Oil and Gas Acquisitions: Mitigating Obstacles in Operations Data

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Data is foundational for improving upon the baseline of acquired assets. Many times the organization of data, and subsequent intelligence gained from that data, plays a critical role in the ability to successfully navigate the journey towards profitable returns in the acquired assets.

The focus of this writing is for the actual operational data moving forward, as opposed to the verification of net interests of the properties acquired. The goal of the strategies suggested here are simple: to make the acquiring company succeed at an optimum level in exploiting the operational opportunities within oil and gas acquisitions. We will cover several principles that will help make your efforts successful in acquiring properties. But before we lay out those principles, let’s first go over some of the obstacles that you’re bound to encounter in an acquisition:

  1. It is likely that the information you will encounter from the seller is both scattered and in a variety of data sources.
  2. The parameters in understanding of the data surrounding the properties you acquire will likely have different definitions than what your company currently uses.
  3. Often times the divesting party is not does not have the same organizational standards for information that is considered basic for your operations.
  4. Generally there are a variety of people in the divesting organization who are responsible for getting you various elements of information. These people often become more concerned with their ongoing operations and less concerned with retrieving the information you need in the divestiture.
  5. Frequently the acquiring party does not have a clear vision concerning what data they need from the acquisition, and/or lack strategies to go about obtaining that information.

While there are several other obstacles we could list, we will focus primarily on what is mentioned here and discuss strategies and principles that can mitigate these issues.

Principle 1: Create a Complete Strategy Prior to an Oil and Gas Acquisition

Prior to making an oil and gas acquisition, it is essential to have a complete strategy in place for on-boarding all operational data that can be obtained in the efforts. This is essentially your well life cycle framework. I.e., the people, processes, and technology to fuel the best decisions and extract the maximum return on investment along the life cycle of an oil and gas asset. By having the strategy completely in place, your company will have greater success in transitioning operations no matter the condition of the source data. Each element listed below needs to have complete records supplied by the divesting company:

  1. Asset header information
  2. Production daily data at both facility and well levels
  3. Production measurements such as tanks, meters, LACT units, salt water disposal injection meters, etc.
  4. Production monthly records and sales records for each asset
  5. Electronic logs, maps, and geological documents surrounding the assets
  6. Drilling and completion of work over well records (whether in paper form, electronic documents, or database electronic records)
  7. Every piece of equipment associated with the assets, where available
  8. Regulatory records (whether in electronic or paper format)
  9. A listing of all information related to key employees that will follow the acquisition (They are often a valuable resource in deciphering the location of information from the divesting source.)
  10. Copies of any AFE documents and associated justifications for completed or pending projects on the acquired assets (This is to be a starting point for discovering and prioritizing any near-term activities to improve upon the production rates of the assets being acquired.)

Principle 2: Have the Right People in Place

These guidelines will ensure that you have a staff that is well-situated to create and execute the on-boarding strategy for the information surrounding the purchased assets.

Experience Matters

In the transition team having leaders that can decipher and understand the data being received and how to quickly and efficiently upload that information into your completed well life cycle framework can be the difference between months or weeks of effort in successfully bringing the information viably across to your established strategies and technologies.

System Management Skills

The ability to receive data and easily upload and transform that data is extremely valuable in a transition.

Document Management Skills

This highly-organized person (or team) will decide which documents need to be brought in and to whom and when they need to be available. They will also be responsible for tagging said documents to assets, departments, roles, etc.

Operations Managers Who Value Accurate Data

These personnel should understand the importance of process, clarity, and consistency of historical and future information in managing properties. This allows the acquiring company to on-board the acquisition as smoothly as possible. This person is often a key influence in successfully getting the proper people involved and aligned with the processes that are being put in motion.

IT personnel

Planning and communication skills are essential for the IT staff. They are responsible for coordinating the acquisition of all electronic information from the divesting company, providing the infrastructure to efficiently manage the data until it is on-boarded to the proper locations. These personnel ensure that the IT infrastructure is in place as soon as needed to allow for field data capture, and allow the necessary access for remote offices that result in a smooth transition from the old operations to the new operations environment.

Executive Sponsorship

This element cannot be understated. Support and buy-in of the executive leadership of the company for executing on the established well lifecycle framework is key in every successful project. Successfully executing an on-boarding strategy begins at the top, and will result in accurate measurements and immediate insights into the acquisitions from the start, continuing over time.

Principle 3: Be Prepared to Integrate New Field Personnel

Often, the people that are associated with an acquisition bring both opportunities and obstacles to successfully implement strategies. On one hand, they know the properties and their day-to-day nuances better than the acquiring company, and therefore have knowledge that will help to make them successful assets. Conversely, they may be unaware of better processes and capabilities that the acquiring company has to further exploit those assets. Rigorous communication and dialogue should take place early in the process to establish the processes of the new company, while at the same time enabling transitional personnel to detail any opportunities they may believe lie within the properties. The goal is to integrate people with technology and processes that optimize the productive potential of your assets.