Understanding your operations performance relative to basin competitors gives a much-needed boost in alignment needed to drive operational improvements.
A great example of this is an operator in the Green River Basin that has been attempting data analytics and technological advancements for the past few years. Field management and executives deemed their operations to be best in class. Upon benchmarking the performance of their operations using $/BOE (LOE + G&A) and deferment (production vs. target), they were shocked to find their operations ranked among the poorest performing operators over the last five years. There were 18 different operators in the basin that had similar operational characteristics which allowed for relevant and direct comparison. Indeed this came as a surprise as the perception at the highest levels of the organization was of operational excellence. The gap between reality vs. perception is primarily about operators who are too busy surviving the daily grind to take the time to evaluate their current state of operations performance.
Once the operator realized that the benchmark against these more efficient operators was accurate and comparable, they then accepted the results and began asking the right questions. Where is the opportunity for improvement? What are we able to measure in order to track improvements? What is and is not working well daily? Through answering these questions, the executives and field management were able to align themselves on the current state and have constructive conversations about operational improvements (Figure 1). Without alignment on the current state, the ability to see the opportunity and pull the organization in a positive direction would have been impossible.
Unfortunately, it is common to see operators that have a huge gap between perception and reality. They typically have not taken the necessary steps to discover and align the team on the current state. It is critical first to identify the current state, align the team, and then move as a unit to the desired state that leads to efficient and effective operations. Without alignment on the current, the end result is an end state far from the desired state (Figure 2). As we have all had to make big and tough strategic decisions during the oil downturn of 2020, sometimes those strategic decisions do not land the organization in the desired, target state.
With the focus on becoming a profitable operator at new commodity market rates, companies are looking to wring every last efficiency out of their organization. To do this, operators are wagering that 2021 initiatives will deliver. Taking the first step to uncover an objective current state and relevant benchmark, will solidly underpin any meaningful investment in well operational excellence. Ambyint’s Well Optimization Assessment will support and accelerate you on that path.