Digital Disruption in the Oil Patch

17May '17

Digital Disruption in the Oil Patch

At Prism Group, one of our core missions is to help clients transform change into competitive advantage. One of the key trends affecting the oil and gas business today is digital disruption – the proliferation of information technology in the oil patch. New technologies are helping operators do more with less, drill and complete wells more intelligently and ultimately increase recoveries and return on investment.

We sat down with the co-founders of Wellcast, a Tulsa-based energy tech company, to learn more about their contribution to digital disruption in the oil patch.

Front Row Seat to the Shale Boom

In 2011, Adam Krier and Katy Davis were members of an asset management team at one of the nation’s fastest-growing E&P companies. At the forefront of the oil and gas shale revolution, Petrohawk was rapidly building and developing its acreage positions in three major resource plays, including the Haynesville Shale, Eagle Ford trend and Permian Basin.

In 2010, Petrohawk produced at the rate of 675 Mmcfe/d, 34% higher than the previous year, and the company had no plans of slowing. Management was guiding the investment community to a production increase of 40% in 2011 to 950 Mmcfe/d, and Petrohawk was going to invest big to make it happen. Powering the company’s meteoric growth rate was a $2.85 billion capital budget to fund a 25-rig drilling program to drill 495 wells.

Growing production at that magnitude without making catastrophic or costly mistakes requires discipline, coordination and teamwork. Adam Krier, Wellcast co-founder, remarked: “As part of the asset management team, I couldn’t believe we were running one of the country’s most active drilling programs on Excel spreadsheets. At the time, there was no enterprise application for managing our inventory of wells, rig scheduling or even scheduling workover rigs. It was a manual and inefficient process. Looking back, we spent way too much time in meetings just making sure our disparate spreadsheets talked to each other, instead of solving problems.”

Drilling in multiple regulatory jurisdictions also presented a hurdle to the team. Drilling permit and regulatory requirements differed between the three basins, creating additional complexity and potential for error. “We spent a lot of time putting out fires, and making sure that each rig had an approved and permitted drilling location to go to,” said Katy Davis, Wellcast co-founder and Operations Manager. “If a rig finished a job on one site and didn’t have a location to mobilize to immediately, the resulting idle time could quickly rack-up a big bill.”

Krier, Davis and their colleagues were encountering challenges the industry had never encountered before. Their experiences as part of the asset management team at the peak of the shale revolution gave them a unique perspective that few generalist software developers have, giving the Wellcast team valuable insight into the real-world problems faced by E&P executives, operations personnel, engineers and landmen.

Products of the Shale Revolution

Petrohawk was successful in executing its business plan, so much so that the global resources giant BHP Billiton eventually acquired the company for $12 billion in 2012. After that experience, Krier, an experienced software developer, and Davis, an engineering tech and analyst, teamed-up to start Wellcast.

“You can say we are the children of the shale revolution. We founded Wellcast to create the solution we always wished we had, and bring it to market,” said Krier. “We knew there was a better way to manage and develop a resource play, and whether a drilling program had one rig or 30, the benefits of a robust, purpose-built rig scheduling solution would pay off quickly. And, we did it. Our solution helps operators develop their resources more efficiently with better planning, management, drilling and maintenance. They spend less time in lengthy meetings, and more time doing – solving problems and getting the job done. Teams using Wellcast are just more efficient and productive.”

Wellcast has powerful capabilities for rig scheduling and planning backed by workflow management processes, communication/collaboration tools, alerts, reporting functions and file management.

Davis put it this way, “Wellcast improves communication and its flexible workflow process management allows operators to configure the system to the specific regulatory requirements of each basin and regulatory jurisdiction. Importantly, every well has an audit trail, providing for accountability and making it easy to review well history and diagnose problems.”

Wellcast is Born

The Wellcast resource play management solution reduces the risk and total cost of asset development by delivering on three major benefits:

High-Performance Teams. Wellcast offers operators dynamic planning capability, which allows managers to answer critical “what if” questions in a matter of hours or minutes, instead of days or even weeks. Analyzing the impact of adding, or reducing, rigs to a drilling program can be assessed in real time without having to make guesses. Importantly, Wellcast transforms team meetings into problem solving sessions by providing fast, accurate reports based on approved workflow processes. With Wellcast everyone is using the same information and workflow, so team members no longer have to coordinate spreadsheets, track down discrepancies between departments and the potential for error is reduced. We estimate that Wellcast can help a company running a five-rig program free-up over 3,000 hours of valuable time per year, resulting in an ROI of 84% and payout in as little as seven months. Not to mention, Wellcast can increase job satisfaction by giving people the right tool to get the job done.

Cost-Efficient Operations. A critical function of the asset management team is having drilling locations approved and ready as rigs are released from one site to the next. Idle time is expensive during any part of the business cycle, and it can add up quickly. Wellcast helps create a high-performing team capable of providing each rig a clear path, minimizing idle time and avoiding costly delays. We estimate that if Wellcast can reduce idle time by half a day on 12 wells per year at a $15,000 day rate, a company can save $90,000 per year, or $450,000 for a five-rig program, resulting in an ROI of 355% in the first year with a three month payout.

Avoid a Catastrophic Mistake. Although it doesn’t happen very often, drilling a well in the wrong location is every asset manager’s nightmare. This mistake has the potential to end careers, result in catastrophic financial losses and can damage the company’s reputation for years to come. Wellcast has built-in safeguards to make sure drilling locations and critical permit and regulatory approvals have occurred, are accurate, reliable and not subject to a “fat finger” error. Permit or regulatory data is input once, and then Wellcast workflow logic ensures that all the boxes are checked before spudding a well.

Implementing Disruption is Easy

Fortunately, obtaining the benefits of the Wellcast resource play management solution is easy. Implementation requires very little, if any, involvement from the IT department, because Wellcast is delivered via a Software as a Service (SaaS) model through a web browser, so there is nothing to install on your network and no big up-front cost just to get up and running.

Additionally, Wellcast is delivered on the Cloud, so all team members have access to it wherever they are located – in the field, on a different floor of the office building or working from home – Wellcast links the team together and ensures the are all looking at the same data.

Helping U.S. Operators Compete Globally

The oil and gas industry is a model of innovation, starting with the first commercial oil well drilled by Edwin Drake in 1859. Wellcast, like many of today’s energy tech innovators, is following in the footsteps of Drake and others by helping American E&P operators compete on a global scale.

Get more information on Wellcast here.

About Prism Group

Prism Group provides investor relations, marketing and financial consulting solutions to the oil and gas, technology, oilfield services and financial sectors. We provide strategic communications, marketing and financial consulting to leaders who are serious about building value and delivering results.

 

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