the George Brown Convention Center, which is across the street from the Hilton Americas, where many of the receptions, meetings, and meet-and-greet events take place.  Last year, it was icy and cold. The year before that, the weather was rainy and cold. This year, the weather was spectacularly beautiful, and the more than 17,000 attendees and exhibitors had an opportunity to walk to the many different restaurants in downtown Houston, ranging from the House of Blues to Massa's Seafood Restaurant. The energy is just absolutely electric. You can feel the racing pulse of Houston, which is the heart of the oil industry.


susan smith nash at NAPE
Susan Nash getting ready for NAPE.
Ready for NAPE
I'm making my way along third floor of the Hilton Americas, getting ready to participate in an all-day meeting of the AAPG Executive Committee.  Because the AAPG is one of the partners behind NAPE, it is important for the members of the EC to attend. So, like clockwork, the events unfold: dinners, meetings, receptions, and more meetings. There is some science and some engineering, but mainly, it's business. If you have a property to sell, this is the place to be because you'll get it out in front of a lot of people. At least that's the hope. There is a lot of competition for mind-space, though.  I'm not sure I've ever met anyone who actually ever closed a deal at NAPE.  But, it's where you connect and initiate communications. I'd like to make a lot of money at NAPE, but I've never had anything to sell. That said, I do find it to be a great place to promote AAPG's activities. I think that my activities at NAPE, when I'm really aggressive and proactive, probably result in additional business to AAPG.  That's in a good year. This year is shaping up to be not merely bad, but potentially fatal to some companies and projects. Nevertheless, I think I need to push myself and try to do whatever I can to find out what people want and need, and then see how AAPG can meet the demand. 


Year of the Vulture?
Because of the the collapse of the price of oil during the second half of 2014 and the first few months of 2015, I fully expected the atmosphere to be utterly apocalyptic. Layoffs at major companies were happening, and the ones I read about already totaled around 50,000.  Worse, Citibank was predicting $20 per barrel oil.  Most companies need $85 per barrel to be profitable. So, I expected fear and avoidance of pain as the dominant or informing weltanshauung, the fundamental cognitive orientation of society. I, myself, have already suffered a number of sleepless nights, or at least nights in which I wake up at 3 am, my mind racing with ideas and possibilities. To my surprise, aoocalypse was not really the overall mood. The mood was enthusiastic, even euphoric. Why?? Clearly it's all about opportunities, and if one is positioned well, it's possible to buy at a price that is favorable. There are short-term, medium-term, and long-term profits to be made. Some of the opportunities could form the foundation of a new, successful company. 
Susan Nash at the NAPE IceBreaker, Feb 2015
Breaking the Ice
The Icebreaker is a great place to hear yourself be utterly drowned out by background noise. I do not have much to say this year, but I would like to listen. I generally attend the Icebreaker out of curiosity, just to measure the mood and to see if I run into anyone I know. This year, I saw at least 20 people I knew, which surprised me, given that it's really a landman's event, and not so much for geologists. This year's color was purple.  Is it always purple?  I do not think so.  This year's signage seemed particularly elegant and compelling, and the knowledge that this will be a year of dramatic changes, and that change means opportunity gave me a huge surge of adrenaline.



Mini Hot Dogs
The lines were really long for the mini-dogs and sliders. They were also long for the chips and queso / salsa. I always feel relieved that I'm not a fan of hot dogs or hamburgers.  But it's really interesting to me to see what people like and how enthusiastic they are about what is being offered. The convention center food service types are great. None of the food stations ever seem to run out of the food.  I wonder how they chose the items. I know that they're convenient and easy to eat. They also seem ideal for sporting events (basketball games, football games).  Metaphorically, it's perfect. Selling deals and deal-making -- yes, it's a sports event.  How could it not be?  The game requires one to be smart, nimble, and quick. It's also good if you've been practicing diligently, and with an eye for how your competition has been making changes to their tactics and strategy.  It's perfect!

Life is a candy jar ...
Well, not this time. I did not see anyone digging into the candy.  Instead, they waited patiently in line for the chips, queso, nachos, hot dogs, and mini-hamburgers.  Perhaps it was too early for "dessert." This was the first time I had noticed jars of candy, and I wondered why they were there. Candy jars are a staple of the booths. Perhaps it was a way to set up a resonance with what would be taking place tomorrow -- what people would be seeing. It was a smart move, in my opinion.  It was an unconscious reminder of what would people would be seeing in the booths - generally big candy jars and other give-aways (pens, etc.).  So, it helps whip up excitement (and a sugar high) for the next day.



