LJ Guillotte, President of Lightning Production Services discusses the challenges and solutions of poking a hole in the ground.
Please excuse any typos in this hasty transcript.
Matt Register: And welcome back to the show. Texas Business Radio, texasbusinessradio.com being the website. Get on there and see the entire show in beautiful high definition video. 844-814-8144 is our 24 hour call in line. Go ahead and get those calls in. Get those questions in. We’re going to get the experts on here to get those questions answered. I’m your host, Matt Register. Jay Curry’s the one sitting over there in the co-host chair. We’re talking about oil field. Oil field, obviously, is a very, very big business in Texas. And we got some companies in here that have various services and products in that market that we find interesting. What do you think, Jay?
Jay Curry: Well, I’ve got tell you. If you think you just plug a big old hole in the ground and it comes up, and it ought to be cheaper, you’ve got to listen to LJ. This is a complex business.
Matt Register: Well, and you kind of do just poke a hole in the ground. But there’s a whole lot more to that. We have Lightning Production Services in the studio today. LJ Guillotte is the president of it. LJ, welcome to the show, sir.
LJ Guillotte: Thank you.
Matt Register: Talk to me a little bit about Lightning Production Services. What do you do, and who do you do it to?
LJ Guillotte: Lightning Production Services was founded five years ago with one concept in mind, to reduce the mean time between failures and shale oil and gas artificially lifted wells, that are most commonly lifted with the predominant lift of Reciprocating Rod Pump. So we focus on rod and tubing string, and reducing the overall frictional side loading and holes in tubing, which is a common problem amongst operators.
Matt Register: So we were talking during the break and I’m gonna try to simplify this for some of our guests who have no idea what it is you just said, right? Bottom line is, you poke a hole in the ground, and if you have to actually pull the oil out of the ground, pull the fluid out of the ground, right? You have the rod that goes down there that operates a pump. But sometimes the hole is not straight, and you have the products that will help reduce friction. Having a rod that goes into a crooked hole that is hitting the sides, and everything else as it’s pumping. Is that close?
LJ Guillotte: That’s pretty close. Bottom line is the vertical and horizontal section look like a corkscrew, and on a Reciprocating Rod Pump, you have a solid rod that drives the Bottom Hole Pump, stroking up and down. And that is pressing up against the side of the tubing, the frictional side loading. That causes a hole in tubing.
Matt Register: So, but you guys deal with the actual rods and the tubing itself, correct?
LJ Guillotte: That is correct.
Matt Register: And the goal is to reduce as much friction as possible as it’s making that up and down motion, operating that pump.
LJ Guillotte: That is correct.
Matt Register: So tell me a little bit about how you got into this business?
LJ Guillotte: Well my career path was with a major oil and gas service company for ten years, working in the artificial lift forum, of that sector of the business. Which, I founded this company five years ago with a core fundamental focus of bringing continuous sucker rod to the shale oil and gas market of Permian Basin and Eagle Ford Basins.
Matt Register: Interesting. Now why is it important to… if somebody were not to use your product, right? They’re introducing a lot of friction into that process, what is the benefit of reducing the friction? What is the benefit? Does it increase the life of their parts? Does it make it easier to pump? What is the-
LJ Guillotte: So, bottom line, it’s like taking a drill bit with a Grinding Disc. The harder you push, the quicker it’s gonna wear a hole through the steel that you’re applying it to. Same application with a rod and tubing string. They created a-
Jay Curry: In other words… I’m sorry, go ahead.
LJ Guillotte: No, please.
Jay Curry: I was gonna say, in other words, you’re going to wear a hole in the piping and that’s a disaster.
LJ Guillotte: That’s right.
Jay Curry: So, they need ya. That’s the bottom line, so the friction won’t cause holes in the pipes.
LJ Guillotte: So just to give you an idea, the failure rate of these wells that they’re working over, due to holes in tubing can range as high as three to four times a year, on average. Maybe even one-and-a-half to two-and-a-half a year, that results in a workover cost of-
Matt Register: A lot. It’s a significant cost to ’em for workover.
LJ Guillotte: A significant cost-
Jay Curry: Big digits
LJ Guillotte: That’s exactly right.
Matt Register: So what kind of difference does it make using your products versus not, right? You can reduce the amount of workovers they have to do?
LJ Guillotte: Exponentially.
Matt Register: Okay, interesting. So the savings to them is very, very significant using this friction reducing products versus not.
LJ Guillotte: That’s right. So we just had a tangible result from a customer in the Permian Basin that went from an average of 2.2 failures per year to .17 using our products.
Matt Register: Wow, and with the cost of workovers being an extremely high, that becomes… so they’re a fool if they don’t use your product, and they have this friction introduced into their well, right?
