Why Maximizing Production Means More Today Than Ever

The trend of oil price forecasts has changed from years past and if you are not changing your business focus accordingly, you may be missing out on significant value. Historically, multi-year oil price forecasts when oil price was $100/bbl or lower have shown an increase per annum of approximately 7-15%. With the impacts of the 2020 lockdowns as well as energy mix forecasts for the impending energy transition, today we are seeing decreases in future oil price of 5-6%. If that isn’t tingling your spidey-sense, then you are likely missing out…both on in year revenue as well as long-term NPV.

 

So what does this mean? Traditionally, we would discount the production benefit from spend associated with getting that out sooner…e.g. pulling oil forward would be priced at $4-10 /bbl in any economic calculations. In other words, spending money to pull oil forward from the tail was like mortgaging it; ultimately, reducing the net present value of the asset. However, trends are suggesting you may want to pull it forward…that oil in the ground will be worth much less in the future.

 

Cost of development and production is traditionally $25-30/bbl…and that return is 2-3x at best over several years. Putting a small fraction of that into increasing your production today will lead to returns of greater than 10x…and you get that today. Are you capturing every barrel of oil from your asset? I’ve yet to walk onto an asset that is 100% efficient on a daily or annual basis. Here are the key things I look for:

 

• Constraint ‘Dogma’ – It’s amazing how a simple number in the project phase or in early production life can become a hard-lined constraint through the life of the facility. Many times that number was provided as a constraint at a given time, but is no longer applicable…meaning there is room for more. On top of that, constraints are typically not a single number, they are a curve based on other conditions. Digging through and pulling out these ‘constraints’ is where the gems are found.

 

• Integration of Activity and Production – Lack of integration results in unoptimized business results…e.g. non-value adding and poorly prioritized activity and, in many cases, over-engineered solutions. Unplanned Downtime – 70-80% of production incidents have a human element in their cause…and that needs to be at the top of the mind as you plan for people to conduct activity at your site. Planned Downtime – good enough is rarely an answer you get from engineering and many times that shows in their engineered solutions, which tend to have a larger impact on your production downtime.

 

Endeavor Management has over 7000 years of experience in upstream oil and gas across every spectrum of the business (that’s more than most operating companies). We offer experienced, cold-eye support for your operation. The value of experience is pragmatism…and that is what you get from Endeavor…a pragmatic assessment of prioritized production opportunities that you can implement almost immediately (e.g. which levers to pull and which dials to turn). We’ve been there and we know where the opportunities lie. Unique to Endeavor is that we don’t leave you with actions, we provide support in their implementation. What are you waiting for?…let’s maximize your revenue today.