Managing the administration of a well’s lifecycle from inception to abandonment is a complex process—not unlike managing a Chinese food buffet. Not all patrons select the same items in the same order, and eager diners jump around the buffet line for seconds and thirds. Keeping the buffet stocked with fresh food is a challenge. Likewise, the combination of landowners, multiple parties in a joint venture, take-in-kind owners, changes in property ownership, and other complexities make administering a well’s lifecycle difficult. Add third-party production, revenue and billing data, consent and non-consent partners, and billing out contracted field services, and the situation becomes daunting. It’s a bit like managing an all-you-can-eat buffet.
Many of the well lifecycle administration challenges are external to the organization and cannot be changed. However, the internal challenges are significant and can be addressed to achieve efficiency. Each activity in well lifecycle administration is owned by different departments in the organization who will assign multiple attributes to the wells in different systems. The attributes provide information about the well such as the well ID, well name, location, production status, spud date, completion date, and acquisition date. The handoff between departments is often unclear and the definitions for the same well attributes become inconsistent across systems. The inconsistencies negatively impact cost tracking, production tracking, and revenue allocations.
Leading exploration and production companies respond to the complexities within well lifecycle administration processes by addressing three key areas:
1. Defining accountability
Unclear accountability is the root of much frustration in the well lifecycle administration process. Leadership should collectively agree on each function’s accountabilities and responsibilities within the process. A RACI (Responsible, Accountable, Consulted, and Informed) is a very effective tool to communicate roles and responsibilities and to define activity ownership. One of the first areas our clients address is aligning the planning function in the organization. Aligning development, lease operating expenses (LOE), production, and general and administrative (G&A) planning allows an organization to streamline data flow and reduce the planning cycle time.
2. Developing clear processes
Organizational accountabilities should be supported with clearly defined business processes. Standard processes improve a company’s ability to address issues arising from external parties and ensure consistent well lifecycle administration. Process flows for data entry and approval should be documented, clarified, and streamlined for every step of well lifecycle administration. Moreover, compliance monitoring is critical to ensure employees follow the policies and procedures. A high-impact area where our clients begin is clearly defining the process of managing and communicating the creation of and changes to the revenue decks between land and revenue accounting.
3. Integrating tools
Exploration and production companies implement a variety of specialized tools to support the business, typically resulting in a best-of-breed environment. Revenue accounting and joint interest billing may be on a common accounting platform, yet marketing, production, land, and drilling functions may be supported by independent, function-specific tools. Our clients have built technical data management and workflow capabilities to bridge the systems and automate the synchronization of the business processes through a centralized hub. Key information required to support efficient and effective well lifecycle administration is gathered and distributed in a timely manner through a set of integration tools. The integration tools require the alignment of department accountabilities and processes before tool implementation.
The optimal solution for streamlining the well lifecycle depends on the size, organization structure, and growth strategy of the exploration and production company. While there’s no one-size-fits-all solution to the well lifecycle administration challenge, Trenegy has successfully worked with various exploration and production companies to identify and implement fit-for-purpose well lifecycle process improvements.