with Marcos Almeida, President & CEO, GeoQuasar
What was the impetus behind founding GeoQuasar and what is the established business model for the company?
I made the decision to leave my former company and found GeoQuasar when oil was at $150 per barrel and the market was booming but by the time I went through the organizational process we opened our doors a week after the collapse of Lehman Brothers.
The focus of our company is to provide high-level vision and guidance to upstream decision makers. Out of our headquarters in Rio de Janeiro we are in the business of geophysical data acquisition, processing, interpretation and integration services. Additionally, through strategic partnerships such as with UGA Seismic of Argentina, we operate in other markets throughout Latin America including Columbia, Ecuador, Peru, Mexico and Venezuela.
In terms of leadership, I’ve been in the business for nearly 30 years having worked for what is today Geokinetics, Western Geco, CGGVeritas and Paradigm up until recently as the latter’s Director of Business Development. Jorge Machnizh, another board member, has been in the business for over 25 years, most recently as the President of Paradigm. This is complemented by the experience of our Operations Director Chaalen Hage with nearly 30 years as well as Miguel Nũnez, our Technical Director who worked for a number of years with PDVSA. Together, along with the rest of our team we offer comprehensive solutions to the exploration and production segment.
We also offer strategic consulting activities which is an arena where many of our competitors have become oil companies such as Vale’s acquisition of PGT and HRT’s own moves into exploration and production. A year ago in our niche we were the smallest but all of a sudden we are the biggest.
Our mission is to grow in the areas we choose to operate while striving to achieve a high level of performance. GeoQuasar is company of technical excellence and as such we depend on state-of-the-art technologies. Therefore, we seek out companies with emerging technology that are closely held to build a portfolio that can provide solutions to the market especially when paired with our knowhow.
Which technologies are you bringing to the market?
We provide several technologies such as ARKeX which is a newly available gradiometry technology for the industry having previously been used in the defense industry. Its ability to be used from boat or plane makes it very versatile and environmentally friendly as you don’t have to drag extra weight.
As I mentioned before, we also represent UGA which is a company spun-off of YPF when it was privatized and has been very consistent over the past 18 years.
We have also signed a MOU with Spectrum for processing solutions and we hope to close on this soon.
The key technology that is leading our process is from Foster Findlay Associates (FFA) based out of the UK whose applications originate from the medical field. They have translated their computerized analysis into the oil and gas business and we represent them through all of Latin America while also utilizing their technology for our own services.
It’s these technologies that have allowed a small company like ours to be involved in several important projects with companies like Petrobras, PDVSA, Repsol, and HRT.
The other aspect we bring aside from knowhow and technology is a distinct edge on the local market with an extensive network including not only the oil companies but also the geoscientists. This allows us to be very successful in introducing new technologies to market that we feel are worth our while.
Within the interpretation sector of the market we are focused on the high-end niche of analysis. Through our software and capabilities we can provide exploratory leads within a few weeks.
In terms of acquisition services, are you competing directly against the industry giants such as Western Geco, CGGVeritas and PGS? How do you handle this?
In fact, we are. About 15 years ago a lot of these major companies began to pull out of the land acquisition business and turned their focus towards less-risk, higher-margin business of marine acquisition.
The first point I would make is that this is a nearly a commodity based business as all of the technology has been developed and then sold to all of the other players in the industry. Therefore, if you have money to buy the equipment and software you have the raw inputs to be competitive.
That being said throwing money at a problem will only work up until a certain point so it’s really the experience and ability to work in an environment that makes the difference. For instance, I’ve worked in the Upper and Lower Amazon among other numerous places in Latin America. I think it’s this knowledge and the cultural understanding that provides a clear advantage.
It also helps to have a following and create a team of experts to tackle the issues at hand.
If you look at Brazil there are 29 sedimentary basins and 7 million km² of ground of which only 300 thousand km² are under concession making the region largely unexplored.
GeoQuasar has been around for two years yet is already involved in Espirto Santos and Campos Basins as well as the pre-salt cluster. How have you managed to gain this high involvement in the industry; is it due to the personal relationships you have from before?
The relationship opens the door but the technologically closes the deal. I’ve been very fortunate to include some very significant emerging technologies that make a big difference and draw attention to a fairly young company like ours. Since we were able to come to an understanding with our provider companies we are now the only vehicle by which the market can access these cutting-edge technologies.
It also has a bit to do with the passion for this business that comes after three decades.
You work with a number of NOCs as well as the rising Brazilian independents like OGX and HRT. Why do you think these companies have turned to you when several of the IOCs shy away?
In regard to the IOCs, a lot of the process is centralized in their home office so the decision on technologies isn’t made from Brazil. I can go knocking on Chevron’s door everyday here in Brazil but they have a team back in Houston that handles the technology acceptance for the group. Convincing these groups is actually done through the companies we have agreements with for instance FFA has signed a worldwide deal with Statoil.
I’ve made presentations to managers of IOCs in the market but while the managers may like the technologies or services we offer, their hands are tied by headquarters. This is especially true for the high-end technical work in these companies.
As a result of this centralized process we tend to focus in on the companies that can make a decision locally. This isn’t unique either as I’ve worked for both Halliburton and Schlumberger whose biggest customers for years have been Pemex, PDVSA and Petrobras. In fact, in Paradigm, Petrobras represented 90% of our business in Brazil. So while we engage other companies we’re focusing on those that can act.
