How To Survive Downturns: Advice From 30 Years of Firsthand Experience
I graduated with a degree in petroleum engineering in June 1986. During reading week (February), I thought I would be proactive and walk the streets of Calgary with my résumé seeking a job, rather than heading to the mountains and skiing like most of my classmates. I failed miserably!
Why? Oil was somewhere around USD 9.50/bbl, and every manager that I met simply threw the daily newspaper at me, showing how bad things were. I heard the same chorus from everyone: “How can I possibly hire a new grad when I’m going to be laying off?” and “I might lose my own job,” and on and on.
I should have gone skiing. 1986 was about the worst I had ever seen or imagined, until now.
Over the years, I have been a typical guy toiling at a service company or a small independent company wondering what the future will bring. My best view is gazing into the rear view mirror, where things seem to make sense. Take heart, young professional, and welcome to the industry. If you can learn to prosper in the good times and be frugal in the bad times, you will do just fine.
For this article, I have been asked to reflect on my career and give you advice and methodology, especially pertaining to budgeting while also creating game-changing technology. I’ll get there eventually, but first a little history.
Having served as the chief executive officer (CEO) of a small public company, I realize that the market has far more influence than you do on drilling your favorite prospects. I have been sales manager of large and independent service companies and realized that although you can hustle and promote the best and most innovative technologies, if the market is not right, you may just have to wait. I have been the darling of a new region when the energy industry moves in, only to have it all reversed in anti-whatever campaigns by the same people, vilifying me in the process.
I cannot give much great advice, but I have learned a few things that I can pass on. Maybe they will work for you—budgets and technology aside.
- It is always going to cycle the other direction. If the oil price is at a high point on the commodity cycle, and there is no looking back, and all the experts say “this is why”—be aware: The drop is near. If the cycle is near the bottom, and it is the end of the world, and there is no way the oil/gas/ (insert commodity here) price will ever come back because the same experts have all these graphs, look out—it is probably already changing. If you gear your employment and savings plan and family planning around the fact that there will be cycles, you will have a long and happy career.
- Learn something from everyone you work for. Bosses can be great, good, mediocre, or downright scary, but every single one has taught me something. Perhaps it is to hold out with a poker face, perhaps it is to be efficient above all, perhaps it is to learn to make decisions, or perhaps it is to learn to speak out. Make a point to find at least one good (or effective) habit from everyone you work for.
- Be yourself. Maybe you are not technical. Good. Learn to network and connect with those who are. Maybe you are technical. Good. Be the best you can be and be known for your innovations. Maybe you are just a grinder that does a solid job of everything. Good. The world needs a lot more of you.
- Respect other professionals around you. The land department might drive you crazy, or supply chain may make you want to hide, or the geologists may have you convinced that they lost their minds, and, of course, the accountants spend their entire day just figuring out how to waste your time. However, this is merely your opinion, and you need to spend time in their shoes. The best way to do this? Be a part of their team or get into groups with other professionals so you can see how they work. Suddenly their collective IQ goes up an order of magnitude (or are your eyes just being opened to the bigger picture?). Teamwork, respect, and appreciation of other professionals goes a long way. It has saved me many, many times.
- Be true to yourself. Would you do to yourself what you impose on others? Would you want a well drilled on your property? If the answer is no, then work your hardest to make sure the regulations, practices, and attitude are changed so that you can accept the work you do to others on yourself. It is easier said than done, but the public is watching. Now more than ever, we must walk the talk.
- Present well and know your material. Sometimes, in the heat of the budget battle, you only have time to do a 5-minute elevator pitch to get your point across. Learn how to be succinct. Learn how to do a one-page summary of anything. Most executives lose interest after a page. Being in the public markets honed my skills. Let me give you an example: I once was presenting to a fund manager who—mid-presentation—called in his assistant, handed her the keys to his Porsche, and then gave her instructions for a service appointment on the car. He motioned for me to keep talking, but really, I was done by that point. The first 10 minutes mattered, the rest was just courtesy or long-suffering on his part. If I’m competing with a car service appointment, I need to rethink my pitch. I never got the funds.
I firmly believe that if you follow these six rules and develop a passion for budgets and methodology, you will survive in any market cycle. Oftentimes downturns create innovation that is not realized until the next upturn. Of course, that innovation may become overused or require perfecting in the next upturn (case in point: multistage hydraulic fracturing in horizontal wells).
We—as an industry—are tremendously innovative, but we—as individuals—often have no control, so consistency and sound technical knowledge are the best ways to achieve innovative budget success.
Here’s an example: In 2008, I was CEO of a small public company, and we raised a significant amount of “bought deal” financing—the largest amount in company history. That capital was specifically raised to do large fracturing treatments in an area where I strongly felt that we were running ahead of our research on the rock. I had no choice; I took the money and performed the unsuccessful stimulations but kept enough in reserve to pull off one drilling AFE [authorization for expenditures] that allowed me to delineate a current reservoir. Both parties ended up getting what they wanted. Know what you want and keep grinding toward the target.
Learn how your capital or budget decisions are being structured and work to that end. It is generally futile to buck the system rather than work with it. If you understand the “why” in the budgeting process, you will be able to work toward an acceptable result. Whether the budget or financing is internal or external, there will be parameters, and once you can align with those goals (I did not say agree, I said align) you will find you have the budget for technical innovation.
I strongly believe that if you truly give your best effort at working with the six key learnings, your chances of success will improve. Good luck and remember Lesson #1: The cycle will always change.
Darcy W. Spady, managing director of Broadview Energy Asset Management, is 2018 SPE president. He is the first Canadian elected as president of SPE. An active SPE member since his graduation in petroleum engineering in 1986, Spady previously served on the SPE International Board as regional director for Canada. He has held officer positions in the Calgary, Illinois Basin, and Appalachian sections. In 2012, he won the SPE Regional Service Award for his work in the Canada region.
Spady has an extensive background in the natural gas, oil, and heavy oil segments of the industry, having worked a decade for Schlumberger across North America in its wireline and pressure pumping segments, as well as with the Columbia Natural Resources/Triana Energy Group in the Appalachians, Atlantic Canada, and internationally. He has also served as the chief executive officer of Contact Exploration, and more recently as head of sales for Sanjel Corporation. His expertise of 3 decades in both the independent producer and service segments of the industry greatly enhances his role at SPE.
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