Data-driven Workflow Makes Better Use of Historical Data to Improve Return on Capital

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For more than 100 years, the oil and gas industry was a profitable place to invest capital. As such, it had no problem attracting capital as the shale revolution started in 2012. With the protection of high oil prices over a prolonged period of time, shale drilling seemed as profitable as any other form of E&P development.

From 2016 to 2020, it was a boom-and-bust cycle for shale-focused E&Ps. Return on capital was largely abysmal during this period.

New competition for energy production subsidized by governments began to impact the market beyond 2020. Investors began to view traditional E&P as a legacy industry, and they demanded return on investment in the form of stock buybacks, dividend hikes and pure stock speculation.

Novi Labs, founded in 2014, helps the industry make better use of historical data to improve return on capital by using data-driven workflows augmented by cloud compute and machine learning to help its E&P and financial services customers find hidden value in their assets and maximize returns. The AI-driven oil and gas production forecasting software is designed to improve productivity while increasing decision quality.

Challenges

The well production forecast is the basis for making investment decisions in E&P workflows. Traditional methods for well forecasting involved a painstaking process of manually filtering historical well data to find analog wells, then averaging the production profiles of these similar wells to come up with a type curve. There is nothing fundamentally wrong with this process, except it is very manual, time consuming and prone to personal bias.

Typical E&P software was not equipped to handle the scale required to properly evaluate capital deployment scenarios with a lean engineering, business development or financial analyst team. Data loading was manual, methods to evaluate data were either non-existent and outdated, and once a model was developed, there were limited opportunities to ask the model scenario driven capital allocation questions.

Novi's “Data to Decision” workflow is an end-to-end, self-service, data-driven tool that engineers and financial analysts use to learn lessons from historical data and apply them to future capital allocation decisions, thereby improving return on capital. 

An evolution of workflows

Novi automates well planning and forecasting workflows, optimizes asset value and improves return on capital for drilling programs.

The company's initial use case was focused on completions optimization to drive increased production. Over time, Novi added spacing datasets, post drill automated forecasting, data management and capital return datasets as the focus of the industry changed to disciplined shareholder returns.

Novi has also been developed with significant E&P operator input over the years. 

In late 2021, Novi added Novi Public data to its product offerings with its acquisition of ShaleProfile, an aggregator of publicly available data. This acquisition completes Novi’s vision of being a leading platform driving data to decision workflows.

Product capability and use cases

Novi supports a variety of high-value use cases for both operators and financial services firms. The company's focus is to help its customers get the maximum insight from historical data using an end-to-end workflow driven by modern cloud architecture and machine learning capabilities.

Customers use Novi software and data to drive major capital decisions—acquisitions, divestitures, asset optimization and, most importantly, improving return on capital on E&P investments. Some of the use cases Novi supports are listed in the graphic below.

Case study

Blackstone-backed Primexx was acquired by Callon Petroleum Co. in late 2021. Novi was an important part of Primexx’s asset optimization workflow, helping them design key sections that helped drive Callon’s assessment of Primexx’s value.

“We were able to use our Novi regional Delaware forecasting model to make a very strong case for our inventory quality and free cash generation potential. Novi was a key component in our approach," said Samuel Blatt, the former COO of Primexx, in December 2021.

Post acquisition, the former Primexx management team has formed Blue Ox Resources backed by Carnelian Capital, and Novi software and data are being utilized by the Blue Ox team to help them acquire the right asset for the right price.

Future industry applications

Novi sees growth in financial services stakeholders as well as the traditional market of E&P operators, helping the industry transition to a consistent source of investor returns. Traditionally sourced energy will play an important role as energy sources transition, and Novi will build new products and help the industry continue to drive down emissions while moving to a sustainable future.