Exploration and Production (E&P) companies face unique data challenges when implementing new ERP systems to support accounting, land, revenue, joint interest billing production, asset management, and reporting. The sheer volume of land ownership, working interest, market contracts, and well information crossing multiple functions requires extra time and effort to clean up during ERP migration. Therefore, many E&P companies experience significant implementation delays, causing project cost overruns and disappointing the executive team and board of directors.
Avert major implementation setbacks by planning accordingly and paying close attention to these four areas:
1. Revenue and land decks
To process revenue accurately and eliminate manual revenue calculations, new enterprise systems often require land and revenue decks to have complete information. However, royalty and working interest data in legacy systems is frequently incomplete and inconsistent across various business functions. This happens when critical information is housed in different places, often in spreadsheets. The effect is exacerbated when data updates do not happen concurrently across the business, leaving a wake of inaccurate data.
Set expectations for a deck analysis and cleanup effort to ensure all interest and ownership is complete and accurate before go-live. If a company makes the mistake of implementing a system with inaccurate working interest data, accounting staff will continue to build revenue calculations and maintain reports outside the system.
For example, an E&P company found a significant number of royalty interest and working interest burden discrepancies between the land and revenue decks. The company realized that the deck information set up in the legacy accounting system was not sufficient to process revenue in the new system. The company conducted a lengthy research and reconciliation process to align working interests, which allowed the revenue process to be automated in the new system.
Take time to understand what information is required in new system. Armed with that knowledge, begin the cleanup process.
2. Well master
E&P companies often find the legacy system’s well master data is incomplete or contains a mix of completions, gathering points, storage facilities, and other cost centers. Moreover, the information describing each of the wells or completions may be inconsistent. Each well or completion has dozens of assigned attributes in the well master database for reporting and analysis. Attributes include spud date, production status, bottom-hole location, API number, impairment group, etc.
A new, integrated ERP system is useless without a clean well master. A significant well master design and cleanup effort must be included in the implementation plan and completed before go-live. Any manual processes to report and analyze well information outside the systems should be eliminated as a part of an ERP implementation.
3. Well lifecycle
Well information is stored in various systems and departmental databases within an E&P company. This includes land, revenue, production, economics, drilling, AFE, reserves, and accounting. The challenge is sharing well information across each of these systems and departments when a new well comes online, changes status, or is plugged and abandoned.
For example, the well lifecycle process often starts in accounting when initial expenses are allocated to the well. If property accounting assigns a cost center to a well which is not cross referenced to a well in the production system, consistent production and revenue reporting will be an issue.
A clearly defined well lifecycle process is a must, regardless of whether the sharing of well information is automated or not. The well lifecycle process should be designed during the early stages of the ERP implementation and before any significant interfaces between systems are built.
4. Cost, production, and revenue tracking
E&P companies often struggle with defining the level to capture and track certain costs, production, and revenue. Two major decisions need to be made regarding information capture early in the ERP design phase.
First, decide whether to capture operating costs and revenue at a field, well, or completion level. This should be consistent across the company. Second, identify the operations management hierarchy of rolling up costs, production, and revenue. The management hierarchy should be consistent with the economics and budgeting process.
Consistency and alignment across the entire organization are key, and the cost, production, and revenue tracking decisions should be made early in the implementation process. Mock up reports during the decision process to give all parties involved an idea of the information they will get at certain levels. Without consensus, companies run the risk of dissatisfied departments managing their own reports outside of the system.
These are merely a few of the issues causing significant delays in rolling out new ERP systems in an E&P company. A company may state, “We’ll clean up the data later,” and find themselves unable to make time to do so. Trenegy encourages companies to include the data alignment and cleanup efforts in the ERP implementation plan from the start.
Trenegy specializes in helping E&P companies prepare for and implement ERP solutions. Reach out to us at email@example.com to learn more about preparing for a system rollout.