Seitel, Inc. History
Telephone: (713) 881-8900
Fax: (713) 881-8901
Incorporated: 1982 as Seismic Enterprises Inc.
Sales: $163.81 million (2000)
Stock Exchanges: New York Toronto
Ticker Symbol: SEI
NAIC: 213112 Support Activities for Oil and Gas Operations
Seitel, Inc. stands apart in the petroleum industry by virtue of its end-to-end solutions capabilities. Through the convergence of several wholly owned subsidiaries, Seitel, Inc. provides exploration and production companies with a synergy of products and services that spans the wavelet to the well.
- Seismic Enterprises, the predecessor to Seitel, is founded.
- Paul Frame is hired as vice-president of marketing.
- Frame is named president.
- Frame is appointed chief executive officer.
- Seitel forms DDD Energy, using the subsidiary to enter the exploration and production business.
- Frame is named chairman.
Seitel, Inc. develops and markets seismic data to the petroleum industry. Seitel owns the largest publicly available library of seismic data in North America, a database that contains one petabyte (one quadrillion bytes) of seismic information. The company captures, or "shoots," measurements of sonic reverberations off underground rock formations, which scientists use to ascertain the likely existence of oil or gas. Seitel is paid to shoot these seismic surveys, then stores the information in its library, later licensing the maps to other oil and gas exploration companies. Through its wholly owned subsidiary DDD Energy, Inc., Seitel also is engaged in the exploration and production of oil and gas wells. In exchange for cash and seismic information, DDD Energy secures an ownership stake in exploration and production activities. Seitel operates primarily in California, Texas, Louisiana, and the Gulf Coast.
Seitel's robust growth during the 1990s was attributable to the influence of the company's motivational leader, Paul A. Frame. A native of Crown Point, Indiana, Frame, above everything else, prided himself as a salesman without rival. His family owned a shoe store in Crown Point, giving Frame the opportunity to hone his skills in sales. While in high school, Frame sold shoes at his family's store and enjoyed success, but the family business, he soon realized, could never support his lofty ambitions for the future. In an interview with Success magazine in May 1995, Frame reflected on the reasoning that forced him to leave Crown Point and the family shoe store: "Based on my ability--and I was as good a shoe salesman as there is--I could only make so much money. I needed to find a product with a higher unit price to make my time more valuable."
After leaving Crown Point, Frame shifted his focus from shoes to commodities of a much higher value: diamonds and gold. He attended Indiana University, earning a degree in economics in 1969, and began a career as a jewelry broker. His stints in the diamond and gold industries lasted for roughly a decade after he left Indiana University, ending abruptly after Frame endured a near-death experience. In 1979, just before Christmas, Frame was working as a wholesale diamond salesman, visiting a client in Stockton, California. Frame concluded his meeting, returned to his car, and was ambushed. Hidden behind his car were three assailants, waiting for Frame to return so they could steal his collection of diamonds. Frame was clubbed in the head three times. His sports coat was used to bind his arms and he was thrown into the car, a .45 caliber pistol cocked and pointed at his head. The thieves, with Frame in the car, drove off. They stole the diamonds and locked Frame in the trunk of the abandoned car. Eventually, Frame popped the trunk open and escaped, vowing never to sell diamonds again.
Acquiring Its Future Leader in 1984
As the 1980s began, Frame started a new chapter in his sales career. From shoes in the 1960s to jewels in the 1970s, Frame devoted the 1980s to marketing seismic maps and selling data used by oil and gas explorers to improve their odds of discovering viable wells. The progression was incongruous, but for someone ingrained with the concept that selling was selling, no matter the commodity being sold, Frame hardly blinked as he threw himself into the business of selling scientific data.
Frame's introduction into the realm of geophysics occurred after he arrived in Houston, Texas, in 1984, with several pieces of furniture and $10,000 in a bank account. He soon met an entrepreneur named Herman Pearlman. Pearlman invited Frame on a three-day yachting trip. Frame accepted the invitation, and by the time the offshore trip was over, Pearlman had secured the employment of the most important executive in his company's existence.