Drink the KoolAid
The lines were very long to the ION / TGS booth where fur-hatted baristas handed out purple "on the rocks" something-or-other served up in giant plastic martini glasses. I was offered one, and I took a photo of it. I was afraid to drink it. What was in it? There were absolutely no indications.  I know it has been more than 20 years since Jim Jones,  but is there really so little memory of the purple KoolAid? I recalled reading about the "white nights" when the followers drank KoolAid they fully expected to be laced with cyanide, meaning that they would most certainly die. I had to ask myself, have we forgotten the entire impulse behind the different Doomsday cults that suffused our culture with horror and a realization that uncertainty drives people to security, no matter how insane....?  My dissertation was on the use of the apocalyptic narrative to manipulate people (including in doomsday cults), and so I was quite impressed by the elements of this booth. It was very stylish and laden with multiple interpretive possibilities. In times of dramatic change and uncertainty, there is a tendency to create cultural enclaves of "true believers," usually headed by a charismatic leader who offers his followers security and a sense that they will be protected from the battering waves of change. So far, I have not seen the emergence of a charismatic leader. I believe that the oil industry is too cyclical for the formation of cults and mad messiahs. Further, it's possible that a short-lived downturn could actually lead to improved overall health of the industry. It's too early to tell. At any rate, I appreciated the multi-level semiotics in this booth. It strikes me as quite intelligent. Later, after reviewing my photos, I wished I had taken the drink. I would not have drunk the purple brew, but the enormous plastic martini glass was dramatic and it made me smile.

The Booths Are Big
So you want to know what NAPE looks like?  Here it is. Check it out. Lots of large booths by companies who want to make a statement and also open the floor for new ideas and opportunities. Devon is from Oklahoma City, and they've been a huge presence. So has Oklahoma City-based Chesapeake and America Energy Partners. Linn Energy and SandRidge were solid this year. It's all very strange for me to realize that after Houston, Oklahoma City is probably #2 in terms of US oil centers. I would not be surprised if OKC has eclipsed Denver. If so, that's interesting -- why? I attribute it to environmental issues in the Rockies and the fact that the cost of doing business in Colorado is very high. And, it's very clear that OKC's entrepreneurs are bold, visionary, and even messianic. I like it. I think that there is a very good chance that Oklahoma City's entrepreneurial spirit will help weather the storm. Let's hope the price rises to something reasonable soon, that Europe's economies find a way to recover, that China transitions from an investment-driven economy to one that can sustain itself on its own markets.  Let's also hope that new investment capital becomes available.


Where Deals Happen
NAPE is for the big guys. It's also for the little guys. So, NAPE also looks like this: lots of maps, lots of terms of trade. If you're exhibiting, you've got to find a way to capture the interest of the passersby within about three-tenths of a second. Then, you must communicate your value proposition within a space of 3 - 5 seconds.

Here are my favorites:

Theme 1: The Bargain.  Buy low, really low, and sell high. The message is that the property is being sold because the company is in a distressed situation, or consolidating their approach / properties / focus. The message is palpable: "We are a bargain. Buy low, and in a year or so, you'll sell high."

Theme 2:  Revitalizing Mature Fields.  Usually, there's an opportunity cost in taking a producing field offline. Now, with the price of oil at a 7-year low, there's no opportunity cost. Here is the message:  Buy this field. Take it offline. Waterflood it. CO2 flood it.  Drill the stranded pay. Buy the time you've done all that, the price will have gone back up. Of course, there are risks with mature fields, which include tricky production problems and potential environmental issues. 

Dreams of Flying High
Another smart and vivid "tactile metaphor" of NAPE.  All the guys who were touching the small plane were talking more or less in the same vein. "You know, the last time the industry went in to a tailspin and extended downturn, I was in my 20s and I did not have any experience or any access to capital. So, I saw big opportunities pass right in front of me. I tried to grab them, but because I had no capital, they slipped through my fingers. However, this time, it will be different! I'm smart, or at least, experienced, and I know how to work within the industry! I'm going to jump right into the game this time, and I'm going to win. I will win big. I know it. I will be flying high!" I listened, felt their enthusiasm, but decided that I would not try the same approach. I'm very conservative, so although I could understand the narrative, I still could not help but think of some of the challenges.

Snakebite Kits
These are actually business card holders. However, it was not at all clear what they were, and as people wandered in and out of the Southwestern Energy booth, they all had the same question: "What are they?"  I could not resist. I said, "They are snakebite kits." This response never failed to elicit a laugh -- often a pretty loud horse laugh. I even approached the engineers manning the booth, held one out in my hand, and then politely inquired, "Are these snakebite kits?" They laughed and had a great response: "We did not think so, but who knows? However, we do not warrant their efficacy in combatting the consequences of being bitten by a snake."  I loved it. So, I went back to lurking next to the pile of mysterious blue packages, and I continued to be helpfully responsive to all the passersby who posed the "What are these?" question. One guy had a great comeback: "Whoa - that's perfect," he said. "After all, we are ALL feeling a little bit snakebit these days!"  I liked his response.

susan smith nash
Offshore Nova Scotia
It's not the best time in the world to be promoting a very high-risk venture in drilling offshore Nova Scotia. But, what can you do? You have to think long-term. The government of Nova Scotia has invested in a massive study, which includes geophysics, geology, and a petroleum systems study, which was positive enough to entice a few super-majors to obtain concessions and to file intents to drill. If they have positive results, the entire world will be turned upside down -- at least offshore Nova Scotia. The beauty is that this is a great time to be drilling. Prices of services are leaping off cliffs and plunging into really low territory, just to keep people busy with the hope of riding out the storm, and the emerging stronger than ever, like a lizard after accidental exposure to radiation. We all know what that is: GODZILLA! Perhaps we do not think of Nova Scotia in the same mindspace as Godzilla, but it's high time that we open our minds to power in unexpected places. I know that I like thinking that underdogs can emerge as major players. 


