The American Oil and Gas Reporter – January 2011
New Software Technology Converges Land, Financial Data in Centralized Repository: By John T. Sandager and Richard A. Hines
ALBUQUERQUE, N.M.–Shale plays are revolutionizing the domestic industry and giving operators an entirely new horizon of opportunities in large, repeatable plays. Oil and gas companies are testing and developing an abundance of gas, wet gas and oil shale formations, but controlling costs in these plays can be an Achilles’ heel if land data are inaccurate or incomplete.
It is becoming a common, but publicly unspoken, acknowledgement that 10-30 percent of the data on all shale play acreage under leasehold are rife with errors, including miscalculations in gross acreage, net acreage, and broker and land acquisition costs. Add to this the fact that acreage costs have exploded by a factor of 20 since 2006, and any bottom line can really take a hit if land data are not precise.
By leveraging technology in bold new ways, leasing and operating companies are vastly cutting margins of error and significantly increasing the ability to control their base costs. New technology is bringing a convergence of reliable field, map and financial data to give land personnel and company management unprecedented confidence. Such enhanced accuracy also helps avoid overspending at a time when federal and state onshore lease sales are experiencing record bidding and spending levels for acreage ranging from the Niobrara play in Wyoming, to the Wolfberry and Bone Spring plays in West Texas, to the Collinwood Shale in Michigan. Just ask anyone attending NAPE how competitive leasing in shale plays has become!
The convergence of land information for multiple departments is driving new land management software technology that offers a real-time, tract-based solution for exploration, drilling and production stakeholders. It was created by land managers with decades of experience to address the inefficiency and disparity of data incurred when numerous partners are working in a field.
Westward Energy is an independent exploration and production company based in Albuquerque, N.M., with lease acquisition activity in six states. Westward deployed the new software for real-time land management and is finding the technology to be indispensable in bringing order and reliability to the enterprise. When the company took on its first land project in November 2009, management quickly became frustrated by the lack of accuracy involved with inputting and updating information among all land personnel in the field. Having formerly managed a $500 million trust with 600 accounts, management was accustomed to precise and accurate accounting with a five-tier accounting system.
Westward Energy’s very first land acquisition project got complicated quickly. It involved multiple partners, which meant different people were working in the field collecting information, obtaining leases, signing options and signing leases. The company typically would have to wait at least a week to get reporting. Often, so many touch points meant that the left hand did not know what the right hand was doing. What leases did the company own? What were the terms? When were the leases reported, or had they even been recorded? Management simply did not know the answers to these rather fundamental, yet critical questions.
There was no centralization of information. Westward Energy tried a simple Excel™ spreadsheet that involved entering data and updating it, but there were three landmen in the field from two companies, and everyone basically was keeping score with a different score sheet.
After that potentially disastrous scenario, it was imperative to find an understandable and reliable solution. Management began searching for alternatives and came upon what first appeared to be a supersized spreadsheet, but turned out to be the answer that Westward Energy’s land operations needed. The solution not only served as a centralized repository for data on an area of mutual interest for Westward, but it also proved to be an intuitive tool.
Westward’s management team began to see immediate benefits. The technology’s proficiency in reporting capabilities was quickly evident; the reports the company had been making were more numerous and extensive than first anticipated. The company has 14 landmen located all over the country on different projects, and all are distantly remote, working acreage in Montana, North Dakota, Nebraska, Texas and other states.
What most impressed management was the system’s ability to centralize the data from different projects and land personnel. Westward’s landmen can simply scan in a lease and “attach” it or include it in the project report or tract report. This makes it easy for the head office to call up the lease. If anyone has any questions, there are standardized leases to refer to and all the corresponding documents are easily accessible.
Information for each contract (lease) can be recorded along with acreage, depth and recording data. Term, rentals, contract and surface restrictions as well as extension and prescription options also can be captured.
Perhaps the biggest effect that the new technology has had on Westward is the uniformity it creates in how the entire company organizes and accesses information. Within four months, all Westward projects were centralized into a uniform view for reporting and maps. Every landman has a different background and style of doing things, such as writing lease variables. But now they can each enter such common data as a tract number when queried by the new system. And they can do this in real time.
No longer is it necessary to translate information. With the new technology, uniformity exists that gives the data credibility. Data are organized and standardized so that they can be accessible, and therefore, manageable. The screen shot in Figure 2 shows a list of tracts along with basic information that provides access to all details associated with each lease Tracts within a project can be viewed easily and quickly from any part of the program.
In the past, a spreadsheet had to be created for each of the company’s 14 landmen. Data were entered and sent to management daily or weekly on spreadsheets located on different parts of the computer under different partnerships. Now, Westward Energy is able to manage roughly double what it handled before. All that efficiency–cost savings, time savings, increased profitability, etc.–has allowed the company to get in the right place at the right time, and to confidently manage its land program.
