Hello World!

For those of you who are looking for GreaseMonkey from the E&P Magazine article entitled, “Operator: Unchained“, look no further!

We’re actually known around the oil patch as “GreaseBook”. Anyways, typos happen and we’re still VERY thankful to Hart’s Energy and the folks at E&P for including us in their September edition!

GreaseMonkey Typo

To find the Pumper Mesh you seek, click the link below!

http://www.greasebook.com

Respectfully,
The folks at GreaseBook

In any business, there are “rules”—traditions and expectations that most accept as true.

production manager software oil gas

The oil and gas industry is full of them. That said, many of these rules are probably due for some questioning (if not a little breaking).

All too often, businesses plod along holding onto long-held views and calling them “rules.” However, many times these rules can be reclassified simply as bad habits.

Bad habits make for all sorts of struggles in business and in life. But because these habits are mistaken for rules, most people don’t realize they can be changed.

Recently, I stumbled across some interesting insight from Hiroshi Mikitani, CEO of Rakuten (Japan’s biggest e-retailer) and #23 on the Forbe’s “Richest in Tech” List. Mikitani explains that when building a company, every system you set up eventually breaks. Pretty obvious, right?

oil and gas production system optimization

That said, Mikitani goes on to say that you can actually predict when your business will begin to break down. Essentially, Mikitani claims that every system you put into place will need to change at roughly every 3rd and 10th steps.

For example, as an oil and gas operator, when you go from one employee to three, it takes a bit of adjustment. However, eventually you ante up and make the jump from 3 to 10, then from 10 to 30.

When it’s just you, you know what you’re doing. But as you continue to grow you must bring on staff, a production supervisor, and add more pumpers to maintain your production assets.

What I found even more curious was applying this same rule of 3 and 10 to our well count (i.e., the amount of wells we operate). Nearly every operator I’ve had the pleasure to know generally falls into a specific “step” or size, with 3 wells, 10, 30, 100, 300, or 1000 under management.

Many independents enjoy running a small shop and find that about 30 wells is all they can (personally) manage before hiring beyond their current set-up of a couple of pumpers and an outside consultant.

The next rung up from 30 wells tends to hover around 100. An active operator such as this will generally have 6 to 8 pumpers tending these wells, an in-house engineer, and support staff. New wells will be drilled. Old wells will be plugged and abandoned. But, 100 wells (give or take a handful) is generally where they’ll remain.

Why? Because it’s what they know. It’s what their rules permit. And, it’s what they’re comfortable with.

To break beyond a step, an operator must reorganize itself and its systems (i.e., break rules). Generally, as the market permits, they’re able to grow unhampered until they hit that next step.

The exception to the rule is when you see operators receive a large influx of capital from outside investors. Basically, this enables them to skip steps.

Companies with huge influxes of money have serious growing pains. Pumpers in the field are left to their own devices with the only instruction being, “Let us know when you have oil to sell; we’ve got other things to work on now.” Missing run tickets and a sloppy oil sales reconciliation process causes these large companies to hemorrhage perfectly good money. (Check out this post on how 80% of your company’s skimmed oil comes from just 20% of your purchasers.)

Essentially, what these operators find is that they’re bumping up against Mikitani’s law. Although they’re operating 300 wells, they’re still relying on the same systems that were set up when they were managing 30.

If you haven’t arrived at one of these milestones yet, just ask your predecessors who have. Ask what happened when they reached 100, 300, or even the 1000 well mark.

They’ll tell you that at every one of these steps, everything breaks. Everything: your communication systems, your payroll, your accounting.

Usually, operators end up adding people to the process. And this is where we get into trouble. Understand, we must refine rules and processes before adding people. Adding people to a refined process multiplies output; however, using people as a fix to a poor process multiplies your problems.

Basically, we don’t add people to broken systems. People are expensive. If Operator A manages 100 wells with a staff of five people and Operator B manages 100 wells with a staff of twelve—all things being equal—Operator A wins. His investors win. His employees win. And, the company will carry on in nearly any environment.

When operators are wondering why they can’t move beyond a particular well count, or why their operating costs are so high, it’s because they’ve skipped one of these steps without reevaluating their processes.

Those who were able to make it to the next step in good times (or survive in bad times), were the ones who were able to successfully revisit their rules and habits and make the necessary adjustments.

There’s nothing magic about 3 and 10, but we see it all the time. Every time you approach one of these milestones, take time to review your processes before chasing that next well!

Do you think Mikitani’s Rule can be applied to oil & gas?

If so, where else have you seen the rule of “3 and 10” play out?

If not, why not? Leave your response in the comments below!

