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QuickHit: 2 Things Oil & Gas Companies Need to Do Right Now to Win Post Pandemic

This week’s QuickHit, Tony Nash speaks with Geoffrey Cann, a digital transformation expert for oil & gas companies, about what he considers as “the worst downturn” for the industry. What should these companies do in a time like this to emerge as a winner?

 

Watch the previous QuickHit episode on how healthy are banks in this COVID-19 era with Dave Mayo, CEO and Founder of FedFis.

 

The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

Show Notes

TN: Hi, everybody. This is Tony Nash with Complete Intelligence. This is one of our QuickHits, which is a quick 5-minute discussion about a very timely topic.

 

Today we’re sitting with Geoffrey Cann. Geoffrey Cann is a Canadian author and oil industry expert and talks about technology and the oil and gas sector.

 

So Geoffrey, thanks so much for being with us today. Do you mind just taking 30 seconds and letting us know a little bit more about you?

 

GC: Oh, sure. Thank you so much, Tony, and thank you for inviting me to join your QuickHit program.

 

So my background, I was a partner with Deloitte in the management consulting area for the better part of 20 years, 30 years altogether. I had an early career with Imperial Oil and I’ve spent most of my career helping oil and gas companies when they face critical challenges.

 

These days, the challenge I was focusing on prior to the pandemic was the adoption of digital innovation into oil and gas because the industry does lag in this adoption curve and yet the technology offers tremendous potential to the sector. I see my mission, and it still doesn’t change just because of the pandemic, as the adoption of digital innovations to assist the industry and to resolve some of its most intractable problems. That’s what I do.

 

 

TN: Wow. Sounds impressive. I’m looking at the downturn in oil and gas and the downturn in prices. There have been big layoffs and cost savings efforts and these sorts of things with oil and gas firms. And, typically, a pullback is an opportunity for the industry to re-evaluate itself and try to figure out the way ahead. Are we there with oil and gas? Do we expect major changes, and as we emerge from the current pullback, how do we expect oil and gas to emerge? We expect more technology to be there. Do we expect more efficiency in productivity? Are there other changes that we expect as we come out of this?

 

 

GC: I’m pessimistic about the prospects for oil and gas and it’s driven by this collapse and available capital and cash flow to the industry.

 

When the industry hits this kind of survival mode, there’s a standard playbook that you dust off. And that playbook includes trimming your capital, canceling projects, downsizing staff, closing facilities, squeezing the supply chain, trimming the dividend. Anything that is considered an investment in the future is put on hold until the industry can get back on its feet.

 

And this is the worst downturn. I’ve lived through six of these. This is the worst I’ve seen.

 

Certainly sharpest, fastest, and deepest and coupled it with the over excess production in the industry. When the industry comes out of the other end of the pandemic, what we’re going to see the industry do is devote its capital to putting its feet back on the ground and getting back into its normal rhythm. But what that means is all the changes that our potential out there are likely to have been set aside in the interim.

 

 

TN: If you were to have your way, and if you were running all the oil companies, and they were to make some changes in this time, what would those changes be? What would some of those key changes be?

 

 

GC: There is a gap between what other industries have discovered, learned, and are adopting, and where oil and gas is at. That gap is, first, needs to be addressed by raising the understanding and the capability and the capacity in oil and gas to deal with the possibilities presented by these technologies. And so there’s task number one that oil and gas companies can absolutely do even during a downturn. Just train people and get them across the newer concepts or newer ideas.

 

A second possibility is to embrace the foundational elements that have proven to be the key success factor for so many other industries. One of those would be cloud computing. The adoption of cloud-based infrastructure, moving data into the cloud, is not costly, it generates an immediate payback because cloud infrastructure is so cheap, and it puts the company into a solid position for when the normal day-to-day running of it gets back in gear, the investments it may have been making an in digital innovation can all now be brought back into stride because this foundational technology will be in place.

 

So those are the two things that I would do: Get people ready for the journey ahead and put one of these foundational steps in place to get ready.

 

 

TN: Those are really enabling technologies, right? They’re not substitutional. They still need people, they still need engineering skills. It’s really just enabling them to do more, right?

