Tag Archives: data management

Better Capital Allocation With A Rear-View Mirror – Look Back

In front of you are two choices: Tie up $100 million with low return or over spend by $50 million with no reliable return. Which option do you choose? Neither is acceptable.

“It seemed we were either tying up cash and missing on other opportunities, or overspending where we should not have in the first place,” said a former officer of a US independent. “We heard great stories at presentations from engineers and geoscientists as they were painting the picture to executives to fund their programs. But at the end of the year, the growth was never where we had expected it to be.”

Passing by poor investments through better allocation of capital greatly enhances company performance. To achieve this, executives needed a system to look back and evaluate what each asset team had predicted compared to the actual performance of the asset. They needed a look-back system where hindsight is always 20/20.

A look-back system is beneficial not only for better capital allocation, but also to identify and understand the reasons for low or high performance of an investment.

Implementing a look-back system is data intensive. The data needed, however, typically has already been collected and stored as part of everyday operations. For example most companies have an AFE system that captures predicted economics of well projects. All companies keep system(s) to capture production volumes and accounting data for both revenue and costs.  Data for evaluating an investment after-the-fact is already available – for the most part.  The reason executives did not have a look-back system was buried in their processes. In how each asset’s economic returns are calculated and allocated.

Here are few tips to consider when implementing a look-back system for an oil and gas company:

  • Start with the end. Identify the performance indicators (KPI) required to measure assets’ performance.
  • Standardize how economics are prepared by each asset team. Only then will you be able to compare apples to apples.
  • Allocate costs and revenue back to each well. Granularity matters and is key. With granularity, mistakes of lumping costs under a wrong category can be avoided and easily rectified.
  • Missing information for the KPI’s? Introduce processes to capture and enter data in company’s systems (historically this information may be in presentation slides and personal spreadsheets).
  • If well information is scattered across systems, data integration will be needed. Well, AFE, Production, Reserves, and Accounting data will need to be correlated.
  • Automate the generation of information to executives. Engineers and geoscientist should not have to prepare reports at the end of each month or quarter to management. Their time is FAR better spent making money and assets work harder for their investors.
  • Know it is a change to the culture. Leadership support must be behind the initiative and well communicated throughout the stake holders.

“Once we implemented a look-back system, we funded successful teams more and reduced the budget from under performing assets, then we utilized the freed money to grow. We were a better company all around” – Former Officer of a Large Independent.

Bring It On Sooner & Keep It Lifting Longer. Solutions To Consider For ESPs (Or Any Field Equipment)

Settled on average 6,000 feet below the surface, electrical submersible pumps (a.k.a ESPs) provide artificial lift for liquid hydrocarbons for more than 130,000 wells worldwide.
Installing the correct ESP system for the well, installing it precisely, and careful monitoring of the system is paramount to reducing the risk of a premature end to an ESP life cycle. But the increasingly long laterals of horizontal wells, along with rapid drilling in remote areas, is creating challenges for efficient operations and the ESP’s life span. Implementing the correct processes and data strategies will, undoubtedly, be the cheapest and fastest way to overcome some of the challenges.

1- Implement A Process Flow That Works, Break The Barriers

When a decision is made to install an ESP in a well, a series of actions are triggered: preparing specifications, arranging for power, ordering equipment, scheduling operations, testing, and finally installing it in a well, to state a few. These actions and decisions involve individuals from multiple departments within an organization as well as external vendors and contractors. These series of actions form a process flow that is sometimes inefficient and is drawn out, causing delays in producing revenue. In addition, sometimes processes fall short causing premature pump failures that interrupt production and raise operational costs.
Research of many industry processes shows communication challenges are one of the root causes for delays, according to LMA Consulting Group Inc. Furthermore, communication challenges increase exponentially when actions change hands and departments. A good workflow will cut across departmental barriers to focus on the ultimate goal of making sure Engineering, Procurement, Logistics, accounting, vendors, contractors and field operations all are on the same page and have a simple and direct means to communicate effectively. But more importantly, the workflow will allow for the team to share the same level of urgency and keep stakeholders well informed with the correct information about their projects. If you are still relying on phones, papers and emails to communicate, look for workflow technology that will bring all parties on one page.

A well-thought through workflow coupled with fit-for-purpose technology and data is critical, not only to ensure consistent successful results each time but also to minimize delays in revenue.

2- ESP Rented Or Purchased, It Does Not Matter… QA/QC Should Be Part Of Your Process

Although ESPs are rented and the vendor will switch out non-performing ones, ensuring that the right ESP is being installed for a well should be an important step of the operator’s process and procedures. Skipping this step means operators will incur the cost of shut downs and tempering of reservoir conditions that may otherwise be stabilized – not to mention exposure to risks each time a well is penetrated.
More importantly a thoughtful workflow ensures a safe and optimal life span for ESPs regardless of the engineers or vendors involved, especially in this age of a mass retiring of knowledge.

At today’s oil prices, interrupted production for a well of 1,000 barrels per day will cost an operator at least $250,000 of delayed revenue for a 5 day operation. Predictive and prescriptive analytics in addition to efficient processes can keep the interruption to the minimum if not delay it altogether.