Wells Fargo
There's magic in this artifact, and seeing the replica of the "Wells Fargo Wagon," brings a number of thoughts immediately to mind. First, it's the perfect symbol for Wells Fargo financial services, which are based in San Francisco. One can't help but think of San Francisco's gold rush and the eagerness of people to move west, especially after the Civil War, when Wells Fargo offered it's "Best of Class" transportation system from 1866 - 1869.  The wagons were the best around, and were constructed in Concord, New Hampshire, where they had springs and suspension systems which gave them a great ride. Even fully loaded, the averaged 5 miles per hour, with a team of 6 horses. I have to say though, the idea of having to travel from, say, St. Louis, to San Francisco, at 5 miles per hour, is a bit scary. How many days, or months is that?  1500 miles / 5 miles per hour means 300 hours. Let's say you can travel 10 hours per day, that's 30 days. Good grief! How tough our ancestors were! And, when I think of the lyrics from the Broadway play, The Music Man, I can understand the energy and enthusiasm with the arrival of the Wells Fargo Wagon, laden with packages.  Here at NAPE, Wells Fargo delivers valuable financial services, and they've made many of the capitally intensive resource plays (mainly shale) possible.


The Decameron and Waiting out the Plague / Low Oil Prices
I was a bit shocked to see a booth that had nothing but antiquarian books and comfortable leather seats. It was provided by Frost and Associates, an investment banking firm, and my sense was that the old books were supposed to provide an "old school / old money" sort of cachet. I think that is good. However, did they actually take a look at the books they included? I was amazed to see a Charles Reade volume -- I have an extensive collection of antiquarian books and Charles Reade is one of my favorites. I do not have a single volume of Griffith Gaunt, but I think I have it as a part of a set. It's a psychological study, and it probes the most extreme of emotions. In the case of Griffith Gaunt, it's jealousy.  I was also amazed to see a 19th-century printing of Boccacchio's Decameron, the collection of stories which are a bit like those told by Sheherazade, not only in the fact that that it's a collection of short stories, but also in the fact that they are all about telling stories to stave off death. In A Thousand and One Nights, Sheherezade has to tell stories to buy a new day of life. In the Decameron, it's all about a group of people thrust together because of the horror of plague, and the strategy of doing a self-imposed exile in the countryside to distance oneself from the walled cities where plague, desperation, and random death created a toxic miasma of desire, horror, and rage. Is that what this small little "reading island" within the current chaos of the oil industry reflects?


My Buddy, the Brontosaurus
Yes, you guessed it. This was the Sinclair booth. They were giving out blow-up dinosaurs - the kind we used to call brontosaurus, but now, I think have been renamed as apatasaurus. I ask myself, "Why?? oh, why, oh why???? I love the "brontosaurus" sound in a way that "apatosaurus" just does not do anything for me. The Sinclair dinosaur is very "Old School" and a symbol of individual creativity and entrepreneurship. This dinosaur is the same size as the ones you'll encounter all across the western U.S. in the front of locally-owned gas stations that purchase their gasoline from Sinclair, and also offer oil changes and basic maintenance. In this booth, the big "give-away" is a blow-up miniature Sinclair dinosaur.  I remember taking a small green Sinclair dinosaur home a few years ago. I inflated it and put it on my mantle, where it stayed as a cheerful reminder of the power of ideas and hope for the little guy.   


No Unauthorized Photography
I had already taken 20 or 30 photographs by the time I left the NAPE exhibition floor, when I encountered this sign and became aware that my smartphone snapshots might have been "unauthorized." I quickly retraced my steps and pondered whether or not I had taken photos of anything that could possibly be considered confidential or proprietary, or even potentially embarrassing. The answer was an unequivocal "no," so I emitted a sigh of relief, and proceeded on my way.  The positive energy of the event continued to envelope me, and I wondered how many of the individuals who stated that they were determined to "profit this time" or "buy low, sell high," would be successful. I am sure that many would be. On the other hand, some could soon be unemployed, and a certain percentage would prefer a steady paycheck. 

1 comment:

Charles Sternbach said...

Thanks Susan. Your article really captures the Savage Journey to the heart of the NAPE dream: little hot dogs to the Wells Fargo stagecoach to the XTO fake fireplace. Somehow it all fits together into the grand parade. I think the year of the vulture says it all, and somehow the mood at NAPE is upbeat despite apocalyptic economic forecasts because seeing maps, cross sections and ideas is immensely uplifting to geoscientists. Creative stimulation is quite a tonic to feel good about something other than price. There are times (like now) when we NEED NAPE.