Today, we see the industry heating heating up, demand flagging, and oil prices beginning to rise. All eyes are on the CFO asking very tough questions. Which wells are performing, and which aren’t? What can be done to optimize wells? Does it make financial sense to shut down a well or continue to operate it? Where can we get the best return for our capital? Many leaders are finding themselves flat-footed in their ability to answer them. Today’s CFO is realizing that a new set of tools is required.
Many of the critical functions of the business intersect precisely in the CFO’s office; capital deployment decisions, operational tradeoffs, regulatory compliance. With the pressure mounting, simple, high-level production and throughput reports are failing many CFOs in their ability to make intelligent decisions.
Today’s CFO has become demanding of his ability to see deeply into the operations of the business. CFO demands to reach the next level fall into three categories:
1. Powerful metrics. While Oil and Gas CFOs are striving to manage their businesses through these complex times, they are being starved in their ability to measure the business because of the lack of access to metrics. ROCE is a necessary metric, but it is not sufficient for running the complex business. “It wasn’t until we were able to start tracking and monitoring things like lifting cost per barrel that we were able to compare how wells were performing,” explained the Production Engineer for a mid-western upstream oil producer.
This more granular insight which combines throughput and investment enabled intelligent decisions on which wells to continue to operate, and which to shut in.
2. Performance benchmarking. Intelligence is revealed when performance comparisons can be made across the organization. The anomalies that surface – both the high-performers and the laggards – empower the CFO to compare various production methods and sponsor the best practices across the organization. One large independent oil producer tripled the utilization of Electronic Submersible Pumps (ESPs) because of their efficiency. However, downtime and repairs on the ESPs were proving costly. By comparing the performance of multiple ESP’s, this company was able to standardize how they engineered the wells and set up the pumps, significantly decreasing failures and costs.
3. Accountability. The CFO can hit his stride when he is able to hold teams and individuals accountable for their performance. To achieve this, he must be able to track and monitor performance over time at a detailed, daily, operational level. Transparency relies upon key metrics being easily accessible; daily well reviews, drilling and
completion metrics, rig non-productive time (NPT) and completion NPT. And perhaps even more core to the financial office, transparency across complex AFE business processes, overspends and budgets versus actuals.
The businesses that emerge from this period healthy and poised for the next wave of growth will be the ones that use this time to get smarter and more agile. In addition to bearing the scars of surviving the current struggles, the leaders of tomorrow are likely to also be marked by the following defining characteristics, some of which may come as a surprise: “Data runs the business.” This is a quote from the CEO of a leading oil producer as he launched the companies’ annual meeting. It caught many in the company by surprise, but not the CFO. They had spent the previous 6 months implementing a sophisticated dashboard approach to analyzing their business, and they were amazed at what they were learning.
Information (and decisions) belongs in the field. Oil and Gas companies have spent the last decade centralizing information and decision-making. This is a testimony to the gigantic struggle data management has posed. Armed with ready access to real-time, clean and detailed data on everything from financials to well operations, field personnel are again being asked to make the game day decisions.
Read this new report and discover the latest trends in achieving financial excellence. You’ll find out how CFOs are becoming standout players by using integrated dashboards to capture major savings by making faster, more accurate, and more strategic day-to-day decisions on capital and operational expenditures.