 

 

GC: Correct, yeah. And covering off that gap incapacity is the key thing. Somewhere down the road, there will be the adoption of artificial intelligence and machine learning tools to improve the performance of the business. Those are coming and they’re coming very quickly. We’re not there yet. The job is where the industry needs to move forward, and as I see those are the two steps.

 

 

TN: Do you see this as kind of a generational thing? Is this five-ten years away? Or is it an iterative thing where you see it changing bit by bit for each year? How do you see this on the technology side for them?

 

 

GC: Well, in my book, I actually sketched out a way to think about this problem. And I call it the fuse in the bang. The fuses, if you think about Bugs Bunny cartoons. Bugs Bunny and it would be a comically large keg of gunpowder. It’ll be jammed into the back of your Yosemite Sam. As they go racing off, they leave a trail of gunpowder and Bugs would just drop a match in it. It always ended in a comically large but not very terminal explosion. So imagine that the length of fuse, that trail of gunpowder is how much time we’ve got and the size of the keg of gunpowder is how big the impact is going to be. In my book, I could actually go through some ways to think about this.

 

But you have to think about it in these terms, oil and gas is principally a brownfield operations business. In other words, most of the assets predate the Internet Age and they’re continuing to run and they run 24/7, they’re extremely hard to change, and so as a result, the idea that we can quickly jam innovation into these plants is just nonsense. It’s not going to work. So it’s going to take quite a long time.

 

The generation is on two fronts. One is the technology is legacy and therefore it has generational barriers to adoption of change. We also have a workforce, which is tightly coupled to that infrastructure and it also has struggles to cope with change. So we have to come across these two generational shifts that have to happen and they basically have to happen at the same time.

 

 

TN: Very interesting. Geoffrey, I wish we could go on for another hour. There’s so many directions we can take from here. So, thanks much for your time. It’s been really great talking to you and I hope we can revisit this maybe in a couple of months to see where the industry is, how far we’ve come along, just with the downturn of first and second quarter, look later in the year just to see where things are and if we’re in a bit of a better place.

 

 

GC: It’d be great fun because this is, you know, as I’d like to tell people, this is not the time to actually leave or ignore the industry. It’s when it goes through these great troughs like this, this is where exciting things happen, so pay attention.

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QuickHit: How healthy are banks in this COVID-19 era?

 

This week’s QuickHit episode, Tony Nash talked with Dave Mayo, CEO and Founder of FedFis, and an expert on banking, finance, and Fintech. This episode looks at US financial institutions like banks and how they are faring during the Coronavirus pandemic. Will new financial technologies help streamline the process of providing services like loans to medium and small businesses?

 

Watch the previous QuickHit episode on the Status of Global Supply Chain in Time of Coronavirus with the president of Secure Global Logistics, George Booth.

The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

Show Notes

 

TN: Hi, everybody. This is Tony Nash. I’m the founder and CEO of Complete Intelligence. This is our Quick Hit where we talk to industry experts about issues in markets and in industries.

 

Today we’re with Dave Mayo. Dave is the founder and CEO of FedFis based in Texas. Dave, thanks for joining us, I really appreciate it.

 

Can you tell us a little bit about FedFis? And then I’d really love to jump into how you’re helping out the financial services sector.

 

DM: Sure. We’re a unique company. We sit as a layer above banking, we call FI fintech, and then fintech. From the banking side obviously, we are a data company and provider and intelligence. From the FI fintech side, those would be the vendors to the institutions like their core mobile offering. And then FinTech, that’s the new stuff, right? That’s the sexy stuff, like the Chime and the SoFis and those types of companies that used to be alt banking and now they’re joined back to banking again. So we help all of those different layers in one way or another through a data set that we have and intelligence.

 

TN: With everything going on in the wake of Coronavirus, there’s been a lot of talk about fiscal stimulus coming out of D.C. and stimulus through the Fed and other things. What is the health of the banking sector from your perspective? Because back in 2008 the banking sector was the worry, right? Is that the worry now? Is that something we should be worried about?

