Gibson's paradigm for the future
  from: Offshore Engineer
  by: Andrew McBarnet
  Monday, March 13, 2006

Serious geoscience research is the future, according to John W Gibson Jr, recently appointed boss of Paradigm, the E&P software company. That's just one of the topics he discussed with Andrew McBarnet in this profile.

Gibson had looked headed for the top at Halliburton. He was only in his mid-40s when appointed COO and president of Halliburton Energy Services group. In 2004 that meant being responsible for nearly $8 billion of revenue and 37,000 employees. According to the official CV, Gibson drove a 98% improvement in Halliburton's worldwide energy related operations over a two year period, with operating income increasing from $638 million in 2002 to $1266 million in 2004.

He gives every impression of being enthusiastic about life after Halliburton. 'The reason I joined Paradigm was because I believed the next decade is going to be focused on a deep dive back into technology and research. The future lies in rapid commercialisation of quality research, not the delivery of commodity products, and to my mind Paradigm offers a tremendous platform as a research company.'

Paradigm has been around in the E&P business in one form or another since the 1980s, and in the early days had a computer-aided software offering for 3D seismic interpretation which competed with early market leader Landmark Graphics, the company Gibson joined in 1994, two years before its takeover by Halliburton.

After various corporate incarnations Paradigm really came to notice in the mid-1990s with its GeoDepth product, a pioneering seismic software interpretation system focusing on the depth domain. What transformed the company from being essentially a niche player was a series of acquisitions initiated in 1997 by the purchase of CogniSeis, a seismic data interpretation and visualisation specialist with a significant international customer base for its leading products. Stars of the collection were the Focus data processing system, GeoSec geomodelling package, and VoxelGeo, one of the few proven volume-based interpretation and visualisation systems.

Fuelled by new finance from a launch on the New York Nasdaq in 1998, Paradigm went on to build a comprehensive suite of offerings across the full oilfield lifecycle. It bought Geolog well information tools from the Australian Petroleum Technology division of Minicom (PTM), Stratimagic and IntegralPlus reservoir and characterisation products from CGG, and the Sysdrill well planning software company.

By 2002 Paradigm had built a serious set of software solutions and integrated geophysical services for prospect generation and evaluation supporting every stage of the E&P process. This was when its underlying value was spotted by Fox Paine & Co, a California-based private equity firm. Fox Paine paid $100 million for Paradigm and took it private. The existing management was basically left intact until last year when Gibson was recruited to run the company as part of a deal where he is also very much involved in Fox Paine's wider investment business as executive managing director.

Gibson understands Fox Paine's strategy. 'Paradigm is a company with the ability to make a difference, it has more value than anything else I could identify in oil and gas. We have the potential to breakthrough with new algorithms or methods that can change the daily production decline rates around the world.'

The parallels with Gibson's earlier experience with Landmark are inescapable. He joined in 1994 after what can only be described as an unconventional career path, reflecting a relentlessly inquisitive mind. The life history includes dropping out of agricultural college in Georgia and three formative years in the US Army before he finally made it to business school at Auburn University, Alabama. He actually wanted to study oceanography but ended up graduating in geology. His marks were impressive enough to earn him a job at Gulf Oil, where characteristically evenings were spent studying for a master's degree. Gulf morphed into Chevron and Gibson gravitated to his real passion, R&D, at La Hubra, California. From there it was a short leap to Landmark.

Like Paradigm, the 1990s was a period of growth by acquisition for Landmark in the E&P software market. By the time Halliburton bought Landmark in 1996, Gibson was number two in the company to Bob Peebler (now CEO of Input/Output). He was soon in charge at Landmark before being elevated to the higher echelons of the Halliburton corporate empire.

Gibson recognizes that today Paradigm trails Landmark and Schlumberger in the big league of E&P software, but is not overly concerned. 'It's not an appropriate vision for us,' he says. 'We want to be a product development company.We don't have the resources or desire to be a full service company carrying out the work for the customer, although of course we provide high quality support for our products. Our goal is to deliver the first rocks and fluid interpretation system, and that's something the industry doesn't have at this point.'

Right now the strengths differentiating Paradigm in the marketplace, according to Gibson, belong in the signal processing area and petrophysics. 'We are the leader in spatial positioning of seismic attributes and the absolute gorilla as far as petrophysics is concerned.We tie in the macro data represented by seismic with the micro data from the borehole.' He sees tremendous potential for this combination as the application of 4D seismic techniques really take off in the industry, although he acknowledges that progress in that direction has been slow. '4D work still only makes up 5-6% of the overall market. But we think we can push the curve forward for our industry. Our reservoir characterisation and monitoring research and expertise particularly in the preplanning of 4D can help to optimize the repeatability of time-lapse surveys and allow companies to accurately track the fluid flow.'

Gibson alleges he doesn't really know how his company is doing against the competition in terms of market share, for the very good reason that he never tries to estimate it! 'If you do it yourself you bias the result in one way or another. My impression is that products such as Geolog, Focus and VoxelGeo are market leaders. If our competitors disagree, then that means we must be pretty close!'

