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April 13, 2015
Have you considered making production management a top priority to improve your E&P company’s margin?
By: Dean Forrester

Amidst volatile prices, and most recent “how-low-can-they-go” oil prices, energy companies face constant pressure from shareholders to cut back on capital expenditures and reduce costs, and increase margin and cash flow. Improving the performance and profitability of operational assets through production management can help upstream companies improve their financial performance and thus their competitive position in the market.

A recent IDC Energy Insights global survey of 40 upstream oil and gas companies confirms that the core production management activities of production forecasting, production allocation and deferment management are a top priority for almost half of the respondents looking to enhance margins. For some operators there is a multi-billion dollar opportunity to operate their existing facilities as effectively as possible without significant new capital expenditure.

Providing visibility into key operations data and KPIs provides leading indicators of issues and opportunities in the field and lets manager take appropriate intervention action such as managing maintenance cost, prioritizing work-over activity, more efficiently scheduling development planning, etc.

The significant challenge, however, is access to accurate, rationalized data in a timely manner. For instance, 65% of companies surveyed agree there is a surplus of data, but it needs to be mined more efficiently to enable short- and long-term business decisions. According to the IDC Energy Insights survey report, “It takes as much as a month to get accurate cost data for 24.3% of onshore wells and 10% of offshore wells.” In today’s environment this is a competitive disadvantage, and over 40% of the companies surveyed indicate that “if a business case is made, production management–related IT initiatives will be assigned the highest priority for immediate initiation.”

Such IT-driven production management initiatives should focus on an establishing integrated production excellence processes and the associated supporting tools that can be consistently deployed across the organization. Often, data acquisition and analysis and operational and business applications are managed in silos, preventing companies from achieving the full benefit of individual investments. When brought together in an integrated manner across the organization— supported by these consistent business and operational processes— these initiatives can then yield the benefits that enable upstream oil and gas companies improve their competitive position.

There is no doubt that to be able to successfully navigate through the up and down cycles, upstream oil and gas companies must get production management right. The survey report, IDC Energy Insights – The Production Mandate, outlines a series of actions for E&P oil companies to start to take now to strengthen their production management capabilities.

* Source: IDC Energy Insights, "The Production Mandate," by Jill Feblowitz, February 2015. The "The Production Mandate" report is copyrighted 2015 by IDC Energy Insights and is reused with permission.

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