 

DM: I think our banking industry is based on a level of faith. It always has been, right? Now that said, this is a completely different situation. Banks are very well-capitalized. Banks are not the cause of the problem. We don’t have a systemic banking problem or issue. We’re very, very healthy right now. When you talk about a stimulus being put into the economy, the more money flows in and out, the more people spend and buy and purchase, the better things are. That’s just the way the banking industry is built.

 

TN: How do you see banking and FinTech really helping? Obviously we know how they help big companies with big placements and debt and these sorts of things. But how do you see them helping small and mid-sized companies with this economic gulf that we have right now, where the economy’s effectively been turned off for a period of time, which is a bit weird? How do you see, what you’re doing, and banks generally, really helping out there on the smaller and midsize level?

 

DM: I think there’s a big gap in education in our country when it comes to banking. People are like, “I don’t like banks” or “I like banks.” When there are the big banks, the big four: the B of A, Wells Fargo, Chase, Citi. And then we have community banks.

 

Community bankers all across the country, they’re the life of our banking system. They’re the heartbeat. It’s actually a lower touch point for consumers and FinTech with the dramatic decline in a number of community institutions that has really opened up this opportunity for a FinTech. And the reason being is it’s a direct touch point.

 

So if you were to say “I want to use my mobile device” or “I want to use my online to do banking without having to actually drive to an institution and deal with all their policies and all of the things that go with it,” it’s a faster connection point. And I think we’re probably going to see a lot of that in these business loans the PPP loans through the stimulus plan.

 

TN: How do we actually execute that from the Treasury to the small business owner or to the individual that needs help? So, do you think that some of these FinTechs are kind of non-banks? I mean, would you consider them kind of non-banks within this system? Do you think they’ll be able to do this stuff faster? And I don’t mean this as a negative to banks. Banks are highly regulated. Do you think some of these FinTechs will be able to do some of this stuff faster?

 

DM: It depends on which way you look at it. Because here’s the deal: so when we talk about banking and then we talked about FI FinTech and then FinTech. So a bank is a chartered institution and FI FinTech is a technology arm of that like online banking, mobile banking. A FinTech is something that looks like a bank, talks like a bank, but it doesn’t have a charter. It’s not really a bank. So they have to partner with an existing bank to charter. So there’s a bank behind every FinTech company. So when you think of Chime and companies like that, there’s an actual bank behind that company that’s doing the regulatory side of this to protect consumers.

 

TN: You guys track a lot of data around banking and real estate and consumer stuff and industry stuff. Are you seeing any data that’s really talking about or raising your worries about the velocity of money about how quickly people are spending? Are you seeing that data? If it’s worrying you, when does that worry end for you? Do you see us going back in to say a quasi-normal situation within the next two months or something?

 

DM: Predicting the future I’ve never really been a big proponent of. That’s your business. But for us, what we look at are key components.

 

One way to measure things right now is to look at a mortgage note on a 15 or a 30. What is the spread between, what we would call in the old days, prime and what is the asking rate on that loan So you’re generally looking at above 3 percent. And as long as you’re looking at that, that’s a strong indication that there’s a lot of refis going on right now. And so the spread is there. That’s an adequate spread for banks to make money. There’s a huge volume of it going on. And as long as we see that volume and people continue to go to the bank, cash their checks, direct deposit always helps.

 

When we use our debit cards, when we go out and do the things that we do. Changing our mechanism of spending money whether it’s through Amazon as opposed to going through the mall doesn’t change the fact that you’re still spending money. Those are all positive things.

 

But I think the one thing we want to keep an eye on is the volume of lending. Everyone in a situation like this is going to have a tendency to kind of climb up a little bit. And, as long as that continues to flow, and one of the primary things that I’d be looking at is refis and other lending types of loan, etc.

 

TN: Are there any specific indicators you’re looking at on the commercial side to see if people are climbing up?

 

DM: I don’t really see anything from that perspective. I don’t think people are running out there right now at a time like this. It’s fairly obvious. You wouldn’t want to run out and start a new construction project or something like that. Those are gonna have an impact. There’s no way around it, but there again that’s what stimulus is there to offset.

