The continued increases in oil & gas transaction volume and drilling activity have strained oil & gas land organisations, leading to missed opportunities in building efficiencies and capturing value, according to PwC’s 2014 Land Management Benchmarking study.
The study was based on responses from more than 70 oil and gas professionals from different functions across 20 top oil and gas companies in the US and concluded that rapid shifts from land acquisition to development has intensified the resource and organisational gaps in land administration and operations.
Findings from PwC’s Land Management Benchmarking study are featured in the report, Organising for success: Designing and enabling a successful land organisation.
Onshore resource play
“Nowhere has the impact of US onshore resource play development been felt more strongly than among land organizations,” states the PWC report.
“The volume and pace of development within resource plays requires faster, more ‘nimble’, and more capable Land organizations than in the past. The strategic importance of land has been elevated, but Exploration & Production (E&Ps) are only now beginning to assess their land organizations holistically to understand what success looks like and how they can enable that success.”
Accelerated drilling activity
“Land functions are being challenged to do more and provide greater value, yet they are finding it difficult to keep pace with today’s accelerated rate of deal and drilling activity as leases change hands at greater levels than in the past,” said Reid Morrison, US energy advisory leader at PwC.
“Our study also showed that managing the ever growing volume of data combined with fragmented communications and coordination across the organisation is exacerbating the challenge of maximising the value of their land operations. With so much at stake, E&Ps are beginning to elevate the strategic importance of land from the back-office to forefront of operations, and well-positioned organisations are implementing new systems, processes and operating models across their operations to capture the full value of their upstream investments.”
Key trends in successful land operating models:
- Executive Leadership – High ranking land leadership is essential for promoting the value of land across the business, effectively partnering with other business functions, and ensuring land has the necessary resources to be successful
- Centralisation – Successful organisations are generally more centralised with closer links between land operations and land administration across geographies. Ideally, Land
- Operations are imbedded with the asset teams and have functional reporting lines to Land and apply a common operating model, processes, KPIs, etc
- Accountability – Organisations that are able to create clear roles & responsibilities, performance metrics, and technology tools that drive transparency, responsibility, and accountability are generally more successful
- Talent Development – Leveraging the next generation workforce is crucial. Field experience is required for developing well-rounded corporate/mineral landmen. Lease analysts require broader experiences – the 30-year lease analyst is a thing of the past
- Foundation for Success – It is essential to build a strong foundation prior to looking for organisational improvements in other areas, including land administration and land operations
Land value framework
“Drawing on the key takeaways of the study, we created a land value framework for helping the oil and gas industry understand what ‘good’ looks like within land organisations,” added Morrison.
“Our framework is centred on three value pillars – creating value through acquisition or divestiture, unlocking value through exploration, drilling and well completion, and realising maximum value through the life of the asset.”
In highlighting the importance of executive leadership, results from the study also indicate that a single land organisation leader strengthens communication and data flows across the land value chain.
Among those with functional alignment under a VP of Land, 82% rated communication and coordination as excellent or good, compared to only 57% of those without a VP.
In terms of data flows, 83% rated data flows as excellent or poor, compared to 59% of those without a VP.
KPIs in land organisation
Measuring the value that land can bring to the organisation was also lacking, according to the results.
More than a third of the companies surveyed did not utilise key performance indicators to manage the land organisation, while more than half lacked metrics specific to land operations performance.
Technology gaining traction
The use of sophisticated technology to improve data flows, measurement and efficiencies is gaining traction among those surveyed.
The study found that 55% of companies saw increased integration and leverage of Geographical Information Systems (GIS) as a key enabling technology.
According to PwC, the extensive capabilities of GIS provide a unique way to approach traditional land management activities and business processes in order to improve information sharing and decision quality across the organisation.