Quickly and quietly, the oil and gas industry is changing.
Companies are looking to new technologies to streamline their business and improve the bottom line. At the forefront is a Calgary company cashing in on that change — and predicting even more.
“We are moving towards a virtual oil company,” says Bob Tretiak, president and CEO of Applied Terravision Systems. “You can almost visualize someone sitting at home and running a major oil company from their computer.”
Applied Terravision, or ATS, is an e-business provider that offers its products as traditional software, or as an application service provider (ASP) over the Internet. From integrated accounting to marketing and land-management applications, the products allow companies to out-source more and more of their work.
“It’s nothing short of phenomenal,” says ARC Resources Ltd. president John Dielwart.
An intermediate oil and gas producer, Calgary-based ARC Resources runs its entire land system with ATS applications. The company says downsizing in personnel across the industry has meant computer systems need to be as strong and efficient as possible.
“Our reliance on technology and technological solutions is greater now than ever before — and it will be even greater tomorrow than today,” says Dielwart.
To capitalize on that reliance, ATS is merging with Petroleum Place, a leading U.S. Internet company geared to the upstream petroleum industry. The $105-million deal, if approved, could create a combined customer base of 900 companies across Canada and the U.S.
According to Petroleum Place, a large percentage of that base is mid-size to large independents, “a definitive sweet spot” for ASP solutions.
“This is a great growth opportunity,” says Tretiak. “Our goal was always to get a NASDAQ listing. We knew we needed to make an acquisition to get (on the main board).”
Unlike ATS, Petroleum Place is still a private company. Technology analysts, however, say Petroleum Place has a large sponsorship and they expect the company to go public early next year.
Once the merger is official, ATS predicts a combined revenue of $50 million US. It’s an expectation market watchers say is reasonable.
“They’ve done a good control of costs and moved from a loss position to being profitable,” asserts Acumen Capital analyst Brian Pow.
Since 1998, the 14-year-old company has been consistent with steady, even significant, growth, garnering three consecutive Deloitte and Touche Fast Track 50 performance awards.
Revenue for last year was $24 million. Profits for 2000, projected at $31 million by Acumen Capital, could exceed expectations and see similar gains as a result of the petroleum merger.
The oil and gas industry, however, is not the only sector ATS has set its sights on. While the company says oil and gas business represents about 60 per cent of their revenue, the company is building other bases — something analysts like Brian Pow say is strengthening the company’s profit stability.
“We’ve seen them make a transition from being wholly dependent on the oil and gas industry to developing other things and diversifying their revenue stream,” he says.
That diversification can be divided into two main groups, namely government and banking. Counting among its customers the U.S. government and the Bank of America, ATS says these sectors could represent key growth for the company.
Officials are hoping to expand their government base to include Canada, while making the most of a relatively new banking market.
“There isn’t much competition,” Tretiak says. What was once done in-house by banks is now more efficient and economical to out-source to companies like ATS. “Nobody’s writing their own systems anymore. It’s an emerging market and we’re going after that.”
Also key to ATS’s strategic growth plan are mergers, acquisitions and alliances. An agreement this month with software developer and PC consultant Vanguard Systems will see the companies jointly market Vanguard’s virtual filling system, IMS/21.
“It will not only help us to expand the offering to our customers, but also help to expand outside our space,” says Tretiak. “It’s another building block.”
Many more building blocks may be in the works for ATS. At any given time, Tretiak says the company is considering about half a dozen possible deals. He says there are three possible acquisitions ATS is “deeply involved in.”
Although he would not divulge the details, it is clear an aggressive approach is how ATS plans to capitalize on changing and emerging markets. “The marketplace we serve will be changing dramatically over the next two years.”
Tretiak predicts that will mean more services to provide for clients, continued growth and greater success. “We will be a dominant player in our space.”
