Remember when we all thought that e-commerce
was an automatic way to make millions of dollars?
Well, you should, since it was only one year ago.
E-commerce was the buzzword for business -- including the oil industry
-- although the concept clearly suffered through a less-than-stellar
"shakedown" period that left many rightfully wondering
exactly how the Internet can produce profits.
Geologists, take heart: Unlike many retailers and
other industries that have learned the hard way, it appears the
Internet can in fact be a valuable tool for oil companies.
That's the message of one Dallas-based business development
manager who says that an important use of the Internet emerged in
the last year or so: online marketing and evaluating of producing
properties and prospects.
The Internet, according to Perry White, with Petroleum
Place Inc., provides a unique medium for companies looking to sell
properties or prospects, allowing them to get their message to a
wide audience - and in the last year more and more oil firms of
all sizes have recognized the tool's potential.
"The Internet accelerates the marketing and
due diligence process," White said. "When a company is
selling either prospects or producing properties, they want to increase
deal flow or deal velocity and compress the marketing cycle time.
"These are both goals the Internet and an e-marketplace
can help meet."
White called the Internet "a great mechanism
for putting out a significant amount of information, allowing people
to look at that information and indicate their level of interest.
"Following that initial step," he continued,
"companies can screen potential buyers and selectively allow
them into deeper levels of data via electronic data rooms on the
Internet and/or through a physical data room."
White is in a position to know. His company works
with oil companies to establish electronic data rooms (EDR) where
they can market prospects and properties, and buy, sell and trade
assets through a marketplace supported by its subsidiary in Houston,
The Oil & Gas Clearinghouse.
Know Your Audience
White's advice is this: Before jumping in and using
the Internet to market a prospect, companies should determine what
type of a prospect they have and define their target audience.
"Generally, oil and gas assets, whether it be
producing properties or prospects, lend themselves to online marketing,"
White said. "Prospects, for example, have a great deal of geological
and geophysical data that prove their value - and the Internet is
an efficient medium to present this type of information. Additionally,
according to how the data is presented online you can be creative
with the story you want to tell.
"For example," he continued, "we have
a prospect in the Gulf of Mexico we would expose on the Internet
with a limited amount of information in the form of an executive
summary, consisting of an index map, a brief geological and geophysical
description of the prospect and contact information. An e-mail with
a link to the electronic data room is then e-mailed to several thousand
people who have indicated an interest in that type of prospect.
"We in turn might receive hundreds of visitors
to the electronic data room."
Once company officials have a chance to determine
"who's interested in your prospect ... a list of say 100 potential
buyers might be culled to 20 who are selected as viable candidates.
"These are the companies that are provided access
into the highly secure electronic data room where they can view
economic projections, detailed geologic and geophysical data in
an interactive environment and other information," he said.
That will likely lead to offers, and then the company
"can negotiate with those companies directly or through us
as an agent to consumate a transaction."
Step by Step
Marketing a prospect online, White said, involves
a Web site developer meets with an asset group from the oil company
to get an idea of what they are selling and what they consider the
key highlights of the prospect or property.
on this information, the service company can determine the architecture
of the electronic data room, with the EDR customized to reflect
the image of the company.
"It can take anywhere from a week to a month
to put together an EDR, depending on how elaborate they are,"
the initial meetings, everything is done by virtual collaboration.
"Once we get the information, we can then build
the EDR and then publish it on a secure site where only the client
can view it. This allows us to fine tune the EDR with the client
before it is viewed by the public," White said.
This service is viable for companies of all sizes,
but any company should consider working with a service provider
that can establish these EDRs.
"We developed 70 to 80 EDRs last year, and clients
range from three- to four-person companies up to large independents,
major oil companies, and national oil companies."
Online marketing, he added, is definitely catching
on in oil companies.
"We are starting to see more and more oil companies
with some type of e-commerce initiative - especially larger companies,"
he added. "They are at least establishing pilot programs to
test the waters for different uses of this medium.
"It's difficult to ignore the Internet today
when the number of people coming on line every month is exploding."
