Computer Modelling Group: Rockflow Dynamics & Schlumberger Competition

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I appreciate the unbiased point of view. One of the questions I have is whether CMG is at a competitive disadvantage compared to Schlumberger, given that Schlumberger seems to have a more expansive platform play.

When you look at Schlumberger, it's a platform play. You can go to Schlumberger and get various pieces of software on a generalized platform. However, their platform is more about marketing than actual functionality. Schlumberger's strength lies in their Petrel platform or software, which dominates the industry with over 90%, maybe 95%, of the geological modeling side of oil and gas. This feeds into reservoir simulation.

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I appreciate the unbiased point of view. One of the questions I have is whether CMG is at a competitive disadvantage compared to Schlumberger, given that Schlumberger seems to have a more expansive platform play.

CMG and RFD have recognized this and understand they need to work well with Schlumberger's Petrel because it feeds into the reservoir simulation space. They also need to find a way to detach oil companies from Petrel to avoid being dependent on Schlumberger. Schlumberger must balance this carefully, as being too aggressive with other vendors could upset oil and gas companies.

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You said they're not typically very levered to oil and gas prices, but you also mentioned that when prices turn down, customers become more cost conscious and cut licenses and possibly projects. Last quarter, organic growth in the traditional business was down 10% or 11% in the reservoir simulation, if you strip out carbon capture, which I think got decimated.

In Canada, CMG has dominated for a long time, but RFD and Schlumberger want to enter that market. There's a lot of pressure on CMG in Canada due to competition. CMG needs to maintain or grow its market share. In the U.S., CMG did well early in the unconventionals market, but now it's in a typical production mode. They're using cheaper, less accurate but sufficient tools.

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