You cannot cut your way to prosperity
Sustainable Cost Reductions [noun]: scalable and repeatable reductions in operating costs through increased operational efficiency.
Put differently; you cannot cut your way to prosperity. Instead, operators must enhance their current data capture and reporting practices to drive efficiency in every phase of a well. In this blog, we highlight the top 3 strategies our customers use to create sustainable drilling and completion cost reductions.
- Focus data capture on what’s important. Less quantity, more quality.
- Track non-productive time and document lessons learned.
- Reduce variance between field cost estimates and actual well costs.
Common among all three, leading operators are collaborating more often with technology vendors who not only make the software, but also provide personal guidance and support for their customers. These software-as-a-service vendors, like Quorum, can pull from a broad customer base, with a variety of business models, and a wide dispersion of operating areas to provide data management trends and best-practices to fit your company needs. At Quorum, our customer success team uses our knowledge base to help customers achieve their individual performance goals.
#1: Focus data capture on what’s important. Less quantity, more quality.
In a time where terms like “Big Data” are used often but only understood superficially, it might surprise you that a software company is telling you to capture less data. Most companies will parrot “more data equals more insights.” However, the truth is that you probably do not have the time, tools, or resources to process and analyze such large amounts of information. We suggest spending your time capturing and measuring a select set of key performance indicators (KPIs) that give you the best indication of overall performance.
We have seen our customers succeed when data capture focuses on the following areas…
- Activity codes by phase of the drilling or completion job
- Non-productive time causes, resolutions, and responsible parties
- Field cost estimates by day and by vendor compared to the job AFE
We know there is a minimum amount of activity data you need for sufficient daily operations reports, but we recommend focusing detailed data capture on the three areas mentioned above. This will allow field personnel to spend more time on operational matters and less time keying numbers into a laptop.
Companies who make performance a priority also use quality control (QC) reports that are distributed prior to regularly scheduled daily reports. These QC reports highlight key data points that fall outside of an acceptable range, allowing the team to spot and correct mistakes quickly. Now, morning meetings can focus on operational decisions instead of identifying missing or suspect data.
#2: Track non-productive time and document lessons learned
The success of any drilling or completion project does not rely solely on your team’s performance. There are dozens of vendors that must all coordinate and execute on time and as expected. And now that your data capture is focused and accurate, it can be used to hold everyone accountable. We see our top performing customers capturing detailed non-productive time and using that data to negotiate contracts, gain credits, and hold vendors to their demurrage time obligations.
Operators do this by adding levels of conditional picklists within the time tracking portion of data entry. The picklists give field personnel options to choose activity codes, NPT reasons, responsible parties, and add resolution notes. See below for reference.
At any point in the project, users can run reports that display details of any NPT events such as when they happened, who was responsible, and what was done to resolve the issue. The operator improves on each project because root causes are identified quickly and lessons learned can be passed on to the next crew. Going a step further, operators run these reports across multiple wells to spot trends and stop issues before they happen again. All of this leads to operating more efficiently and ensuring you are getting what you pay for when it comes to vendor performance. Watch the short video below for a more detailed explanation and examples of how our customers are reducing their non-productive time.
#3: Reduce variance between field cost estimates and actual well costs
Admittedly, this blog post is about cost reductions, and we have yet to mention costs. However, the top strategy that our customers use to gain control of project costs and create sustainable cost reductions is through increased visibility to AFE vs. FCE vs. actual costs.
The ability to identify and understand cost discrepancies early in projects helps companies make data-driven adjustments, perform more accurate accruals, and build tighter AFE’s. By examining cost performance across multiple wells, companies can understand how the variance between project AFEs and FCEs can lead to over or under-shot budgets once the final invoices come in.
Additionally, getting detailed about tracking cost data by specific vendor invoice can alert you to discrepancies between field tickets and invoices. You can quickly see how much you have spent by vendor and cut-down on billing mistakes.
Watch the short video below to see this process in action and we’ll show you a dashboard that combines WellEz field costs with AFEs and actual costs to give you instant visibility into your cost performance.
Summary: See the Results
All three of these strategies will help cut costs, and not just temporarily, but long-term and repeatable reductions. A real example of this is a customer that decided to work closely with our customer success team starting in early 2018 to enact the strategies mentioned above. They focused on cleaning up data entry, held vendors accountable with detailed NPT tracking, and controlled their field cost estimates. The results speak for themselves. The data below is comparing eleven wells drilled in 2017 to eleven similar wells drilled in 2018. They show marked improvements in every performance metric.
- Spud to TD time was reduced by an average of five days, saving big dollars on daily rig and personnel costs.
- Average NPT per well was cut by over 40%, reducing money spent waiting on vendors.
- AFE vs FCE variance was reduced by 60%, allowing the accounting team to perform more accurate accruals, and create better budgets.
If you want results like these, partner with a SaaS provider that has the functionality and the expertise to help you reach your performance goals. WellEz on Demand provides a cloud-based drilling and completion reporting system that is simple to implement, easy to use, and priced the way operators do business. Contact us to learn more!