Even though these are difficult times in the oilpatch, we cannot lose sight of the fact that we are an industry driven by technology. While the conventional wisdom holds that we should “cut back” in lean times, I would assert that lean times demand unconventional thinking. One somewhat counter-intuitive assertion is that now is the time for E&P leaders to embrace their commitment to new technologies that can make a positive impact on both the top and bottom lines.

When the good times are rollin’, as they had been for several years up until July 2008, I have found that E&P companies tend to be less enamored with new technology. Although this seems a bit counter-intuitive, my guess is that the high cash flows made possible by us $150-per-barrel oil provide a cushion against dry holes or less than ideally placed well bores, while supra-normal activity levels associated with everyone trying to deploy as much capital as fast as possible simply makes the industry’s collective professional staff too busy to worry about finding or deploying a new technology that would only let them further enhance an already robust return on investment.

But when hard times fall upon the oilpatch, as they now have, new technology can reign supreme. Investment funds become scarce. Activity levels fall, freeing up staff time to think and reflect rather than just “do.” And pressures mount on professional staffs to find new approaches to old problems, with the reward being that a new approach might just deliver the incremental returns a potential project needs to clear the required hurdle rate.

It is in these down-cycles, then, that technology providers like ION become even more relevant to the E&P companies, a counter-intuitive notion that I spend a great deal of time explaining to my investors. I’ve managed through similar downturns before and have found the down-cycles to be the periods in which the most prudent E&P operators seek out technologies that let them de-risk their exploration prospects or operate more efficiently.

Landmark Graphics, where I used to be CEO, experienced one of its most rapid growth periods during the late 1980s down-cycle. Why? Because the hard times brought on by the price implosion to $10 in 1986 forced E&P operators to embrace emerging technologies like 3-D seismic (and the visualization platforms that Landmark provided to make sense of this data) in order to sustain reserve additions, production growth, and cash flows in one of the most challenging economic environments the industry had encountered.

I believe that we are likely to see today’s hard times usher in a new wave of technologies throughout the E&P industry once again. ION concentrates on seismic technology, so I’ll use several examples from our sector to illustrate the types of benefits that we at ION (and several of our competitors) believe we can deliver to our customers.

The first involves marine seismic acquisition, a segment in which E&P operators spend roughly $7 billion per year. On a conventional 3-D acquisition program, the cost of infill (or re-shooting to ensure adequate subsurface reflection coverage) can account for 25% or more of the total cost of acquisition. With acquisition rates running at upwards of $10 million per vessel per month, this infill cost is significant. With today’s modern streamer steering technologies and command and control software, it’s also highly unnecessary. We now have the ability to steer the streamer spread and maintain uniform spacing among the streamer cables that can, in many cases, reduce infill to 10% or less on a typical program. Since only about 10% of the 3-D seismic vessel fleet is outfitted with the requisite streamer steering technologies, the E&P industry has an opportunity to capture a multi-hundred million dollar annual prize by more rapidly embracing the approach.

Acquiring the data is only half the battle. Processing the data is the second challenge. This is where depth migration usually comes in (especially in the highest cost development areas like the Gulf of Mexico, West Africa, and Brazil). Prestack depth migration technology is always evolving, but reverse time migration (RTM) has always been the industry’s Holy Grail. I won’t get into the nuances of RTM, but the biggest stumbling block to its adoption has been its computational intensity. Our GX Technology imaging solutions group was the first vendor in the industry to commercialize RTM in 2005; back then, we could only process a modest number of Gulf of Mexico lease blocks each year. Since then, we’ve made huge improvements in the efficiency by which we implement RTM such that today we can process orders of magnitude more data each year. RTM projects now account for about 70% of our business in the Gulf of Mexico, but RTM-based projects are only beginning to hit the radar in other key petroleum centers. In this case, the benefit our customers derive comes not only from the cycle time reduction we can deliver (which allows them to make drilling and development decisions in a timely way) but also from the high-resolution subsurface images made possible by RTM that allow new wells to be more optimally targeted.

Now let’s take land acquisition, another roughly $7 billion segment within the seismic sector. Leading companies like Apache, BP, and Pemex are working with us to pioneer the development and deployment of cableless, full-wave acquisition platforms. By removing the cables from seismic systems, we reduce the weight of the recording system, the number of field-based personnel, and the HSE risk. We also generally enhance productivity by 25% compared to conventional methods.

At the same time, we record densely sampled full-wave seismic data that the processors and interpreters use to characterize reservoirs, including fractured shale and channel sand plays. The improved characterizations have enabled drilling success rates to climb in many instances from the 30% to 40% range before full-wave was used to the 70% to 90% range after it was applied. Yet these types of surveys account for less than 5% of all the land acquisition programs being conducted around the world today.

The technology exists to reduce the number of dry holes significantly in many areas, but it’s only in the earliest stages of adoption.

So that’s why I’m so confident whenever I talk to our investors or our customers or people worrying about the future of the E&P industry. We’ve only just begun to scratch the surface of what is possible. But at least the tough times heighten the interest among our customers in learning what is possible and, when that happens, the first domino has already fallen.