 

The other day, a gentleman called to inquire about the GreaseBook pumper app.

Basically, this guy — we’ll call him Dave — had spent the better part of his professional career in the oilfield, had sold his service company, and is now retired. However, after a few years on the sidelines, he was now sick of sitting around.

Dave wanted back in, and he wanted to open up a well servicing company.

That said, Dave had one minor issue: he was a transplant from Texas, and therefore had no wells to service and very few contacts to call upon here in Oklahoma…

oil filed pumper jobs

Hey Pumpers! Line ’em up and knock ’em down!!

Dave told us he’d printed up 4500 flyers to pass out and bought ads in an industry trade mag. He’d even knocked on a few operator’s doors around town (and in the process said that he found a new respect for people he saw going door to door during his professional tenure while on the other side of the desk…)

At GreaseBook, we speak to dozens of operators and pumpers every week. And, not too long ago, we were the new kid on the block.

We tried the cold calling. We tried the dropping by of offices of operators.

And to tell you the truth, the word ‘No’ still rings clearly in my mind…

Now, how many times have you heard the oil & gas industry is a network of ‘Good ‘ol Boys’?

Sure, there’s a lot of inner mixing of operators in different parts of the country and the industry is a small world (even smaller for those with a weak moral compass or questionable business practices… ;-P)

However, Dave — someone who was very much apart of this “Network” in his younger years — now, may have found himself on the outside.

That said, something about this guy resonated. He was probably twice my age (I’m 33 FYI), and he was getting back out there and starting from zero. And it wasn’t for lack of money — this guy simply loved the oilfield (which makes him really freakin’ cool in our book :-D)

Side note: if you’ve never read it, check out the Lease Pumper’s Handbook. (Get your free download by clicking here!) Basically, It’s 500 some-odd pages on the topic of “oil lease pumping”, a great resource for new and veteran pumpers alike.

Anyways, we wanted to help.

We work with a lot of data. And while we focus on kick-ass oil production software for operators and pumpers (and eliminating human error in the oilfield!), we have a lot of other very helpful data sources cross our desk, too.

So, armed with this task, we asked ourselves, “if we were a contract pumper or service company (or company pumper trying to tend a few wells on the side ;-P), how would we go about landing our first few clients?”

The first thing that came to mind is that the proximity of one well to another would be very important to me. Besides pay, drive-time and wear-and-tear on your truck may be just as important of factors to consider when taking on a new well.

During this search, another thing we kept at the forefront of our mind is the idea that you may be able to pump — and receive payment(!) — for 50 wells in close proximity, but maybe only 20-30 if they’re spaced further apart.

Side note: here in Oklahoma, most batteries aren’t commingled. There are exceptions, but the general rule is one well to one battery. That said, Okie pumpers can probably command higher monthly fees per wells than their commingled pumping counterparts.

Of course, starting out you may not be able to be so choosy. But, as you begin to establish a name for yourself, you’ll probably have the ability to be more selective about the wells you take on.

Our friend Dave was living just outside of Oklahoma City. Therefore, keeping our focus on tight knit group of wells, we think Oklahoma County is where he would want to concentrate his efforts.

oilfield pumper jobs oklahoma

That said, we tapped a friend of ours on the shoulder and asked if she’d poll IHS for some data. Basically, we told her we were looking for all the active wells in Oklahoma County AND the operators who owned those wells.

Side note 1: Most operators have some sort of subscription to IHS. If you’re like a lot of pumpers we know, you come to know some of your operators pretty well (at least over the phone!)

Most your clients will have a subscription to IHS can poll this operator/well info for you in about 8-10 minutes. If you don’t have any connections — hang tight, we’ve got an alternative for you!!

Anyways, within 20 minutes our friend had shot us an Excel document of every operator with production assets in Oklahoma County — bingo! From a pumper’s perspective, things were starting to heat up…

After a little sorting and a little manipulating of the Excel sheet, we found there are 120 operators and 1505 active producing wells in Oklahoma County (we’ve attached this Excel spreadsheet at the bottom of this post…)

We figured for Dave to get started and start building a good name for himself, all he needed was about 10 wells (that’s less than <1% of the wells in Oklahoma County  — .0066 to be exact).

Dave used to run a fleet of pumpers, and my guess is he had more knowledge of wells than about 95% of the guys out there pumping. He’d be a hell of an asset for any operator lucky enough to find him — Dave just needed to get his name out there…

Don’t be just another Oil field Pumper…

Most pumpers hold onto their wells with an iron grip. However, as in any business, there will always be folks who are disengaged, disinterested, apathetic, or simply spread too thin to give their job the attentiveness it requires.