In 1982, two years before meeting Frame, Pearlman had helped start a company called Seismic Enterprises Inc., a seismic information company. Pearlman, who had earlier founded a television production company called Telepictures Inc. (later acquired by Time Warner Inc.), applied the strategic underpinnings of television syndication to the operation of a seismic data concern. Similar to the library of television shows controlled by a syndication company, a seismic information company controlled content that could produce a recurring revenue stream. The financial success of a company such as Pearlman's Seismic Enterprises hinged on selling data to oil and gas companies. The crucial component of success was marketing. By the end of his trip with the then 37-year-old former metals broker, Pearlman had found the salesman to make his fledgling company a genuine financial success.
In 1984, Pearlman hired Frame as Seismic Enterprises' vice-president of marketing. Frame's initial task was to build and market the company's database of information. Six months later, Pearlman converted the company to public ownership, using the proceeds raised from the initial public offering to fuel the young company's rise from obscurity toward national recognition. Although every other seismic information company pursued this same goal, Pearlman and Frame decided to take a different route. Unlike its competitors, Seismic Enterprises did not use its meager supply of capital to purchase seismic equipment. Nor did the company rely on capturing--"shooting"--surveys exclusively for one customer. Instead, Frame searched for small groups of energy exploration firms who wanted to survey a particular area. Once a collection of clients had been signed, Seismic Enterprises hired a contractor to execute the geophysical shoot.
The atypical approach adopted by Pearlman and Frame enabled their small company to survive in an industry occupied by firms exponentially larger than their Houston-based concern. According to the terms of the deals brokered by Frame, Seismic Enterprises' initial customers paid for roughly 70 percent of the cost to obtain the data. For their investment, the oil and gas companies who ordered the seismic survey paid for the first look at the data captured, securing rights that generally ranged between 60 and 90 days. From the start, however, Seismic Enterprises retained the ownership rights to the surveys, which served as the source of the company's profit stream. After the initial 60- to 90-day period passed, the company resold the data to other interested oil and gas exploration firms, enabling Frame to recoup the company's initial 30 percent investment. Once the company's capital outlay was recouped, it began to make money.
In 1987, the same year Frame was named president, Seismic Enterprises was renamed Seitel, Inc. At the time, the company was generating less than $7 million in revenue. Its stock was trading at $1 per share. In the coming years, Seitel's financial stature swelled exponentially, as Frame, newly appointed to the more powerful position of company president, began to exert his influence on Seitel's salespeople. An avid listener of motivational tapes, Frame expected everyone beneath him in the company's hierarchy to share in his passion for sales. He demanded much and, more often than not, his sermons paid dividends. Every morning at seven o'clock, Frame presided over a strategy meeting that included all of the salespeople within the organization and the company's geophysicists. The hour-and-a-half meetings became known as "shark tanks" throughout the industry. Specific goals were set, and if they were not met, the guilty party had little chance of surviving the wrath of Frame. "A marketing intelligence network, that's what I brought to this company," Frame remarked in a December 16, 1994 interview with the Houston Business Journal, referring to the spirit of success he instilled in Seitel's sales force. It was a marriage of marketing and geophysics, with Frame presiding as the preacher of successful salesmanship.
By the end of the 1980s, shortly after Pearlman appointed Frame president, Seitel was starting to show signs of the robust growth that would define the company in the following decade. In 1989, Seitel supplied data to 91 oil companies. The company derived half of its revenues from supplying seismic maps under initial contracts, typically contracting with groups of four or five firms. The other half of revenues came from the licensing of the same data to the other companies at a later period, once the original rights had expired. Frame built a library of data that was licensed much like syndicated television programs.
By the beginning of the 1990s, few observers could ignore the meaningful strides achieved by the Frame-led Seitel. By 1991, the company's success in selling its proprietary data to energy concerns in its operating territory of Texas, Louisiana, and the Gulf Coast belied recessive economic conditions. Seitel's market share in the area had risen from 1 percent in 1985 to 10 percent by 1991. During the same period, the market for seismic information in Seitel's service territory had plummeted from more than $600 million a year to less than $350 million a year. Seitel was bucking a formidable trend. All the accolades were accorded to Frame and his conviction that skillful marketing would fuel the company's success, whether the company sold shoes, diamonds, or seismic data.
