Enterprising Ideas, Joe Terzo, The Technological Evolution of the Oil and Gas Industry

Technology is once again on the forefront of advancing the oil and gas (“O&G”) industry.  Throughout the supply chain, O&G companies are experiencing pressure to increase operational efficiencies as a result of a “New Normal” in depressed commodity prices.  This environment has created a substantial opportunity for companies focused on delivering technological solutions tailored to solve age-old problems in the O&G industry.

Much of the new innovation is centered on leveraging big data through cloud-based internet of things (“IoT”) technology.  The utilization of big data can be used to derive information that can lead to smarter business decisions and improved operations.  A single well can produce terabytes of data in a single day; however, most of this data is currently unutilized.  With these uprising trends, digitalization in the O&G sector can potentially unlock billions worth of value to the industry over the next decade.  Furthermore, these technologies combined with data-driven insights have the ability to boost operations and decision-making abilities, substantially cutting down capital expenditures.

Automation and cloud technology is also being combined to discover cost savings and improve the efficiency of operations.  O&G companies have the power to connect on digital platforms and engage in information sharing.  Devices, from drones to sensors, will allow for automation to take over the industry.  Firms will use these devices to increase their reservoir limits and focus more on analyzing information.  Big data combined with machine learning will allow for these digital applications to deliver insights which humans can easily overlook.  In addition, advanced analytics will promote predictive maintenance, decreasing operating costs.

Technological innovation has already started to make its way to the industry today.  In recent news, several players have started showing interest in the digital transformation, setting an example for their competitors to follow.  For example, BP recently invested $20 million into an augmented reality start-up known as Beyond Limits, which was created in conjunction with NASA.  With augmented reality, BP will use cognitive computing to fill in areas not possible through human operation.  This technology has the capability to improve the way BP locates reservoirs, produces oil, and markets their products.

As for software-focused businesses, companies like DrillingInfo, which has received over $200 million in funding, focus on providing operators with the correct analytical tools to maximize operations.  RigUp, which has received $18 million in funding, has created an online marketplace for O&G professionals to come together and scale operations. These are the platforms and initiatives that are necessary for the profitable future of the O&G industry.

Learning Curves, Alex Hicks, Post-Grad Outcomes Driving Change in Coding Academies

As an education investment bank providing advisory services to both entrepreneurs and financial sponsors, MHT and its education advisory team are consistently asked about investment opportunities in STEM-related fields, specifically coding. While opportunities exist for investors to acquire coding bootcamps, the number of providers has decreased as graduate outcomes become a large factor in determining the success of many bootcamps.

As background, the emergence of coding academies starting in 2008 was in response to the dearth of coders in the U.S. and across the globe. Coding bootcamps sprung up offering to teach anyone the latest programming languages over eight to twelve weeks for $10,000 or more. With the rapid market growth in the bootcamp market, several of the for-profit universities acquired some of the larger bootcamps, like Kaplan’s acquisition of Dev Bootcamp and Apollo Education’s acquisition of The Iron Yard.

As early as 2014, the writing (or code for that matter) was on the wall regarding the quality of coding education, as some students from leading programs either were not prepared for or could not secure a programming job. This caused many providers to change their business to focus not only on the quality of curriculum but also the caliber of the prospective student. Several coding academies implemented internships and externships to augment the coding experience in the classroom, allowing students to develop on-the-job skills. Further, bootcamps developed more stringent application processes, weeding out applicants that do not meet new minimum requirements. By providing a better learning experience to students that are more uniquely qualified, coding bootcamps are improving the outcomes for their graduates.

In addition, several bootcamps are focusing on graduate outcomes by offering support programs and job placement services. Like more traditional, well-known universities, several bootcamps have developed alumni networks, with graduates working at some of the top technology companies in the U.S. By utilizing alumni networks, bootcamps can place graduates more effectively with leading employers and receive feedback regarding the latest market trends and coding languages.

By focusing on post-graduate outcomes through student vetting, learning and post-grad support, coding academies are changing common perceptions about the industry. Investors who are interested in coding opportunities should focus on the success of graduates, as it will be a telling indicator of the leadership, reputation and broader quality of the asset and potential for growth.

Shop Talk, Craig Lawson, Baby Ruth Likes Benevolent Bacon!

While late to the “healthy” food & beverage acquisition game, Nestle (“the Company”) is attempting to quickly catch up to some of its more active competitors with the recent acquisitions of Blue Bottle Coffee, Sweet Earth and Chameleon Cold Brew.   These companies, Sweet Earth and Chameleon Cold Brew in particular, are miniscule compared to the global behemoth but speak strongly to the Company’s growth aspirations and likely portend more similar acquisitions to follow.

So why the change of pace for Nestle?

  1. The Millennial generation, in particular, continues to drive exaggerated change in consumer tastes that are at odds with staid brand portfolios of large CPG (consumer packaged goods) food companies.  While Millennials favor organic, clean label, sustainable and authentic brands, the Nestle’s of the world largely offer Kit Kat’s, Nerds and Toll House.  Nestle is just the latest large CPG company to increasingly embrace smaller, food & beverage M&A as their outsourced, new product innovation arm.
  2. Third Point, a global hedge fund, headed by activist Daniel Loeb, announced a significant stake in the Company earlier this summer and immediately publicized “suggestions” that Nestle shed some of its 2,000 plus brands, among other corporate actions.
  3. Nestle, coincidentally or not, shortly thereafter announced plans to both buy back stock, as well as to consummate acquisitions in fast growing categories such as coffee, pet care, bottled water and consumer health care.  Blue Bottle and Chameleon certainly check the box for coffee and Sweet Earth occupies a position in the fast-growing plant based food category (a market growing at double digits and one in which Nestle expects to be a $5.3 billion market worldwide by 2020.

While Nestle’s acquisitions are not without risk – a common refrain from consumers is that these smaller brands have “sold out” – the key to successful integration and growth will be maintenance of quality in consumers’ eyes.  The stock market has rewarded the Company (Nestle’s stock is up 3.7% since Sweet Earth, the first of the deals to be reported, was announced on 9/7) and given the inertia of consumer tastes, you can be assured we will see more from Nestle – likely soon.