3- Know Why And How It Failed Then Improve Your Processes – You Need The Data And The Knowledge

One last point in this blog: Because ESPs consist of several components, a motor, a pump, a cable, elastomer, etc… ESP failure can, therefore, be electrical, mechanical, thermal or fluid/gas composition. Capturing and understanding the reasons for a failure in a system to allow for effective data analysis provides insight that can be carried forward to future wells and to monitoring systems. Integrating this knowledge into systems such as predictive analysis or even prescriptive analytic to guide new engineers will have an effect on operator’s bottom-line. A few vendors in the market offer these kind of technology, weaving the right technology, data and processes to work in synergy is where the future is.

On how to implement these solutions please contact our team at info@certisinc.com.

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How an E & P Subsidiary took its Information Communications from Risky to Efficient

It starts with chatter around the workplace. A company is growing. Procedures that were once “nice to have” are now serious money bleeds. That is exactly what Certis found when they revamped a major E&P subsidiary’s communication procedures.

When an oil and gas company plants itself in any nation to explore for business opportunities, its communications with the nation’s government and with its JV partners can be, understandably, informal for the early stages of the project. As the company moves from Exploration and Appraisal phases towards a full fledge Development and Operation, what once worked with lax communications becomes a risky endeavor.

While these risks can be underplayed next to health and safety hazards, we discovered they warranted immediate action if the company is to survive long term. Consider these two real situations, to name a few:

1)      Sensitive information leaks, for example, at early stages of exploration efforts, any discovery would have a large impact on a company’s stock price (if public) and serious implications on their competitor’s behavior.

2)      Growing companies’ watch millions of dollars become billions of dollars almost overnight. Those large dollar amounts require complete technical data and timely communications to appease the government and the JV partner. The flow of information becomes crucial.

Knowing something is broken isn’t the same as understanding how it is broken and how to fix it.

Most employees can feel the weak spots in their company. When you start to sense problems, the cost of fixing them seems outlandish. But overtime the scales tip. Often, when the scales tip, the problem has grown to overwhelming proportions for employees to handle alone.

The scale had long ago tipped for this client.  Our team’s role was to quickly identify causes of communication problems, and orchestrate a long-term plan and processes to mitigate risks.

Over a period of few weeks, we surveyed the office, field, and rigs in two different continents. We went through a full cycle of process improvement. At the end we were able to divide their information communications needs into four process categories: 1) Documents and Data Management 2) Decisions Documentation 3) Security and Access Management 4) Request Management.

Our plan started with ‘Quick Wins’ that changed the way the subsidiary did business in the first month. Imagine being able to institute relevant changes in your company in one month. Yes, it was that easy to solve. The rest of the implementation plan spanned over 4 months. Communication policies, standards and procedures were to be defined and complied to across the organization.

We all know that the cost of fixing is cheap compared to the cost of cleaning up a huge mess later.

The costs of missed opportunities, reduced stock prices, or the cost of million-dollar lawsuits make this kind of projects important, combine that with the relevant low fixing cost, makes this project a “high” priority.

I believe a company needs to do more than simply comply with government or JV partner contracts. To build strong relationships, you must be able to readily prove your compliance. That’s just good business.

Our client’s new transparent business practices allow the government to view them as a serious and trusted part of the country’s future. It is impossible to put a price on a valued relationship. But successful business people know that gaining trust means big business over time.

What about your company? Is it starting to feel the risks of outdated communication systems?

$250 Million Oil Take-Over Deal Implodes Due To Disastrous Data Management

As professionals in the oil and gas sector we all know that when it comes to a merger and acquisition (M&A) that having access to quality data is essential. In its absence deals don’t get made, investors lose $000,000s and livelihoods are put at risk.

So we were pretty taken aback recently to hear of one deal – of a public company – which fell through because the organization couldn’t even list their complete assets with confidence – such was the mess of their data.

We were talking with a CEO recently who “vented” about a recently failed acquisition.  He is a major player who has worked in the sector since the mid-1970s, he told us here why the $150 Million to $250 million investment his company was prepared to make didn’t just fall flat, but imploded:  “Despite asking this company repeatedly to give us access to their “complete” data sets they failed to deliver time and again. We became increasingly frustrated and discouraged to the extent we wouldn’t even make a proposal in the region of $80 million for the company.  What was so galling to us was that it was obvious this company badly needed an investor and had approached us to bid”

We all know what data is needed for M&A investments to happen, some of which we can get from public records and from commercial organizations such as I.H.S and Drilling Info (in the USA). But those sources alone are not nearly sufficient. So what were they thinking? Did they think data would take care of itself? Or was someone just not doing his/her job well?

The CEO continues “…. in the past when companies were under pressure, typically a lot of data got swept under the rug as it were. Today though, investors demand tighter regulation of data and I suspect that, because of this, in ten years’ time some companies just aren’t going to make it. If our company had been allowed to invest and take over we could have solved many of the organization’s problems, saved some jobs and even added value. Sadly, in this event, due to poor management of critical data that scenario was never allowed to take place. The deal never even got past the first hurdle. No-one is going to invest $millions when they don’t have a clue of (or confidence in the data of) what they’re buying.”

Considering this was a company which had a responsibility for public money the management team should never have been allowed free rein without critical data management regulations or at the very least “guidelines”.

What is your opinion?