Given Weatherford's participation in many other segments of the oil and gas service business, the company saw stimulation as an area of new potential consistent with its overall growth strategy. Stimulation is a natural extension of the company's core capabilities. It affects the ultimate productivity of the well and is an excellent way to add value for clients. Although the company had essentially no pumping or chemical-related businesses, management saw a lot of potential in well stimulation by focusing on service quality and bringing value to that segment.
Starting from a clean slate
When a new endeavor is begun, there is always a choice: acquire an existing business or build it organically. Each approach has benefits and challenges. The company saw an opportunity to build a business that incorporates new, state-of-the-art equipment, a robust portfolio of chemical technologies and a dedicated work force. One of the biggest challenges to this approach turns out to be its greatest opportunity: the lack of a legacy stimulation infrastructure. Thus, the company was able to look at every aspect of the stimulation business and ask the question, "What is the best approach in today's business environment?" Invariably, the very existence of a legacy infrastructure would have influenced decisions; but by starting from a blank slate, efficiency and quality could be built in to every decision from the outset. At the same time, safety has been fully integrated as a fundamental tenet of the business. For example, the newest safety restraint technology is used on all energized fluid treatments such as foam frac jobs, something that has not happened with many other companies. The protection offered by such safety restraint technology warrants the investment, and is a visible signal to customers about the company's commitment to safety.
How will Weatherford compete?
The fracturing business comprises three basic elements - equipment, chemistry and people. With new equipment, the incidence of breakdowns that plague older systems will be sharply reduced. The use of standardized equipment as much as possible to minimize inventory, maintenance and training costs is expected to provide an advantage. In other words, by buying equipment that best solves the customer's needs and making that the standard going forward, a more efficient, streamlined organization results. Going hand-in-hand with good equipment is the establishment of a proactive maintenance and inspection program to keep systems in top operating condition.
With respect to chemistry, a robust portfolio of chemical products has been built through a distributed approach to chemical research and development (R&D) that uses both internal and external resources. Weatherford's internal capabilities now include a new chemical R&D facility and a network of regional stimulation laboratories that support field operations. In addition, the acquisition of Clearwater created another support base for the stimulation business within the company itself. Time was invested to develop high-performing fluid systems that can compete effectively and efficiently, and the result is a strong product offering.
Using a proven success formula
The Southwest Airlines approach is a classic success story worth emulating. Beginning as a tiny airline, Southwest faced huge competition in a capital-intensive, cyclical, competitive business. Many didn't give Southwest a chance when it entered the airline business, but today it is viewed as the most profitable airline in existence. How was it done? By standardizing on efficient equipment appropriate for the market it chose to serve, Southwest gave its customers exactly what they wanted in a flight - on-time departures, reasonable comfort, safety and employees whose apparent enjoyment of their jobs makes the whole flying experience enjoyable for the customer.
What's Weatherford's growth strategy?
Beginning with districts in Odessa, Texas, and Elk City, Okla., additional field locations were established in Decatur, Texas, and Longview, Texas, during the first year. Now, less than a year-and-a-half since launch, a new location has been added in Alice, Texas. Weatherford will continue to look at new opportunities, particularly where there is a chance to leverage the existing presence of its core competencies. The company's growth strategy involves viewing each opportunity to expand as a unique business decision to be implemented when the opportunity is right to deploy equipment, technology and people to deliver the greatest impact.
The company fills a key niche with its current service offering built around fracturing and acidizing services. Water-based, oil-based, acid-based, and foam frac jobs as well as matrix (low pumping rate) chemical services jobs can be performed. For foam fracs, which are a mixture of gas and fluid mixed to form a shaving cream-like system in the well, nitrogen pumping units are available. Liquid carbon dioxide (CO2) can also be pumped.
Weatherford has chosen to create a distributed R&D network - meaning a small nucleus of scientists and engineers. Their skills will be leveraged by surrounding them with collaborative groups consisting of academia, service/supply providers, industry consortia and the company's own field labs. This technique has enabled rapid development of robust fluid packages to compete on a day-to-day basis. The company's new Chemical Research Center in San Antonio is not a huge monolithic structure but rather is focused, powerful and innovative, without the "not invented here" syndrome. Both the R&D Center and field labs have been equipped with some of the best analysis equipment including state-of-the-art rheometers and viscometers.
In a relatively short time, the company has built a broad portfolio of experience, ranging from very high-pressure jobs to ones involving sophisticated chemistry. Many challenging of jobs have been performed successfully, such as pumping a MagnumFrac L foamed with CO2 at more than 14,000 psi surface pressure.