Beating the Best: Eight Characteristics of Winners in the Shale Arena

Beating the Best: Eight Characteristics of Winners in the Shale Arena

          
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Beating the Best: Eight Characteristics of Winners in the Shale Arena

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  • Over the past 10 to 15 years, many energy companies, including nearly all of the majors and numerous independents, have tried to jump on the “shale train” to take advantage of the glut of natural gas and oil locked in tight U.S. rock. While the resulting surge in development—in 2013, the U.S. overtook Saudi Arabia and Russia to become the world’s largest producer of hydrocarbons—has been a boon to the U.S. on multiple fronts, the financial results for some of the involved companies have been less than stellar, even discounting the effects of the recent plunge in oil prices.

    A critical factor behind this is that many of these companies have tried to apply or adapt conventional upstream processes, operating models, and cultures to what is, fundamentally, a very different business. Shale development has its own distinct underlying economic principles and requirements for success. This holds especially with regard to operational performance — which, for many companies, can prove to be the linchpin that determines success or failure, particularly in today’s low-oil-price environment.

    What does it take to optimize operational performance in the shale arena? Through our casework and industry analysis, we have defined what we consider the most mission-critical levers. Deployed together, they can deliver significant, potentially game-changing financial results, including a 25 to 30 percent savings in well costs and a near doubling of wells’ lifetime production. Companies that can execute on these fronts will be well positioned to thrive when oil prices rebound; players that cannot, or that cannot act quickly enough, might find themselves fodder for consolidation.

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