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PennWell drills into exchange

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As independent Net markets stumble because of their market inexperience, Penn-Well Corp. is proving that old-line publishing companies—even one that’s been around since 1902—can be nimble players in b-to-b e-commerce.

Tulsa-based PennWell recently formed PennEnergy Inc. to aggregate all of the oil, gas and related energy sites it purchased to enhance its Oil & Gas Journal Exchange, which launched in January 2000. The exchange provides e-marketplaces for oil and gas properties and used equipment, and offers industry news and information from PennWell’s flagship Oil & Gas Journal.

Since the start of last year, PennWell has made several key acquisitions:

•Â In January 2000, it acquired a majority interest in EBCO, which conducts live auctions of oil- and gas-producing properties.

•Â In March, PennWell bought Global Logistics Partners L.L.C., an Irving, Texas-based international broker of used and surplus oil, gas and electric power equipment. Global Logistics then created the Oil & Gas Journal Equipment Exchange, which lists more than $1.5 billion in equipment.

•Â In October, PennWell bought Madison Energy Advisors Inc., whose deal rooms list oil and gas properties valued at about $250 million. Together, EBCO and Madison Energy formed the Oil & Gas Journal Property Exchange.

Access to detailed information on the exchange regarding equipment and properties costs $84 a year, with discount rates for companies.

Sales on the Oil & Gas Journal Exchange are about evenly divided between equipment and properties.

Commissioned exchange

The exchange works on a commission-based revenue model, with fees ranging from 1% to 10% of the sale, depending on the size and complexity of the deal. While some properties go for as little as $1,000, used equipment can command millions of dollars. Closely held PennWell expects transactions on its sites to top $750 million. Already, 98% of the ad inventory for the sites has been sold.

The exchange is expected to be profitable by the second quarter of this year, said Paul Westervelt, PennEnergy VP-marketing and business development. He said the exchange has been able to avoid any conflict with advertisers’ core business products by being selective in what it handles on its e-hubs.

Exchange users can keep up with daily industry news and access Oil & Gas Journal archives dating back to 1990. PennEnergy also has exclusive online content rights for several of PennWell’s other publications, including Offshore Magazine; Oil, Gas & Petrochem Equipment; Power Engineering; and Electric Light & Power.

Offering content on the exchange has helped PennWell build an audience. “Buyers need to be informed about the availability of properties and that’s where the content becomes invaluable,” said Geoff Roberts, founder and president of Madison Energy Advisors. “Content brings us buyers.”

PennWell had serious concerns about whether it might be cannibalizing its print products by placing its content on the exchange. Westervelt said the company was able to avoid this by charging for both the print and online products.

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