Pumpers allowing tanks to spillover, pumpers who are a month behind on their paperwork, and pumper’s who are hard to get a hold of are all “Prime-Time” targets from which to snipe wells.

oilfield pumper jobs

“Say what? You tryin’ to get a hold of me?!” ~ Deion “Prime-Time” Sanders

I know for a fact that if you contact an operator at the right time with the right approach (the manner of approach is crucial!), you’ve got a damned good shot at snagging a few wells.

So, what is the “right approach”?

Being different is a fundamental differentiator. Different is better when it’s more effective or more fun. If everyone is defining a problem and solving it one way and the results are subpar (ie knocking on doors, taking out ads, or waiting for the wells to come to them), this is time to ask, “What if I did something else?”

Don’t follow the model that doesn’t work. If the recipe sucks, it doesn’t matter how good a cook you are.

And, Dave was right: cold calling ain’t gonna work.

In my mind, my fundamental differentiator would be to spend 2-3 days driving by 20-30 wells in Olahoma County. If you’re too busy with the wells you already got, make a stop by one or two wells on your way home. Walk around the premises of each lease, take photos with your smart phone, and make notes of what you would change or simply clean-up if you were the pumper there…

Side note: a great FREE app for determining the operator of just about any well. Basically, the map interface shows all the wells within a 5-8 mile view radius of your location.

oilfield pumper jobs 2 oil field pumper jobs

iPhone App can be found here: https://itunes.apple.com/us/app/di-wellspot/id562174037?mt=8

Android can be found here: https://play.google.com/store/apps/details?id=com.drillinginfo.baytown&hl=en

Look for things that are amiss, ways in which you think you could better rock the well, etc. — basically, stuff that the lazy or inexperienced guys (ie ‘windshield pumpers’) might overlook.

Do a quick internet search to find the operators telephone number and address. If the operator is close by, print out and drop the 2-3 page write-up w/ your findings and photos by the operator’s office with your business card.

If the operator resides further away, call his office and tell whomever answers the phone that you’d like the contact info (name and email address) for the production or well supervisor in charge.

When she asks why (which she inevitably will), simply state “I have some important information I need to forward in regards to XYZ Well in _______ County”.

Fire off your report via email telling him what you found, and tell him how you think you can help his business and his operations. You don’t necessarily have to be right. From a business owner’s standpoint, the simple fact that you’re engaged and putting your head to use for their company is very refreshing.

Extra Credit: For an added umph, open an account on LinkedIn, add a photo, and fill out the pertinent fields about your professional experience (where you worked, for whom you worked, what you did there…). Be sure to link to this profile in your email and tell the operator to check it out! Linkedin offers you a place to demonstrate your experience and showcase your personality.

Seem like an overkill?

Maybe so. But by doing so, no longer are you just an interruption or an email. You’re a name with a face. Or, in Dave’s case, a guy with a hell of a lot of experience who wants a shot at upping your production.

Notice, Dave doesn’t get stopped by the admin before he gets access to the decision maker. Dave provides value right out of the gun…

First, the owner would say to himself “who the hell is this guy?” 

Then, 5 minutes later he’d be thinking of how he can get you on some of his wells.

If he isn’t, he’s:

  1. somehow managed to hire nothing but A players in his operations (which anyone who has ever run a business knows how hard this is to do),
  2. he’s too snowed under to respond because he’s hired too many B and C players and can’t see the forest through the trees (remedy: fire B/C players, hire A player who is knocking on the door – YOU!), or
  3. he’s apathetic in the management of his wells (unfortunately, this is sometimes the case…)

If anyone ever approached my business in a similar manner, told me how I could improve my app, showed me a way to better run aspects of my operations, I’d hire the guy in a freakin’ minute.

Why?

‘Cause nobody does this. And that right there folks, is what we call “differentiation”.

It’s a very targeted approach to winning wells. You offer value. And, i’d bet you’d do better than winning 1 in 5 wells you visited. If nothing else, you’ll be top of mind when they’re replacing one of their pumpers at another site.

Look, the fishing is best where the fewest go, and the collective thought train of your competition (other pumpers!!) makes it easy for people like you to hit home runs while everyone else is aiming for base hits.

Getting more wells begins with asking for them properly.

You’ll find the Excel list we used attached below.

 

Download (XLSX, 35KB)

You know how they say good things come to those who wait? We’ll we say good things come to those who read to the bottom of our posts 😉

That said, what if we told you landing new wells as an oilfield pumper was a snap?

What if you could pick and choose your wells at will, letting go of wells that were off the beaten path in favor of those that were closer to home?

