Key metrics is important for the oil and gas exploration companies worldwide. In order to reach the proper strategic decisions to what exploration efforts should be performed and where they should be initiated and continued, or even discontinued has become a very dynamic decision.
More complicated exploration efforts together with more data from various sources within the company demand a more visual effort to enable use of these data in an analytical purpose.
Decisions need to be taken at all levels of the company which will have major effect upon the performance of the company, therefore the involvement from more people is needed now than before.
In this article the author will cover some aspect that are important to cover whenever the oil and gas exploration company wants to create key metrics for its operations.
Business intelligence has had and still has many faces. Today Business intelligence is known as business performance management system (BPMS) and has evolved into Key Performance Indicators (KPI). These systems were usually restricted to the the chief financial officer (CFO), Chief Executive Officer (CEO) and Boards of an oil and gas exploration company. The intelligence data and their systems were opened gradually to the E&P management, accountants and financial analysts. The purpose of collecting business intelligence data and to incorporate performance management systems is to be more efficient in handling resources, reduce cost and augment return on investment. Expansion and larger complexities in the oil companies' increase the demands for integrate analytical data from operations, data handling and financial areas.
More professionals within the company are in demand of greater access to these data. Business intelligence has now become a driving force in most majors' international and national oil and gas exploration companies. Today these systems are called the oil and gas exploration metrics.
Using Key Performance Indicators to perform metrics on its oil and gas exploration activities and portfolio is not a static tool, but evolves as companies' activities and processes evolve.
The principles behind the metric for oil and gas exploration are basically the same as those used in traditional business intelligence tools. The major difference is found on the presentation side. As the company grows, its volume of data also expands, so data like power computation and surveillance instrumentation need to be processed efficiently and intuitively using cost effective visualization techniques. These visuals will then become available not only to accountants, CFOs, CEOs and financial analysts but also to operators, geoscientists and engineers. Everyone play an important role in an oil exploration venture and demands that everyone should be given access to these overwhelming yet critical data. The clue is not only to grant access to these data, but to be able to perform key messages through a thorough analytical process which the oil and gas exploration metrics can provide.
The metrics for oil exploration today covers more than just the financial side of the companies' oil and gas exploration activities. There are essentially three major contributing factors that will lead a company to produce more oil and spend fewer resources be it financial or non-financial. These factors are constant troubleshooting on upstream assets, monitoring and incessant production planning. Oil exploration demands real time visualization and monitoring of operation that will help key persons in fast decision-making and analysis. Oil exploration becomes more remote and more challenging. Data from different geographic locations and multiple professional disciplines need to be processed fast and accurate.
There are generally three areas where metrics are important in an oil and gas exploration project:
- Evaluation cost versus success rate of exploration wells
- costs and expenses
- revenue and realization
Key indicators for the evaluation cost versus success rate would be:
- contribution to company reserve database according to company business plan
- maintaining a unrisked and risked portfolio volume, risk profile versus volumes and diversity
- success rate versus evaluation cost per exploration boe
- consistency in main risk assessment versus actual reasons for failure
- consistency in post drill full field potentials versus most likely assessed prospect volumes
Key indicators for the costs and expenses are:
- ad valorem taxes
- lease operating costs
- work over costs per boe
- lifting costs per boe
- lifting costs
This aspect has the least number of metrics however tracing the cost of the operation is just as important as tracing how profitable the exploration is.
Key indicators and metrics for the revenue and realization aspect that indicate good and bad performance are:
- profit – boe
- oil per barrel
- gas per $ Mcf
- net processing income
- lease income
- oil sales
- gas sales
Metrics for production are:
- well downtime
- water cut
- well tests
- well head pressure
- gas oil ratio
- liquids yield
- water produced
- overall daily and monthly oil production
The impact and importance of oil exploration metrics have dramatically improved over the last few years. No longer will engineers and accountants wait for weeks to analyze and come up with good decisions. With these metrics, analysis of engineering and financial data is now made real time.
Success of any metric systems is dependant upon how the data is made available to the various users, and also how these data are entered into the databases.
In order to make any financial impact, there needs to be a focus on the technical metrics, and what parameters should be used in the oil and gas exploration company.
Therefore there should be made an effort to map out the metric parameters as well as mapping out inter-departmental as well as intra-departmental workflows within an exploration company.
Therefore the structure and transparency of the database containing all the data to be performed visual analytics on needs to be in order before any efforts are tried to make key metrics for the company. Most of the times, this aspect is neglected at a major cost to the company and also the lack of ability to measure its key performance indicators set out.
The author Stig-Arne Kristoffersen, has more than 20 years experience within oil and gas exploration and production. He has worked for various major national and international oil and gas companies around the world. For more details about author and his work, you can go to www.ec-ba.com. You are also welcome to contact him at email@example.com.
The author is more than happy to assist companies in efforts to create or refine its key metrics for their exploration efforts.