Upstream Operations Problems
Independent E&P companies are challenged to explore for new oil fields, and exploit opportunities in existing fields. Many independents still run their operations on spreadsheets, and only a few operators can afford the luxury of expensive applications to manage information about their daily operational activities.
To further compound the problem, these spreadsheets are almost all built and used as silos of data. Very little integration has been done to establish a central repository of information that should be shared between multi-disciplined teams and departments, and Executives still spend about half their time looking for data.
Some key, high-impact areas for return are realized in Capital Management, Well Failures and detailed management of daily drilling and production activities. By directly linking the daily operational events that occur with the associated costs, the reasons for deviations are quickly determined and corrected.
Well Failure tracking and trending offers the added benefit that allows you to make predictive analysis based on comprehensive, accurate, and historical information. Well failure information analysis can lead to high-impact returns for E&P companies as it affects both revenue generation and operating costs.
Client Testimonials
“The Operations Center solution that UPI provided us has increased our team performance at least 50% if not greater, and everyone gets their report the way they like it because of the Centralized Repository approach.” says Cindy Turner, Project Manager, Axia Energy.
“We don’t have an expensive IT staff, and our team uses the Operations Center Application Hosted solution to successively run our business everyday. ” according to John Sanchez, CEO of Cornerstone E&P Company.
Business Change Requirements:
· Integrate all Drilling and Production Applications to streamline operations and improve information sharing and reporting based on security levels
· Mitigate lost opportunities to exploit Asset Reserves through missing, untimely or inaccurate information
· A capture system to track and manage total AFE and capital budgets for management & control
· Asset Project Management & Daily Reports for immediate decision-making and performance improvements
· Misalignment of activities and information flows between Field Operations, Accounting and Financial
· Numerical and Graphing functionalities for actual versus estimated AFE attainment as well as forecasting capabilities and engineering technical analysis
· Departmental “readiness” check before a well is spud
· Rigs, fracs and other events need to be scheduled in advance to optimize resource planning
· Detailed Daily & Monthly Drilling reports for management and partners along with relevant NRI reports
· Timely and accurate operational and regulatory reports are needed, with variance reporting capabilities
· Daily Well-Bore Diagrams to visualize drilling progress
· Accurate Well Failure analysis and reporting
· Immediate, accurate net/gross production volumes
· Solve complex Allocation problems
· Gather & manage daily or monthly field production information, such as production volumes & sales
· Well Potential Analysis
· Complete electronic well histories including workovers to determine best practices
· Achieve Corporate compliance through greater information integrity, transparency and accountability
· Establish Best Practices based on comprehensive, accurate, and historical information about your wells
Example 1 - ROI Calculations
Key Areas for Potential Improvements
1-5% improvement in overall productivity
10-50% improvement in team productivity
1-5% improvement in cost management
Reservoir Reporting Improvements
Focus on Process and Data Accuracy, Timing, etc
Potential impact is 3% - 7% gain
Assume a 5% gain for illustration purposes
If $200 Million in Revenue
$10 Million a year gain = $50 Million over 5 years
Operational Overhead Improvements
Streamlined Processes, Removal of Redundant Activities, etc.
Potential impact is 3% - 7% gain on the bottom line
Assume a 5% gain for illustration purposes
If $100 Million in Operation Costs
$5 Million a year improvement = $25 Million over 5 years
These two areas represent $75 Million over 5 years
Example 2 – Operator (XYZ) Cost Justification & ROI
ROI FACTOR % BENEFIT XYZ Co. Groos Volume XYZ Net Benefit
Capitol Budget Controls 3% - 20% *Domestic $860M $25.8M (annual)
People Efficientcy 20%-100% * 20 people @ 20% x $50K $4M (annual)
Overall Productivity 3%-20% 125,503 MMCF & 9468 MMBOE $41M (annual benefit)
Cost of Project approximately $750K ($.75M)
ANUAL BENEFIT $71.8M
Comments - Better ROI than any opportunity you will drill and with less Risk
Business Impact Examples The following examples are based on real life experiences:
· An Engineer is drilling a new hole at the rate of 4.6 ft./hr. and unsatisfied with progress and wants to know if this rate is to be expected, and wants to compare his rate to other wells in the area and adjusts mud & drill bit properties to coincide with surrounding wells and achieved 25 ft./hr. Net Impact $60,000
· A Pumper sees an LOE report reveals that sales is held in suspense because of a comparison to field gauges. Net Impact $550,000
· A Field Clerk compares location costs and finds vendor that saves $50,000 / location. Savings occur over next 30 wells in a field. Net Impact $1,500,000
· A Drilling Engineer compares ROP’s on different bit types used in drilling program. Optimization saves company 1 day of drilling time over next 40 wells Net Impact $700,000
· A comparison of sales ticket proceeds to field tickets by field office manager reveals underpayment of 3000 bbls of oil to operator. Mitigated by accounting Net Effect $320,000
· Monitoring of downtime by Production Engineer reveals that compression is often down, and not sized correctly. Investment into compression maintenance and infrastructure will correct $4,000,000 per quarter in lost gas production Net Effect $16,000,000 / Year
· Failure Tracking and COI Reviews decrease costs in failures by 35 % in the field Net Effect $4,000,000 / Year