Asset/portfolio management

Why Investors Just Pumped $50 Million Into This Forecasting and Petroleum Economics Startup

The fast-growing software firm was founded by former oil and gas professionals who wanted to disrupt traditional reservoir economics software and redefine workflows.

A new forecasting and economics software platform developed by oil and gas professionals is enjoying rapid uptake in the unconventional business.
Source: ComboCurve.

ComboCurve is becoming known as one of the fastest-growing software companies in the oil and gas business after it raised $50 million from investors last month. That brings the Houston-based company’s total to more than $60 million in equity funding raised since last year.

What investors are betting on is the young company’s production forecasting and economics platform which more than 180 firms are using in the US and Canada—a figure representing an annual growth rate of 300%. Clients include oil and gas royalty investors along with big-name US oil and gas producers Devon Energy and Pioneer Natural Resources.

Cofounder and CEO of ComboCurve Armand Paradis is a former reservoir engineering manager for Statoil (now known as Equinor), which is where he recalls the challenges of trying to manage thousands of the firm’s wells in the Marcellus and Utica shales.

When he started with Statoil in 2014, he was looking forward most to working on solving technical problems with rate transient analysis and by running simulations.

“Then, reserves time came,” he said. “Then, the quarterly results came in, and so my managers asked me to start forecasting fields, updating the production forecasting.”

That meant turning to what was considered industry-standard software to run all the calculations. That’s when Paradis saw a glaring problem.

“Other software I’ve learned to use by myself with YouTube and Google—but this was not one of them,” he quipped, adding that the reserves software required multiple training classes to get acquainted and much more effort to achieve mastery.

“This wasn’t unique to just me,” he said. “When you talk to people who know how to use it, they are still learning. After 5 or 10 years, they’re still learning.”

As Paradis saw the problem, the programs used across the North American unconventional sector were designed 30 or 40 years ago for simpler-to-evaluate conventional oil and gas developments. Furthermore, typical workflows could not be done with just one software. Different programs had to be used for forecasting, type curve generation, scheduling/planning, along with others to run analytics, to make maps, and for data visualization.

This piecemeal approach, and the hand offs from one engineer to another, made it difficult to bring all the analysis together in a seamless fashion.

Starting From Scratch

Paradis believes that the status quo of a few years ago led to mistakes and a low confidence in economic estimates. As he sees it, “The tools that we were using were very outdated.”

What Paradis pined for in his old role as a reservoir engineer was a platform where workflows could be integrated and shared across the business value chain transparently.

Since no commercial software did that, he and Jeremy Gottlieb, ComboCurve’s cofounder and president, decided to build it themselves from scratch. They soon left their respective oil companies—Gottlieb was a financial executive with offshore producer Deep Gulf Energy—to start the new company that would become ComboCurve.

An early break came in 2018 when they received a seed investment from Danny Rice and the Rice Brothers who are best known for selling their company for $6.7 billion to EQT which made it the largest gas producer in the US.

That put Paradis and Gottlieb in a position to start hiring programmers and data scientists. A few iterations later and ComboCurve is today able to generate production forecasts and type curves for 10,000 horizontal wells in about 10 minutes.

Using legacy software, Paradis said a workload of that scale would have taken him and a team of other reservoir engineers the course of an entire quarter to complete.

ComboCurve’s processing speed comes thanks to the compute power available to it in the cloud. Paradis points out this is in contrast to the industry’s other forecasting solutions that are desktop based, which limits their speed to the computer they are installed on.

The other cornerstone to ComboCurve’s approach ties back to the steep learning curve Paradis said comes with legacy production and reserves programs. He said this has been solved for in part with the startup's platform that automates many of the “tedious and repetitive” manual data entry chores involved in forecasting field economics.

Paradis emphasized that while ComboCurve’s user interface was designed with a modern look, it is also intuitive for users of the historical market-leading reservoir economics products ARIES from Halliburton‘s Landmark software division and PHDwin’s software by the same name.

Another example of how ComboCurve is seeking to reset expectations within this particular software arena is the inclusion of greenhouse-gas (GHG) projections, along with what it might cost to reduce those emissions.

“Right now, [GHG] impacts asset value,” said Paradis, adding that “It’s not something that a lot of people are aware of, but it’s happening and it’s happening super fast.”

In addition to the cost of emissions abatement, he said that oil and gas companies' need to start preparing for the coming of a carbon tax in the US and how it will impact field economics and asset purchases.

As these factors take shape to varying degrees across the industry, Paradis said, “The traditional way of analyzing and doing your economics is not going to be valid.”

Creating an Energy Company Operating System

With its fresh funding from technology developers in its Series B round, led by San Francisco-based firms Dragoneer Investment Group and Bessemer Venture Partners, ComboCurve is bolstering its ranks. A year ago, the firm had around 20 employees and contractors vs. more than 120 today.

A major element of its strategy to keep expanding includes offering licenses to petroleum engineering departments at universities around the world so students can become familiar with, and perhaps fans of, the software before they graduate and join the industry.

Paradis said his ultimate vision for ComboCurve is to expand its reputation beyond a reservoir economics platform and become considered an “energy company’s operating system.”

This is why he said the platform was developed to be collaborative. In addition to reservoir teams, ComboCurve wants to become part of the workflow for production engineers, the finance department, planning teams, management, and the newly minted carbon-reduction groups.

In terms of its staying power, one of the reasons Paradis said ComboCurve has found early success is because of the lack of updates his competitors issued over the years to their software. His plan is to go the other direction and keep the company’s clients happy by issuing regular updates to the program along with new features, many of which are driven by customer input.

Paradis summed up his approach to customer service as, “Always get feedback and implement the feedback. Make more releases, make more updates.”