In addition to marketing and evaluating prospects
and producing properties online, companies are finding that the
Internet can be an important internal tool to better manage their
"We have discovered as we go through the process
of setting up EDRs that often companies know the most about an asset
the day they are ready to sell it," White said. "This
has been very revealing for companies, and executives are beginning
to understand what an important data management tool the Internet
can be internally.
"The Internet is valuable for marketing and
evaluating prospects, but there is probably equal or more value
in being able to get a better handle on their own portfolio,"
he added. "It's taking a lot of different turns that people
never thought about before."
Once the EDR is established, an e-marketplace can
help oil firms in other ways -- such as providing statistical analysis
of those entering the EDR.
"At the initial level we can determine who is
visiting the EDR," he said. "This information may then
be used by the seller to proactively market to those companies with
the most interest, or where there may be the best fit," he
"Also, we can tell what pages a given company
is downloading," he said. "If a company is selling a mature
producing field in Louisiana and the key element to the project
is recompleting wells to tap missed zones, by tracking the documents
that potential buyers download we can determine if they understand
"Once a smaller group of interested companies
has been identified, authenticated and administered a password to
additional information, we can track detailed usage and access of
this information," he continued. "That type of knowledge
is very useful to sellers, and enables them to hone their marketing
An e-marketplace also can help an oil company get
the word out to a large number of potential buyers as well.
"Putting something on the Internet is like building
a billboard -- if you put it on a dirt road nobody is going to see
it," White said. "The key is getting it on the interstate
highway where people will see it. That's where an e-marketplace
comes in ... We can get the word out to both a wide range of companies
using the Internet and also to the right people within those companies
by leveraging the immense amount of transaction data and buyer profiles
that have accumulated over the many years both offline and online."
Of course, the big question is always how much does
this cost - and how much will it save?
White said his company's business model is built
on three components: a technical service fee to build the EDR and
to market the asset, a monthly fee to host and manage the EDR --
including the creation of detailed usage reports for the EDR --
and a risk-share success-based transaction fee upon closing.
That cost is offset by other savings - personnel,
document costs, travel and other expenses - that can be achieved
through the Internet's accessibility and through the use of a marketing
"Even though at some point many interested buyers
still want to see the coffee stains on the real maps, we can dramatically
reduce the costs associated with marketing a prospect by using the
Internet," he said.
"If you are active and do several of these deals
a year and you can cut a couple of months off the marketing cycle,
that's quite a cost savings."
The Bottom Line
Marketing prospects online seems to be paying off
for oil companies.
"We have cases where we have put an EDR online
on a Monday morning and had 150 visitors by the first morning,"
he said. "Thirty of these visitors downloaded the confidentiality
agreement and four executed the signed agreement back to the seller
by noon on Monday.
"At the beginning of 2000 I saw a lot of companies
put their toe in the water and post maybe one rank prospect outside
of their core area as a low risk test of this new way of doing business,"
he said. "Over the last year we've seen the value of producing
properties and prospects increase, the EDRs become more elaborate
and more producing asset transactions closed online."
"Today we are seeing a good deal of repeat business
from clients who have realized the value of this medium."
White said the North American oil industry is a very
active acquisition and divestiture market, and that a big part of
that business is being able to efficiently manage a portfolio while
maximizing the value of all the assets within the portfolio.
"Marketing and evaluating producing properties
and prospects online can offer that efficiency and value,"
But while technical hurdles to online marketing and
evaluating have been overcome in recent months, business hurdles
"For example, you can present a prospect in
the deep-water Gulf of Mexico, but may or may not be able to get
the seismic data owner to provide a license to actually view the
data on the Internet," White said. "The geophysical contractor
industry has not yet fully updated its contract language to reflect
the capabilities of using the Internet to view and interpret seismic
"That's a pure business issue," White said.
They have to answer business questions like:
Are we going to let this information on the Internet?
Are we going to limit access - and if so, by how
What kind of business model can be put together based
on viewing the data from a central location?
"It brings up some very interesting business
questions for all sectors of the industry," White continued.
"Today we are grappling with those difficult issues, because
this is a cutting edge situation that's never been encountered before."