Staying in the Game: E&P Companies

You have watched the ping pong game of oil prices over the last six months and now you are trying to figure out if you are still in the game, or if you even want to be in the game. One thing to consider is that hydrocarbons as a fuel are here to stay. You won’t see jets or 18-wheel trucks being propelled by solar panels or wind turbines. Gasoline, as well as other various forms of fuel, are made from oil. So if you or your exploration company have felt a little down lately, don’t fret. Things will definitely change with time.

Recently, I have been seeing an interesting phenomenon. With a small window of price stability, exploration and exploitation deals are taking shape. All kinds of work is beginning to appear on the horizon in the form of mergers and acquisitions, due diligence, curative matters and title work, to name a few. Land expertise is needed in all of these areas, so if you are a startup or larger independent, things should begin to brighten by year’s end. I know many have incurred budget cuts and layoffs, but these will hopefully diminish as we go into the fourth quarter.Oil Prices Graph - Mar. 2015

Some really great gas wells are being completed from the Gulf Coast to the North East and, based on this, I predict that natural gas will be making a comeback. While it may be a while, we should see some action soon. Watching the emergence of LNG and its growth into a fully-fledged powerhouse is going to be very interesting. Companies with high gas-to-oil ratios are hoping for a strong comeback and a paradigm shift, making natural gas a must-have commodity.

From our vantage point we are seeing companies begin to take advantage of this lull in activity and a low pricing environment which is creating huge opportunities. I have also noticed that the companies that are truly organized are joining forces and beginning to make headway. Some, who are employing the use of cutting edge technologies, have begun to overtake and will eventually outpace the ones still using the big chief tablet and slide rule. As the old saying goes “one man’s loss is another man’s gain”.

However, most exploration land departments continue relying on antiquated accounting programs, excel spreadsheets, and hand-drawn colored or stagnant digitized maps. They keep trying to answer the most basic, as well as the most complex questions, that their systems and processes are simply not built for. These systems were built to report acreage from only a surface point of view. In today’s complex leases, a three dimensional view using depths and formations is necessary to analyze and make the right decisions based on ownership at these intervals.

New companies coming into the exploration and exploitation mix will be doing so with fewer personnel resources and more outside contractors. They will need software and mapping services that can extend the capabilities of their companies. These companies as well as the established E&P’s need to examine all the options available to help understand and use the data from the many acquisitions that are starting to take place.

With the great strides made in land software technology, companies need to investigate what is available, especially in the areas of leasing, curative, drilling and production. Just as the shift to using three dimensional data in seismic changed everything for the geophysical departments, viewing land data in three dimensions is now changing everything for land departments. These innovations are helping companies to understand the massive amounts of data being exchanged in the acquisition and divestiture market.

iLandMan allows you to depth segregate your tracts and leases so as to ascertain what your ownership, working interest, and even royalty or overriding royalty interest is on a formation by formation basis. This increases accuracy when determining which acreage is expiring based on pugh clauses or money owed on acreage from shut-in wells. The land department now has the ability to not only answer today’s common questions, but also the complex questions of tomorrow.

Richard Hines, CPL - Vice President of iLandMan

Take advantage of this time to investigate, act and ensure your company has the technology that will help you get ahead. By keeping watch on industry changes and newly available tools, your company can stay in the game, get ahead of the pack, and even become an industry leader.

Richard Hines, CPL – Vice President – iLandMan