Onshore Drilling and Lease Compliance
Does your company participate in onshore drilling? If so, you would probably agree that lease compliance is an ongoing issue. Onshore wells are smaller, so you have more of them, with the accompanying lease provisions that your company may or may not have a system for tracking.
If you work for a small to mid-size company, like many of our clients, you probably employ one person to manage lease compliance. He or she references data from rig reports, the land department, regulatory, etc. every week.
This person is a great at what they do, but they also represent a single point of failure. An outdated report, a miscalculated Excel equation, or the departure of this person can represent a significant risk for your company.
Eliminating the Single Point of Failure
As we’ve highlighted in the past, like for Chesapeake Energy, lease jeopardy can be a very expensive problem for an E&P company. Even leaving out large settlements, the cost in resources for employees to gather the data and prepare for a lawsuit is a huge loss.
One way to free up employee’s time for value-add activities is to develop a custom software application that manages lease provisions. For example, since continuous drilling is often a compliance concern, the application could be a continuous drilling provision tracking system.
The landman inputs the provisions and terms of each lease. The tracking system is then pointed at the drilling data system. As a result, the lease provisions and actual drilling dates are tied together in the database.
When a violation to those provisions occurs, the system can automatically flag this. By contrast, using the old system of a single person and an Excel spreadsheet, this violation might have remained buried in a spreadsheet until the landowner decided to sue.
Streamlined Lease Compliance Reporting
In addition to money saved due to averted lawsuits, the time saved by your landman is not insignificant. Manual reporting takes up many hours each week, and this is time spent that does not lead to better decisions or increased leaseholds.
A custom application can also match your business’ process in a way that no off-the-shelf system ever could. As your company looks to grow or be acquired, a streamlined lease compliance process is a very attractive option.