He does have a feeling that Paradigm in recent years may have confused the market by the emphasis which was put on its middleware integration product pos, even though it was genuinely innovative when introduced. He would prefer individual products and the comprehensive offering they represent to speak for themselves, so a shift in marketing strategy can be expected. Right now he's not quibbling too much since the company has just notched up its best ever quarter in software sales. However, the company's performance in the US is still below expectations. 'The truth,' he says, 'is that we're a truly international company geared towards complex reservoir issues and high end research. Up to now our clients in the US have tended to be the big international companies, rather than the small independents.'

Paradigm is actually headquartered in The Netherlands, and has its main research centres in Russia, Australia, Canada and the US. There is still a cadre of scientists in Israel where the company originated in the 1980s. Since he arrived last year, one of Gibson's priorities has been to shift the company's operations to where the customers are, and he asserts that the company is more genuinely international than the competition.

Surprisingly Gibson is finding Paradigm more of a challenge than Halliburton in some important respects. 'I had thought the differences between a multi-billion and a hundred million company would be dramatic. But because of our international footprint, we are working in many of the same countries with less infrastructure, which makes this a more difficult job. Everything is more hands on, which is exciting but tougher.'

He believes that the experience can teach him some things which will improve his performance as a CEO in future. He cites the example of meetings at Halliburton where financial decisions were on the agenda. 'A lot of considerations would be presented, and whilst having an awareness of what was being said, I couldn't claim to have an in-depth knowledge of how it all worked. In the future I want to be able to scrutinise any recommendation with the knowledge and understanding of a CFO. By extension, the ideal CFO of the future should also have operational experience.'

Working with his colleagues at Paradigm's parent company Fox Paine has certainly opened Gibson's eyes. Formed in 1997 by Saul A Fox and W Dexter Paine, the company funds in excess of $1.6 billion (about to increase by another $1 billion) on behalf of over 50 leading financial institutions. It's a very partner oriented firm, according to Gibson. 'These guys work with a completely different mindset when considering an acquisition compared with the kind of vertical company I'm used to, so it's an opportunity to improve my skills in finance.'

As far as funding goes, substantial backing for acquisitions by Paradigm is available when required. But money is not the issue. Gibson says it's more a matter of finding a product line that complements what the company already does or identifying an area where it wants to expand. 'At the moment,' he confides, 'I am just excited by our core business.'

One of his current concerns is just where Paradigm is going to recruit suitably qualified staff to grow the business. 'It is a serious challenge for geoscience-related companies to find the right talent.We need scientists who are more highly trained and the education system is not coming through for us. To be a next generation geologist, you must possess strong mathematical skills. Geology curriculums need to increase the mathematics requirements.'

Gibson recently expounded in print on this topic pleading the cause of 'geomathematics' as a preparation for geostatistics, in his view one of the most under-valued and under-utilised tools in the E&P software repertoire. His starting point was the anecdotal observation that reviewers of geostatistics titles on Amazon.com actually praised those books which were light on 'painful' maths, and then noting that the maths component in geology degrees is relatively undemanding. His worry was that 'the volumes of data that are being acquired, and will be acquired, in the future coupled with the demands for higher individual productivity dictate that we increase automation of analysis . . . The success of automation resides in the ability of an individual to select an appropriate algorithm(s) and accurately select the parameter(s). Software can assist users in the selection of parameters but cannot replace the capabilities of a skilled user.'

Perhaps as a latecomer to realising the value of a good education, Gibson is passionate about the subject. He is a supporter of the Houston-based Small Steps Nurturing Center involving the delivery of education to preschool children, he's on an advisory board at Indiana University, and is soon to be involved at his alma mater Auburn University.

One thing that education can teach but not guarantee in practice is ethical business practice. Three years ago Gibson made this point when delivering his address as the inaugural AAPG Distinguished Lecturer of Ethics. For some, the role did not sit well given the controversy that Halliburton has sometimes attracted over its operations around the world. Gibson's main point was that we live in an era of poor decision-making rather than poor ethics, and even if evil people do exist in the world they are not the main issue. He also expressed concern about the short term thinking to meet stockholder expectations at the expense of health benefits, pensions and the environment.

How Gibson finds the time to pursue all his interests is something else. He likes to say that he has a degree in attention deficit, and he certainly is busy. Apart from Fox Paine and Paradigm business, he is also a board director of a telecoms company in Alaska (which he visits from time to time) and of Parker Drilling in Houston. Gibson's agenda at any time might also involve his wife and grown up kids, their farm where animal rescue is a specialty and currently has the odd zebra on the property, his church, opera, painting, the gun collection, and of course the Valhalla Six Guns motorcycle group (he rides a Honda Valkyrie).

Straight-shooter that he is, Gibson also admits a fondness for hunting, and yes, he has been out in the field with US vice president Dick Cheney, former chairman of Halliburton. But that, as they say, is another story, and Gibson's target right now is to raise the profile of Paradigm in the E&P software business. OE

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