Since deploying the technology, Westward has grown its land holdings fourfold and the company is managing roughly double the activity of what it would be doing without the tool. Westward now has 200,000 acres under lease in the span of less than one year and has six projects under way, all which would not have been possible with its old system.
Management’s job is to locate and acquire leases in hopes of selling them to buyers that are known to be interested. If leases are acquired with the utmost accuracy and reliability, it means the company’s experienced landmen may be able to secure acreage that others have not been able to buy. When talking about hundreds of thousands of acres being leased or sold at any given time and millions of dollars at stake, there is no room for guesswork.
As far as the return on investment, the cost of the system is a nonissue because of its convergent features. The system paid for itself within the first four months that Westward used it. The company has been able to double its capacity since deploying the technology, and that is 100 percent growth that management can feel comfortable about. It is not about having a lot of data in a depository, but rather a single, real-time, dynamic repository with integrated GIS capabilities that update maps with each new entry (Figure 3).
The technology is purpose-built for landmen, both in the field and head office, to use in identifying, acquiring, mapping and reporting their company’s positions, as well as that of their competitors. Integrated within the technology are payment approval, remittance functionality and a complete audit trail. The information it provides is always fresh and relevant because the development is being pushed up from the field as well as down from the head office. Using these mapping and reporting tools, land personnel and executives can quickly gain the knowledge necessary to control and manage most situations.
The convergence of data offered by the system also has streamlined Westward’s workflow. The company now can manage multiple projects without personnel overlap, duplication or gaps. Even if there are multiple landmen on the same project, there is no overlap. By putting everything in one database for the project, all the information can be converted into one central point with cycle time to deliver a lease package reduced by three days or more. And in land acquisition, where the earliest mover often gets the lease, timing truly is everything. A centralized project map can be created as often as management needs, with the most current leases included in real time.
Faster, Smarter Decisions
The bottom line is that the system brings together all the variables that are needed to make faster and smarter lease decisions. Westward Energy can look at the whole of its projects or even the smallest lease detail and make evaluations regarding how much progress is being made and what the cost is. It is simply better time management. Landmen normally get paid a daily rate, so it can get expensive in terms of personnel costs if a landman is waiting in a hotel somewhere, not being productive because management is waiting on other landmen to fill in other sections of data they are working on. Using next-generation lease management technology, it is possible to know a landman has finished his section and that he can be sent to work on another area, or perhaps even another region.
Westward now is able to digest large amounts of tract and contract data visually, using the system’s database and integrated mapping system. The company also can add layers of its own historical data or purchase and integrate third-party mapping data that are important to a given project. Management can focus on key areas and capitalize on these opportunities. With consistent and time-efficient data coming in from the field, Westward personnel know where they are at any moment. With numerous landmen in disparate locations, there is a cohesion that previously was missing.
All of Westward Energy’s 14 landmen now report in the same fashion, with no conversion or reformatting necessary. Their dashboards are set up to always reveal how much acreage they have, the cost of that acreage, and any other associated project costs or documents. The uniform quality of the data and maps obtained from the field legitimizes, for the first time, the land’s contribution in a convergent manner that improves the return on investment of the land acquisition process.
In the final analysis, the technology allows Westward Energy to manage opportunity, rather than merely react to it. The land phase of the energy industry workflow finally is realizing landmen can gain an edge on the competition by leveraging technology. It is an area where innovators can rise to the top.
John T. Sandager
John T. Sandager is the managing partner of Westward Energy LLC in Albuquerque, N.M. He is responsible for all legal, financial and administrative oversight and operations at the company. Previously, Sandager was the founder and chief executive officer of Santa Fe Trust, which he grew to $500 million in trust assets in six years, making it the largest independent trust company in New Mexico. He then served as executive pastor at Hoffmantown Church. A licensed attorney, Sandager has practiced law for 30 years in the areas of real estate, estate planning and small business taxation and corporations. He holds an undergraduate degree from the University of North Dakota and a juris doctorate from the University of New Mexico School of Law.
Richard A. Hines
Richard A. Hines is a partner of iLandMan, the provider of the lease acquisition and management software technology deployed in Westward Energy’s operations. Based in Lafayette, La., he has 26 years of experience as a practicing landman. Hines is partner and vice president of American Data Corporation, where he oversees all operations. He also owns interests in Heritage Resources LLC and Shelf Minerals LLC. Hines serves on the American Association of Professional Landmen’s Certification and Website/IT committees, and is a past third vice president on the AAPL board. He holds a degree in petroleum land management from the University of Louisiana at Lafayette.
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