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7 months ago
  • Finance

Getting to the right numbers, faster

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Getting to the right numbers, faster

Written By Matt Palmer
  • Finance

What every VP of finance needs to succeed in a modern E&P company

 

The last ten to fifteen years have seen the rise of an important new role in Exploration & Production (E&P) companies—the VP of Finance. This person is the key lieutenant to the CFO, working directly with every department within an E&P organization. They are responsible for making sense of data, turning these inputs into accurate, usable cash flow forecasts to better inform business decisions.

The value of this role has skyrocketed inside these companies, driven by changing market dynamics. Where E&P companies were once focused on exploration and land potential, today they are laser-focused on business execution, cost containment, and cash flow. Being in command of these numbers is vital to business success.

Matt Palmer, VP of Finance at Echo Energy describes his role, and how a truly data-driven approach changes everything.

 

Today’s energy landscape: The Production Era

Those of you in the industry already know that we’re in a new era. You must manage production growth responsibly, live within cash flow constraints, and keep your G&A as lean as possible. You also need to navigate a complex commodity market while still making the smartest investments. To get there it’s crucial to understand exactly how the business is performing in terms of cash flow and expenses. That lets you optimize the reinvestment of free cash flow without sacrificing access to capital markets when needed.

 

A massive, manual exercise

The problem for most E&P companies is that their systems aren’t set up to help them get to the right numbers. At Echo Energy, for example, our finance team traditionally received reserve reports from the reservoir engineering team (and third-party firms) in an Excel data dump. Our finance team then manually performed a massive teardown in Excel so they could understand and validate all inputs and outputs. We often found problems, like incorrect price decks or start dates. It wasn’t uncommon to find a theoretical well with a start date a hundred years in the past or a thousand years into the future.

We were also checking to see if wells were in the right formation and validating ownership percentages. An obvious red flag, for example, is when ownership would add up to more than 100%. Sometimes we found other anomalies, like only having three rigs while drilling over a hundred wells in one year. The net result was that, as a finance team, we ended up becoming pseudo-reservoir engineers so we could validate the numbers.

 

Giant paper maps

Historically, it was also hard to visually represent our assets. If you saw our office, you would have noted that we had 15 to 20 giant printed maps on the wall. These maps changed daily as we got new data, which meant we had to constantly reprint them.

These archaic systems made tasks—like representing our portfolio to investors or deciding where to drill next—incredibly time-consuming, with the result often being very subjective if it wasn’t very carefully considered. We would normally end up getting the information we needed at the last minute, then pulling 100 hour+ weeks just to get it all done.

 

Getting to the numbers

We helped found Zeno for one critical reason: we knew there had to be a better way. Just take a look at other industries across the business landscape. Many have already adopted data and analytics platforms that help drive smarter and faster business decisions. We recognized the same opportunity within the Oil & Gas industry.

What the Zeno team is building is a way for me—and my finance team—to access critical data whenever we need it. We will finally have access to the same data, on the same system, that the reservoir engineering team uses. We will also be able to directly review and change key inputs like pricing, CAPEX, and OPEX. The best part? We will no longer need Excel to understand our numbers. And everyone’s time will be freed up so they can better understand the business and create a wider range of scenarios. Even better, these scenarios will be available for review and validation by other groups like land, geology, and accounting. The result? A smarter business.

 

From paper to screens

The days of paper maps are numbered. The Zeno solution will display modern visualizations directly on my PC’s monitor. No more printing and posting giant paper maps on the wall. The team will be able to view these maps at the office or online. And they will be able to just double-click on any of the wells to dig deeper into the data, eliminating the need for additional research and spreadsheets. Add it all up and it’s clear that we will soon find it to be much easier to understand where our best performing wells are today so we can make better drilling decisions in the future.

 

Real-time insights really change everything

Arming your E&P company with robust, validated data helps you make informed business decisions as the industry paradigm shifts. As traditional energy businesses face more headwinds than ever, knowing your numbers is the key to helping your business thrive.

 

About Zeno

Zeno’s Energy Operating System was built from the ground up to connect the entire business through data, surfacing key insights for smarter, faster decision-making. Learn how Zeno helps businesses thrive in the new market realities of the Production Era by getting in touch.

 

 

Authors

Matt Palmer
Matt Palmer
VP of Finance, Echo Energy

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