LJ Guillotte: I dunno if I’d say they were a fool, but yes it does improve the benefit and the overall return on their investment.
Jay Curry: Now this is particularly important in the fracking, because they don’t take time, I guess to drill a straight hole, what makes it so-
LJ Guillotte: Actually Jay, it’s both on the drilling side, because technology has advanced so far, that they’re drilling so fast today, that even in the vertical sections you have a deviated wellbore. And now, with pad well drilling, which is where they drill multiple wells within a very small footprint of the drill site. Those are engineered deviated wellbores, if you will, having s-curves and kinking off from where they enter the surface. So they engineered, designed deviated wellbores, and there’s also deviated-
Matt Register: Accidental deviated, right?
LJ Guillotte: That’s right, from just the drill bit technology.
Matt Register: Interesting, and with technology coming so far in that, they’ve gotten where they’re poking holes in the ground so fast… like you said, they well understand what they’re introducing, but they can do it so fast, it ends up saving ’em more money, just putting ’em in the ground fast and dealing with the extra friction and stuff that comes out of it, right?
LJ Guillotte: That’s right, and what happens so often is drilling and production have… although the same company, have different goals. So one is to reduce the overall cost of drilling, which is very intensive and expensive. So they wanna drill faster, get on quicker, and move on and off quicker, and drill as quickly as you can to conserve costs. But that produces and adverse effect in the deviate wellbores, which then becomes a problem for production on how do we keep these wells running longer on artificially lifted beam pump wells.
Matt Register: Interesting, and it’s cheaper to deal with those issues than it is to drill longer, right?
LJ Guillotte: Exactly.
Matt Register: Interesting. One of the things we were talking about during the break, and I found this absolutely fascinating, talk to me about some of the tariff things in the market, right? Over the recent past, with The President and the Administration talking about tariffs, implementing some, not implementing others. What has that done to your market for raw materials and stuff, because it’s flipped it upside down. I find this fascinating, right?
LJ Guillotte: Absolutely! Just on media exposure expectations of the tariffs being levied has driven the cost of steel to double in price, this time last year. It’s also adversely affects supply chains, so supply and demand have flipped upside down, prior to the tariffs being implemented.
Matt Register: I find it interesting that some of the unintended consequences of this is… The President will Tweet out something about a tariff here. Well all of a sudden, the market now starts hoarding supply anticipating it’s going to increase in price, which increases the price, without anything actually being imposed, right?
LJ Guillotte: Correct.
Matt Register: Now, that’s interesting, unintended consequences of The Administration negotiating, if you will, with foreign markets, right?
LJ Guillotte: While I agree with the overall…-
Matt Register: Strategy?
LJ Guillotte: Strategy of The President, what remains complex is bridging the supply chain gap in the meantime, and getting US manufacturers to ramp up in time to supply the demand of the market, not just in oil and gas, across all markets.
Matt Register: Yeah, no doubt.
Jay Curry: That leads to a short term because the Americans have to pick up because it’s so expensive now to bring it from overseas, and during that short term, you don’t have supplies.
LJ Guillotte: That’s exactly right.
Jay Curry: The price gets crazy. But hopefully the Americans then build and they can provide you cheaper, and the price will come back down in the long term.
LJ Guillotte: Correct
Jay Curry: Or so the strategy goes. We’ll see, huh?
LJ Guillotte: I agree. I think it will be a little more costly than bringing it in through international markets. But still, it’s the right thing to do, I believe it’s correct, and bridging that supply gap and ramping up US manufacturers takes time. It’s not a one year initiative, it’s a five or ten year initiative.
Matt Register: Sure, interesting stuff. Lightning Production Services, LJ Guillotte is the President. LJ, what’s the easiest way for somebody to learn more, should they wanna learn more about your products?
LJ Guillotte: Via our website, it’s very interactive and informative, and has all the technical data on our website at lpsups.net.
Matt Register: Lpsus.net. Lpsus.net, we’re gonna have it right there from texasbusinessradio.com. We’ll have it linked right there from the front page. If you can get there. Lpsus.net, LJ thank you very much for joining us, we are out of time. We gotta go take a break and pay some of our own bills. We’ll be back right on the other side of the break with a whole lot more of Texas Business Radio.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.
Jay W. Curry
Along with hosting “Texas Business Radio”, Jay is a Professional Certified Coach and Master Chair facilitating four Houston-based Vistage peer groups. In addition to being a best selling non-fiction author, the 2015 release of his award winning novel, Nixon and Dovey: the Legend Returns, adds novelist to his title. Jay holds a BS in Mathematics from Oklahoma State and an MS in Computer Science from Kansas State. You can learn more about Jay HERE.