Frame's resounding success earned him promotion in 1992, when he was named Seitel's chief executive officer. By the following year, a telling measurement of his successful presidency could be taken. Between 1987--the year Frame was named president--and 1993, Seitel's revenues septupled and its stock price increased 32-fold. In 1993, the amount the company posted in profits nearly equaled the $7 million recorded in revenues in 1987. The gains were impressive, enabling the company to carve a position for itself in the $3 billion-a-year
Diversification in 1993
Frame, whose aggressive sales approach had become known throughout the industry, became an iconoclast of sorts when he made a controversial decision in 1993. He formed DDD Energy, Inc., a Seitel subsidiary, to serve as the company's exploration and production unit. Frame intended to invest in the oil and gas wells his customers dug, a proposal that alarmed some of Seitel's customers, who began to perceive Seitel as a competitor. Traditionally, oil and gas service companies did not own interests in wells, and neither did they participate in drilling and exploration. Frame was breaking barriers, but he steadfastly maintained that Seitel's customers should not feel threatened by his bold diversification. In a typical deal brokered by DDD Energy, the company contributed cash, information from its database (by then the second largest publicly available library in the country), and new surveys. In return, Seitel, through DDD Energy, generally gained a 20 percent stake in the well.
By the fall of 1994, nearly 50 oil and gas exploration companies had signed agreements with Seitel. Of the first 25 wells drilled under investment partnerships with Seitel, oil or gas was struck an impressive 22 times, far exceeding industry averages. Encouraged by his initial success, Frame declared that by 1997 Seitel's oil and gas earnings would eclipse the profits derived from selling seismic data. As he guided the company into the mid-1990s, Frame set a new financial goal. He promised to build Seitel into a $1 billion-in-sales company.
Although it took several years, concerns about Seitel's equity interests in exploration and production properties dissipated. DDD Energy, like Seitel's seismic mapping activities, grew during the latter half of the 1990s, becoming a meaningful contributor to revenues and earnings. Late in the decade, Frame decided to spin off DDD Energy through an initial public offering. At the time he filed with the Securities and Exchange Commission in November 1999, Seitel had invested roughly $150 million through DDD Energy. Frame filed for the spinoff to enable Seitel to focus exclusively on its core business of marketing seismic data, but unfavorable stock market conditions prompted Frame to withdraw from the scheduled IPO.
By 2000, Seitel's revenue volume reached $163.8 million, having increased from $106 million in 1996. The company entered the 21st century with what was believed to be the largest nonproprietary seismic data library in North America. In September 2000, Seitel announced plans to make its data available to its customers via the Internet. Although the goal of reaching $1 billion in sales remained a distant dream, Frame's unflagging zeal for sales promised to deliver continued growth to the company. In February 2002, Seitel's 20th anniversary, Frame was named chairman of the company.
Principal Subsidiaries: Seitel Delaware, Inc.; Seitel Data Corp.; DDD Energy, Inc.; Matrix Geophysical, Inc.; SEIC, Inc.; Seitel Canada Holdings, Inc.; Seitel Solutions, Inc.; Solutions, LLC; Seitel Management, Inc.
Principal Competitors: Petroleum Geo-Services ASA; Schlumberger Limited; Baker Hughes Incorporated.
- Fletcher, Sam, "Seitel to Spin Off 90% of DDD in IPO," Oil Daily, November 5, 1999, p. 32.
- Greer, Jim, "Seitel Reveals IPO Vision for DDD Subsidiary," Houston Business Journal, November 19, 1999, p. 6.
- ------, "Seitel Shows Seismic Success, Insiders Sell Shares of Stock," Houston Business Journal, November 25, 1991, p. 9.
- MacDonald, Elizabeth, "Wildcat," Forbes, March 18, 2002, p. 32.
- Palmeri, Christopher, "Shark Tank: Paul Frame Built Seitel, Inc.'s Sales to $50 Million in Practically No Time," Forbes, October 10, 1994, p. 108.
- Rouffignac, Ann, "Seitel Chief Creates Glitz, Glamour, and Controversy," Houston Business Journal, December 16, 1994, p. 8.
- "Rumbles for Seitel," Business Week, August 14, 2000, p. 141.
- "Seitel Plans Eagle IPO," Oil Daily, June 4, 1997, p. 7.
- Warshaw, Michael, "Shark Tank Selling," Success, May 1995, p. 52.
Source: International Directory of Company Histories, Vol. 47. St. James Press, 2002.