In a cyclical industry like oil and gas, people generally expect dramatic market fluctuations; however, when the price of oil drops by 50% like it did last year and remains low, companies inevitably struggle. Modified drilling plans, lower rig counts, layoffs and focus on existing production are some of this year’s themes, and it is the rare oil company that can sustain a positive cash flow.
But as any good economist knows, turbulent market conditions can mean great deals for savvy companies and investors; especially if they can evaluate potential deals quickly and accurately with a powerful economic evaluation tool like Drillnomics.
As many E&P companies struggle to survive the market lull, they’re also ironically surrounded by some of the best opportunities at expanding their businesses. If they can afford to, now is the time to acquire new assets. According to Austin Akers from Drillnomics, “In light of current market conditions, many companies are cutting their operating budgets and are looking to sell great assets at a discount in order to stay afloat. Because the price of oil is so low, many sellers are desperate to generate cash, making it a buyer’s market.”
The problem is, though, for those operating within small margins, one bad decision could spell the beginning of the end.
This is where Drillnomics can help, allowing users to run well economics in mere minutes instead of hours. Akers says, “Both large and small oil companies and investment firms can harness Drillnomics to accurately evaluate and screen a large number of deals, allowing them to identify those that offer the best return on investment.”
A recently released software product, Drillnomics is a web-based oil and gas decline curve/economic evaluation tool. Using this tool, users can evaluate producing (PDP) and non-producing (PUD) oil and gas interests.
Drillnomics is a robust tool with multiple capabilities ranging from analyzing the economic value of capital projects to appraising leasehold, mineral, royalty and other interests. Users can create drilling program build-out models with multiple wells over a custom timeline to forecast future production and determine the present value of cash flows. It also can provide compelling insight into potential revenue, pricing and capital assumptions.
Users can import well data directly from databases they subscribe to, such as IHS and DrillingInfo, or can upload their own data via Excel spreadsheets. By benchmarking against comparable wells, users can easily manipulate type curves to build accurate production/cash flow models. After plotting data and entering a few key variables, Drillnomics generates sleek, intuitive graphs and tables that show Average Daily Oil Production, Net Monthly Cashflow, a Present Worth Profile, Total Recommended Purchase Value and Cumulative Cashflow. The results are visualized in data sets that clearly show a well’s future production and revenue.
What specifically sets Drillnomics apart from comparable programs is its ease of use. It’s not necessary to have a background in engineering to input data and create meaningful reports. With its global edit capabilities, users can change variables with the click of a button to see evaluations based on a new data set. For example, if the price of oil or anticipated lease operating expenses change, users can modify their calculations with a few clicks, making it easy to run economics under different scenarios. From there, users can generate and print PDF reports to show to managers and other stakeholders.
Paramount to most companies these days, Drillnomics is also affordable. Because Drillnomics is targeting a larger segment of the market and is web-based, the yearly cost is not $25,000. It’s not $40,000. It’s more inexpensive than the competition, maxing out at $1500 a year. With the help of Drillnomics, smart companies can weather through, and even capitalize on, the current market lull.
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