 

Right now, I would say we’ve got a very healthy banking system. We’re coming out of a very healthy economy and so what’s our time frame of a bounce-back is it going to be a v-bottom or is it going to be spread out? I think it’ll be a little more spread out than a V-bottom and I think they’ll probably be multiple cycles of this that go on to some degree.

 

But starting from a really healthy position in our banking system and in our economy, this will pass. And when it does, here’s the thing I think is so interesting, unprecedented levels of stimulus and, the old saying you don’t fight the Fed, right? So does the market go up and we have a stimulated economy? Of course it does. And with this level of pent-up demand and stimulus, will there be a bounce back? Yeah, there’ll be a bounce back. The question is how huge will it be and how fast?

 

TN: That’s great Dave. It’s a huge source of optimism. Thank you so much for that and I really appreciate that you’ve taken the time to join us today. So really appreciate your time and and thanks very much for, for all that you’ve shared with us today. I really appreciate it.

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QuickHit Visual (Videos)

QuickHit: Status of Global Supply Chain in Time of Coronavirus

In this week’s QuickHit episode, Tony Nash speaks with George Booth, the President of Secure Global Logistics. SGL is a complete logistics company with global and domestic services. We dig deeper into the status of global supply chains within this era of Coronavirus or COVID-19 and learn how companies move things across the globe, and what that is looking like right now.

 

Last week’s Quick Hit episode was about how SMEs are affected by the global pandemic and pieces of advice from an expert on the best course of action. Watch it here.

 

The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes:

 

TN: Hi, this is Tony Nash with Complete Intelligence. This is our weekly Quick Hit that we publish each week. We’ve got George Booth, President of Secure Global Logistics in Houston, Texas.

 

We’re really interested to understand George’s view on the impact of Coronavirus on global logistics, supply chains, and trade. And what the impact is on the volume, timing and magnitude of trade. George, first could you tell us just a real quick overview of SGL? Then let’s get into some of the topics.

 

GB: Yes, good morning, Tony. Good to be here. The SGL is a complete logistics company. We do a full suite of global and domestic logistics, including import, customs brokerage, exports by air and sea and domestic by air and road. We also do 3PL logistics, so full warehousing, packing and getting ready for export.

 

TN: Perfect. That’s great George. Thanks very much. And I really appreciate you taking the time to talk. I know there’s a lot going on as shippers and the other folks try to figure out how to get goods to destination with the disruption of the supply chain. Can you help us understand, what are you seeing in terms of volumes for your clients?

 

GB: Yeah. Well, interestingly, the volumes haven’t dropped off yet. We would expect that to happen almost immediately. Shut down hasn’t started to happen here. It hasn’t happened yet. I think we’ve been slightly helped with a buffer by China coming back online.

 

In January and February, we took a real hit from our customers that import from China. That’s when they just shut down and factories were closed. We saw nothing coming in, but that’s now picking back up.

 

For example, we have a customer who does a monthly freight out of China. That hadn’t happened in like two months, and this week we’re moving 21 ton of freight out of China. And he said, “Get it here fast.” They want to get the product on the market and sell it.

 

We haven’t seen a drop off yet. We’re also seeing a big spike in freight this past week, and even yesterday, as a lot of clients are preparing for a shutdown. So they’re trying to get that product moving and maybe converting from sea freight, ocean freight to air freight to get it moving and to get to the destination before the shutdown happens.

 

TN: OK. So volume has been pretty consistent. What about, you know, as we’ve seen, say, the crude price, because I understand some of your clients are big gas firms.  With the crude price declining as it happens, what impact has that had on shipping rates? And what is the typical relationship of crude price and shipping rates?

 

GB: Well, this is really interesting. I’ve been in the shipping industry for all of my career of about 25 years. And this is the first time we’re not seeing a direct correlation between lower oil price and low freight rates.

 

That’s been really challenging, our clients are suffering from a lower price, but we have had to present them with much higher rates from the carriers and particularly air freight.

 

The air freight in the past, when the oil price was down, the freight rates go down with it. And then when they go up, you see a big spike included fuel surcharges. But because of capacity issues, air freight has now become almost the highest bidder scenario.

