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Strategic acquisition just one prong of P2 Energy Solutions' growth

If P2 Energy Solutions is any indication, merger and acquisition activity in upstream oil and gas is likely to hit an all time high in 2011. Just in the month of April, acquisitions of two technology companies that focus on upstream oil and gas efficiency, Explorer Software Solutions and WellPoint Systems, have strengthened P2's position in land management in Canada, and expanded the company's footprint internationally to 65 countries. The acquisitions have increased its customer base 46% to 1,200.

With these acquisitions complete, 119 of the top 150 US energy companies, 91 of the top 100 Canadian operators, and nearly 200 international operators, use software and technology solutions from P2. By adding land products like WellPoint's BOLO® and Explorer's CS Explorer® to products like Tobin Enterprise Land, Enterprise Upstream, and Tobin Map Data, P2 says it has created the largest independent technology company with the broadest portfolio of solutions in the energy industry.

While CEO Bret Bolin admits P2 is "still looking at opportunities," he stresses that acquisition as a growth strategy is just one tine in a four-pronged approach to the company's growth. Bolin, who joined P2 in August 2008, outlined four growth initiatives last November at P2's annual ASCEND users' conference in San Antonio as: 1) compounding unconventional drilling efficiencies; 2) enhancing health, safety, environmental (HSE) and regulatory reporting capabilities; 3) creating greater field value for customers; and, 4) international expansion.

While acquisition had been WellPoint's primary growth strategy, it incurred burdensome and unmanageable debt without revenue growth to service the debt. Ultimately WellPoint's debt led to receivership. Conversely, P2 has grown organically over the past three years, while methodically recording a proven track record of effective acquisition management by acquiring Petrosoft Business Solutions, Qbyte® oil and gas accounting tools, and Wellcore® engineering and operations products. With sales of more than $150 million, P2 has built the operational and financial platform to proactively augment existing strengths and presence in current areas of operations, plus add capabilities that extend its solution set into other areas.

"Whether we're increasing our domain capabilities within the Calgary market with CS Explorer, or gaining value extensions within WellPoint's IDEAS® Financial Management or BOLO client base, these acquisitions strengthen our organization in many ways," says Bolin, stressing that the people, expertise, and solid customer relationships come with the deals.

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After its acquisition of two companies, Explorer Software Solutions and WellPoint Systems Inc., P2 Energy Solutions has substantially expanded its global footprint to 65 countries. The firm says that it now provides technology solutions for 119 of the top 150 US energy companies, 91 of the top 100 Canadian companies, and nearly 200 international operators.

This augmentation will be apparent in increased resources for research and development, product support, service, and sales. Already P2's development budget for new products and features, upgrades, and enhancements to existing products has increased by 25%, putting teeth in an admission that P2 is "intrigued by many of the development projects underway at WellPoint."

Aside from building strong customer relationships, the melding of staff talents and knowledge is one of the more beneficial characteristics inherent in acquisitions. Bolin expects knowledge synergy – more minds, more knowledge, and more domain expertise – to deliver more innovation. "That's a good formula for keeping existing clients happy and adding new clients," Bolin says. P2 believes that by extending its solution footprint it will continue to enable its customers to become more efficient and effective across functional lines inside their operations.

"By linking together the various financial, IT, operational, land, and G&G capabilities inside our client walls through common data, decision support applications, and work flow, client's critical decision processes and underlying operations will realize tremendous benefit from speed, accuracy, and efficiency that these solutions empower," adds Bolin.

Click to Enlarge"We provide a great platform of operation that takes away the risk for WellPoint and Explorer customers who have invested in these products. Continuity is critical to their continued success and to ours." – Bret Bolin, P2 Energy Solutions' president and CEO

Helen Leeke, WellPoint's vice president for US Upstream Technologies, has been with the company for 10 years and came to the company via another acquisition. She says that one of the key benefits of acquisitions in general, and this one in particular, is the cumulative knowledge. "With the collective knowledge, combined with each company's commitment to our customers, the industry is getting a unified force dedicated to achieving product superiority," Leeke says.

The WellPoint Systems acquisition, in particular, raised eyebrows among customers and competitors for two reasons: WellPoint was in receivership, and for years P2 and WellPoint competed head-to-head in financial accounting and land management. Bolin and his management team were able to construct a deal that resulted in a winning arrangement because they looked beyond debt and tangible assets.

"Although buying a company out of receivership has the appearance that it's a damaged organization, in this case nothing could be further from the truth," says Bolin. "The product lines within WellPoint are incredibly successful and they have dedicated teams with tremendous commitment to great client relationships. We believe there's an excellent outlook at the product, and at the combined organization level."

For users of Explorer and WellPoint products, some 9,500 in all, P2 believes it will immediately provide a stable financial foundation for products that have become integral to their business. Explorer's primary product is CS Explorer. WellPoint products include: IDEAS Financial Management, BOLO Accounting, Land, and Production Management, Energy Financial Management, as well as various mid-stream products.

"We provide a great platform of operation that takes away the risk for WellPoint and Explorer customers who have invested in these products. Continuity is critical to their continued success and to ours," Bolin emphasizes.

P2 will look to capitalize on increasing the client value proposition by extending its solution footprint inside the strong client base. Geospatial data, GIS data, advanced performance analytics, and the subscription-based Tobin All Access portal, are examples of products that P2 believes will amplify client performance by complementing customer's existing products.

The "platform" of stability applies to employees as well. P2 has transitioned more than 140 professionals from WellPoint and 14 from Explorer. Leeke notes that the former WellPoint employees are excited about the acquisition for a number of reasons, not the least of which is elimination of the financial pressure that was brought on by the receivership process.

"Receivership was a distraction in many ways," says Leeke, "so one of the main advantages for former WellPoint employees is that we can now focus fulltime on developing products and supporting customers. That's what we do best."

As P2 integrates the two companies, dedicated effort will be placed on ensuring continuity of client investment and value proposition, while emphasizing the best-of-breed capabilities of each product within the portfolio. With such deep market coverage, P2 is focused on ensuring high client satisfaction, value, and visibility with solutions that maximize client performance and efficiency. Despite a whisper campaign by P2 competitors that pits former WellPoint products against existing P2 products, Bolin discounts rumors of either conflict or overlap between WellPoint and P2 products.

"Each product line currently has its own distinct value proposition and is being reviewed based on market opportunity and fit," he says, quickly adding, "Each product in our portfolio has its own strengths that allow it to be successful with specific audiences. In the longer term, we intend to align market solutions but not at the risk of impacting our customer's performance or value proposition."

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Assimilation of significant increases in the numbers of products, customers, and employees should pose little problem for P2 Energy Solutions given the company's track record of acquiring other companies such as Petrosoft Business Solutions, Qbyte® oil and gas accounting tools, and Wellcore® engineering and operations products.

The new P2 Energy Solutions, with a customer retention rate well above the industry norm, has a head start on extending customer satisfaction because both Explorer and WellPoint have historically been customer-centered organizations. Leeke says, "The new P2 has a passionate commitment to customers and it shows."

Just last November, P2 formed an Industry Advisory Board composed of financial and operational executives from 13 exploration and production companies. The new group provides strategic guidance and insight to help guide product investment for P2. What emerged from the first session was a snapshot of fully integrated technology that allows management to monitor everything – from health, safety, environmental, to financial issues at drilling sites – from their offices. P2 intends to expand its Advisory Board to 30 executives in 2012, and will announce the new participants at its annual ASCEND user conference in November.

With that type of complete integration, innovation, and vision, P2 believes the acquisition could be an example of growth by acquisition at its best.

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