The Oil Scout – Now and Then …

Title: The Oil Scout – Now and Then …

Author: Submitted By An Anonymous Oil Scout

Publication: The Outcrop, February 2009, p. 32-33

What does this term “oil scout” mean? Many in the industry will tell you what scout tickets and scouting reports are but many newcomers to the industry have no idea what the term oil scout means. If you talk to some of the old timers they will just laugh and say it may be someone who will sell the family jewels for a favor down the road? The answer is none of the above. Scouting has a rich past and a dynamic place in future oil and gas exploration. The name may have changed but the fact has stayed the same. If you’ve been around the oil business for any length of time or have worked in the Exploration business, chances are you have run across or heard the term “oil scout.” But what does this mean? Just the term still conjures up thoughts of standing on a hill counting stands of drill pipe or sitting at a computer downloading as much information as can be found. Who are these people and where did the term oil scout come from? Before we can appreciate what oil scouts do and have done in the past, it will help to briefly review oil scouting and the “good old days.”

Scouting dates back to the very beginning of the oil business. In the very beginning, the early 1900s, when the business was in its infant stages, there were a lot of shady deals and some down right deception going on. The early oil scouts were hired by companies to find out the truth in a timely manner, on not only drilling activity but also business in general; so a sound business decision could be made. In this scope, not much has changed. Scouts still do this basic job. It’s just that now it is done with the phone, fax and computer databases instead of driving to the location or going to the places the field people frequent. In some cases, the old ways are still done. But in general as the business has changed so has the way scouting is done but the fact still remains that information is needed to aid in finding and producing oil and gas.

In the 1960s a company with a new idea emerged making this job a little easier, or so they thought. This company convinced oil companies to contribute to a common publication which would provide them with drilling depths and certain types of geologic data. Like a clearing house of data. In addition this data company was to receive and catalog all well logs. This data would then be packaged and sold back to all contributing oil companies. This sounded like a good idea, but life has a way of throwing curve balls. As time went on it didn’t take oil companies long to realize that this information gathering could be used as a tool to slow their competition down. This was done by the words “tight hole.” Companies soon realized they could still hold information back from the publication and still receive a small part of the data they needed. Well, it doesn’t take a rocket scientist to see how this would work and companies caught on fast to the practice of “tight holing” with most of the really important information. Also, the amount of the well and drilling information was growing so rapidly due to the early boom years (1977-1989) that one department or team could not keep up with the amount of information. Many companies saw this chaos as a prime opportunity for keeping one step ahead of the next guy by lagging information! We will just lag our reports, lets say six weeks, or better yet, eight weeks. “Remember, the lack of knowledge will cost you either now or later, but it will cost you. Information is an important part of the profit equation.”

Once again the business is changing but one thing has stayed the same. The common thread is beating your competitors to the punch. This is the true meaning of oil scouting. The Energy business has undergone dynamic changes in recent years and so has scouting. Competition has increased for specific plays as technology has been the driving factor in recent non-conventional plays. This means you have a better trained work force and a work force competing for a smaller number of domestic plays within a geographic area. Business Intelligence has become an essential part of the decision-making process. A number of studies have been done on how to re-tool American Business along with the oil industry. One common point brought up over and over is, the old way of doing business may not be the best way. As the oil industry has branched out into the global economy the global effect of old business practices may not adjust to the new competitive environment.

In the late 1990s the Japanese had an interesting approach to international competition. Just as their business practices of teamwork made a large impact on the way we currently do business we must also look at their approach at that time to competitor analysis. When the Japanese want to expand into a new market they open a small outpost and then learn as much as they can about that market along with the competitors they will be facing. This is much like an oil company may do when getting into a new play. The Japanese looked at acquiring intelligence from the ground up not from the top down. At that time, many new Japanese companies put someone in the loop to monitor the competition. Many business schools have done studies on keeping focused on business by monitoring your competition from the ground up. It’s becoming more and more obvious that knowing your competition helps to evaluate your business environment (the true meaning of oil scouting). Keeping someone in the loop watching your competition is a vital part of doing business today. As the Japanese did in the 1990s corporate intelligence is an important aspect of business activity. The oil business is much like other industries in that they are constantly trying to stay competitive with the other guy. The ability to understand the new play concepts is done by geological, geophysical and engineering expertise. But even with this expertise it is always nice to have someone with their ear to the ground to find out the true statistics of a play concept. The oil and gas industry still needs to make a profit and find production faster and cheaper than the next guy. Somewhere along the line a company has to know more than the other guy or be able to figure it out faster. With that in mind, oil scouting can still be used to get the jump on the other guy. Obviously, this can be done by having as little as a day head start on the competition.

What does the modern oil scout do to help this process? First, we need to look at not only the term oil scout but competitor analysis, industry analysis, activity representative, or petroleum adviser. These are all titles given to a person whose primary job is to keep you in the running by helping you make these decisions just a little faster than the other guy. The present day oil scout’s job has changed just as the modern day geologist or any other disciplines have changed with our business. At the present time scouts are employed by not only oil companies but gas gathers, drilling companies, service companies and the investment community. The primary task of the oil scout is to keep you and your company, whether it is in the exploration business or an associated business, one step ahead of your competition. This currently is done through many ways; whether it’s through the old scout check meetings or as simple as knowing the right person to call for a piece of information. The oil scout can and will help to keep your business on the fast track. Keeping all this in mind it is easy to see how the term oil scout has changed over the years, but the basic job has not. It comes down to doing it better, doing it faster and doing it in the right direction. The oil scout adds a small piece to the pie which helps us all do it just a little better.