 

Some airlines are selling to the highest bidder. We are seeing freight rates in some cases 10 times what they normally ask. Something would have paid a dollar fifty per kilo in the past, we’re now seeing going for up fifteen dollars.

 

I’ve seen a lot of lack of flexibility from the air freight carriers, as well. While in the past you might have booked it, and the factory wasn’t quite ready or it wasn’t ready to export. You’d still book it into the next day with no charge for lost slots.

 

If you don’t show up with your freight, they’ve been really clear, which, again, from a supply chain, you can understand, they’re not getting the same return. So they’re making it inflate.

 

I once had an airline say that the best deal for them is that the cabin, first-class cabin is full, economy empty, and the belly full of freight. Now, they don’t do first class. So they’re making all their money on the various freights.

 

TN: Are you seeing sea freight come down or stay the same or what’s happening with sea freights?

 

GB: Well, sea freights have been very interesting as well, because the distribution of liner and equipment, shipping containers, there’s a backlog in China because China hasn’t been moving.

 

A lot of equipment is stuck in China. The past few weeks, we’ve started to see competitive, very competitive sea freight rates coming out of China as China tries to boost the economy, get freight moving. And also as liners are trying to get the equipment back in the right places.

 

Conversely, trying to export from Europe or from the US. We’re seeing much higher rates because there’s a lack of capacity and a real demand for liner and equipment. So that’s proven a challenge. So it depends where your ship has been from and to, based on the allocation and relocation of liner and equipment.

 

TN: Okay. It is interesting from your perspective to see China’s actually back online.  We’re actually seeing the physical goods coming and you’re seeing the volumes come in. I think that’s very interesting.

 

So what is the biggest kind of concern that your clients have right now in terms of logistics and some supply chains? What do you hear from them as their biggest concern?

 

GB: Yeah. I mean, a lot of our clients are tied to oil and gas. They operate as a squeeze-in. And as it squeezes, it comes all the way down. And I always say the fate of logistics is at the end of the food chain.

 

We get the squeeze all the way down. Some of our clients are being asked to take 40 percent reductions in the rates. And now squeezing that back down to all that supply.

 

At times in, well, of course, we want to work with you. But we’re also presented with air freight that is 10 times what used to be. It’s proven very challenging commercially for our customers, and for us to keep those relationships. They want to continue to be a partner at a time when they want us to share the bin with the promise of sharing the prize when it comes back.

 

But the oil and gas industry, as you know, has been depleted since 2015. So we’ve all been sharing the bin for a long time. So there’s not much left in the market for starters being distribution goes.

 

TN: OK. And George, I don’t know if you can answer this question, but how long do you expect this to last? What do you expect, what do your clients expect? Are they expecting this next month or two months or six months or a couple of weeks? How long do you think this will last in the US?

 

GB: Yeah, I think China’s a good indicator of the length of time they needed to end it and start to come out of it. So we have been planning for the same length, 120 days.

 

I mean, based on the president’s comments yesterday, it seems like there’s a real bullish approach to not going into this too long. I don’t know if that’s keeping with health advisory or not. But it seems that America wants to get back to business sooner rather than later.

 

I think we’ll see that big spike as we have this past week and this week as people try and get product moving before very they put it in shutdown. And then we’ll see the wall. And then there’ll be a backlog and people will start and try and get goods moving again.

 

So we were making our plans 90 to 120 days. And we’re hopeful, obviously, that it comes back.

 

But, our industry has also led the charge in health and safety, so we’ve been talking about our safety language for many years, even decades. And this is a time to prove that we care for our people, care for our supply chains and for our communities.

 

And we’re thinking very much the safety of our employees at our every week touch points, literally and figuratively speaking. Even four weeks ago, we had a memo out to our staff saying to be ready to work from home. And that this is coming. And we saw it coming because we were in daily contact with our partners in China and Italy and in Europe. So we could see what was happening there.

 

So, and we’ve been preparing for this. We operate from the cloud. So a lot of our people are operating from home. I’ve got so much scale and staff, and we rehearsed it.

 

TN: Fantastic. George, thanks very much. Thanks for your time. I really appreciate it.

 

If any of the viewers have questions, leave me comments or send us an email at Complete Intelligence. Thanks very much.