Our business model will continue to evolve and as such we are currently preparing for the 11th bid round in order to provide the Basin studies and give an overview of the new blocks to all the companies interested.
When we spoke with some of the major international players in the Brazilian geophysical industry they noted that they’ve been selling the same data for most of the last three years while the market has been locked due to the ANP. As a new entrant to the market how has this exploratory freeze affected you?
We’re a young company approaching the end of our second year, and it’s important to consider that our first year was largely shadowed by the global financial crisis. Nevertheless, here we are standing upright having actually grown during this period while competitors were shrinking.
These delays which impose a lot of problems to our competitors with a large installed base have been an opportunity for us. Of course, I don’t want the delay’s to continue on too long but they’ve provided us with time to prepare for the future.
At the moment, we’re already very busy when you consider that one of our clients, Petrobras has the largest number of concessions while another, HRT, has the largest area, after Petrobras.
This is a large responsibility, no?
It is, but it’s important to note that these companies have their own geophysical departments. In fact, Petrobras has more Ph. D’s on their G&G floor than most universities do in their geology departments.
What we provide is an aggregate value by bringing in technology that improves the quality while reducing the risk and increasing the speed of analysis. All we have to do is provide something to the people who have everything.
You mentioned previously the importance of having the right team for the job. In today’s environment within one of the most active geophysical locations in the world, how do you get professionals to follow you into this start-up, particularly a week after Lehman’s collapse?
It’s a good question and one I sometimes wonder myself. The reality is my philosophy has always been to be very transparent with the people I work with and set realistic goals.
Most importantly I treat my employees well and I think this is well recognized. For instance, a Reservoir Geophysicist who joined out company recently spoke with an ex-employee of mien from another company that he was coming to work for GeoQuasar. This former employee told him that he could close his eyes and go. As a manager I think this is fantastic because it’s what you strive for in both your life and career. You want to be someone that says what they’ll do and then does what they say.
GeoQuasar matches many of the qualities Petrobras is looking for. You have local content and new technologies while doing it competitively. With your business model as is, where is the growth coming from?
Our lines tend to be balanced but the consulting side is where we produce the highest aggregate value. For example, if you are a player in the pre-salt each well you drill can cost upward of $250 million. Let’s say this well produces 10,000 barrels per day but if you really understand the facture in the carbonates you can improve this to 50,000 barrels per day then it’s clear our technology and knowhow can benefit any producer at a comparatively minor cost.
We have seen a limited number of local players in the Brazilian market, especially when compared to countries like Norway that have managed to establish a large service sector around the industry. As a Brazilian-born company, how do you view the government support for the local players?
There is a lot of money standing by for the oil and gas industry but a lot of investors don’t know where to put it with all of the noise in the market. HRT is going public, Petrobras has its capitalization plan and OGX is always under watch with its finds. You also have to consider that Brazil was a monopoly less than 15 years ago.
Nevertheless it appears the government reforms have pushed local content but not necessarily local companies having given many contracts to international companies who can build the manpower.
Initially, when the first bid rounds came about, most of the work from foreign companies was being done from the home office while utilizing companies they knew. However, the law has changed and the market is taking more shape.
I’ve always been an international competitor so I cannot say I’m looking for any helping hand in the marketplace.
Would you say GeoQuasar is a Brazilian company of an international one?
We have an office in Venezuela to backup our operations in that market with PDVSA and we also have activities in several other Latin American companies. Therefore, I see us as a multinational company despite our small size. For this reason we have a holding company based out of the Netherlands to represent all of our operations.
In regard to local content, I don’t think it’s a quality we’ve ever been hired specifically for. The technology is what seals our deals and the local content is more of a bureaucratic process that has to be met.
What is the vision for GeoQuasar?
If we follow the model of our competitors in the market, we should become an upstream oil company anytime now. Realistically, we’ll take things one step at a time and grow into businesses we can do a good job in.
Today, we supply a niche in the reservoir characterization arena where we fit very well so as time goes on, we will see where we want to take things.
In terms of global trends for the industry, we have scene larger players segment themselves with specialization in onshore versus offshore while other providers like you go pursue technologies to differentiate. How did you chart this path?
Through our first year we learned that our initial model seeking to utilize an agency-type structure was flawed. Around the world, agents get a terrible rap which is something we didn’t want to be associated with and while most would tell a startup in the middle of an economic recession that beggars cannot be choosers, we made the decision to alter our model.
Today, we look for companies that have very strong R&D groups and a fantastic technology without the take-to-market capability. Our expertise lies in being able to fulfill this need for these companies. We’re effectively looking to find the perfect relationship for both parties to build a solid offering throughout Latin America.
After three decades of working with large multinational companies what inspired you to leave and when things really got ugly during the financial crisis, keep with it, to start your own company?
It wasn’t easy and it certainly was a tough call. I took a step back from the situation to look at long term. I asked, “Am I in the right place?” and the activity in Brazil clearly indicates yes.
Timing is another issue to consider, and when I initially made the jump I think it was the right time but unfortunately the market turned the other way by the time our doors opened. These difficulties make us stronger and more focused on what has to be done. Sometimes you have to go through certain phases in order to better understand the business. We had to be more creative and work harder in order to survive.
It’s important to be a pragmatist optimist through any situation and realize that there’s no other solution than hard work. I think we’re in a much better position emerging from the financial crisis and being a through and through optimist I see a lot of positives on the horizon