One of our competitors (that I hold in very high regard), wrote a great article on the need for oil and gas lease brokers to change the “status quo” of how they work. The gist of the article pointed out that for lease brokers to stay in business, they would have to adopt new technology to bring value and cost savings to their clientele. The “status quo,” he said, just won’t do. I couldn’t agree more, but then again I am biased, because that technology is what we sell.
Expanding on that theme, I suggest that it’s time for the oil and gas companies themselves to lead the way with adoption of new technology. It seems only obvious to me that if they want to cut their E&P cost, the first place to start is with lease acquisition. After all, these are the core assets of any E&P and the very basis of all company value. What they own is what they are worth.
We all know the present status quo: The E&P company landman hires a lease broker to buy leases and the lease broker hires subcontractors (field landmen) to do the leg work. The field landman creates reports and paper files for the lease broker. The lease broker’s staff recreates the same reports, along with more copies, and then sends them to the E&P client. At the same time, that E&P client is receiving different reports in different formats from multiple brokers. The lease analysis staff recreates the “lease folder” with the new reports, along with more copies. Then it goes to the accounting department, who makes more copies, creates more files, and does more data entry. Finally, when this absurd dance is done, it all goes into filing cabinets, or if they are really cutting edge, some PDF “filing cabinets”.
After all this mailing and emailing of files, copying of paper, and creation of new reports from the same data, what has been accomplished? The E&P still doesn’t know what they own. Many E&P’s think that their best bet is to put all of that into an accounting database… built 30 years ago… before the internet and online software.
The data is not put into a database by the field broker who is the source of the information. This is what is needed to really tell them what they own. Instead, the process looks more like our industry’s version of the children’s game “Telephone:” What the field landman told the broker, who told the lease analyst, who told the database operator, who told the accounting department, who put that info into a database that might be older than he/she. What can go wrong with that, besides the fact that it’s always several months behind and will never give them an accurate acreage number?
With the sales of large acreage positions from company to company, a large part of our business is now taking lease files and data from the older database models, and converting it all to modern data formats. What we have found is that the acreage counts are always, and I mean always, wrong on an average of at least 20%. Within modern tract-based lease management software, the brokers doing the field work are instructed to use the same database platform to perform all tasks including title, negotiations, lease preparation, mapping, title curative, and more. The new lease files are going digital, paperless, accurate and linked to real time GIS mapping, and cost are dropping quickly and substantially.
If you are still having your staff or brokers build new “lease files” from old “lease files”, you really should look at what is possible with new technology.
New companies, new technology, new “status quo”.
Tim Supple – President – iLandMan