Well, as of now, it’s not a dream anymore.

Introducing the GreaseBook ‘Pumper Mesh’ – a directory for gaugers, pumpers, lease operators, well tenders and the like – designed to introduce YOU to companies operating in the counties in which you pump.

Hang your shingle out. Get introduced to Oil and Gas Operating Companies. Get your shot at more contract pumper jobs. All through the Pumper Directory. All at no charge to you.

Why do this for the pumpers?

It’s just our way of saying “thanks” for being out on the front line of oil & gas.

To check out the ‘Pumper Mesh’ click here.

Last month, GreaseBook did the impossible: we rolled the 15,000,000 barrel mark.

That’s right, since GreaseBook’s inception a short 2 years ago, America’s independents have scrolled, swiped, and tapped more than 15 million barrels into our modest field production app.

15MM barrels tracked via oil production software

Click the image to check out our bbl counter in real-time!

For our clients, that’s 15 million barrels that went ‘skim free’.  15 million bbls that were fully paid and accounted for. And, 15 million bbls that were tracked, organized, and reported with little to no intervention on behalf of the admins, engineers, and owners responsible for overseeing these operations.

Instead of pushing paper and manipulating spreadsheets, these folks were able to focus on what they do best: pumping oil.

For us — well, we feel a great sense of pride and responsibility.

Pride, because we’re bringing cost-effective solutions that make other industry software vendors curse us.

Responsibility, because so many independent operators have entrusted their production to the folks here at GreaseBook.

You see, something very interesting is happening… a surge of new methodology, ideas, human reason, and logic.

And, it’s not coming from the top down (the large, integrated operators), but from the bottom up (the small independents).

A single pumper shifts from paper to mobile. An admin back at HQ realizes she no longer has to make telephone calls to remind the pumper to ‘get his data in’.

Eventually, engineers and production supervisors start clamoring because they actually have data and graphs that make sense. The band wagon increases in size.

The things that mobile is doing are valuable and positive… it creates proactive pumpers, it alleviates minutiae from the back-office, and keeps engineers and supervisors focused on the task at hand (maximizing oil production & minimizing overhead).

And the best part?

People actually want to use this stuff.

Folks, there is no stopping this groundswell — it’s replacing processes that were forced on the field just a decade ago.

Thanks to mobile technology, independent operators are able to scale every last man hour — and squeeze every last drop of oil — from their operations.

Respectfully,

Greg Archbald

Founder

P.S. To celebrate this liberation of the oilfield (and the number 15!), GreaseBook would like to extend a special invitation:

For a limited time, any operator who signs up  to trial the app will receive a 15% discount to be applied to his/her app subscription for the first 6 months. (The door closes Friday @ 4:59PM CST.)

As always, our 60 day / 110% money-back guarantee stands.

The other day, GreaseBook got to speak with Tom DiChristopher, a journalist who covers the oil market for CNBC in New York…

oil production software productivity tough times

Tom was interested to know more about a trend he was seeing in the industry — essentially, a move toward greater emphasis on productivity measures like the GreaseBook oil production software in a tough price market.

We were thrilled to speak with Tom (and we were even more impressed with his depth of working knowledge of the oilfield — very cool, Tom!)

Tom spoke with a few of GreaseBook’s clients as well as several other Tech Firms in the oil & gas space… a fun read, an even fun-ner experience for GreaseBook to be mentioned on CNBC 🙂

To check out the article, click here.

Given the current environment, independent operators around the country are reevaluating the way they operate their wells…

Now, while we don’t have control over the price of crude, we do have direct control over the costs at which we produce it.

My family has been in oil & gas for nearly 30 years. I respect the old guard. And, sometimes new ways of doing things must be considered — especially when it directly lowers our company’s marginal production costs (the point at which we shut our wells in…)

Understand, most software companies would like for you to believe it’s the technology that’s important. However, what they don’t disclose is that whatever technological advantage they’re trying to push often comes at the price of worsening the team’s sociology.

Instead of building procedures to support your folks in the field, many of these companies limit the contributions of people. They set a tone of rules and rule following rather than thinking and rule adjusting (or even rule improving!)

With apps, it’s different. People actually want to use these tools…

Remember, the first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.

Basically, we don’t add people to broken systems. People are expensive. If Operator A manages 100 wells with a staff of five people and Operator B manages 100 wells with a staff of twelve — all things being equal — Operator A wins. His investors win. His employees win. And, the company will carry on in nearly any environment. (click here to see what happens when operators refuse to go mobile...)

For Operator A, Sub-$60 oil doesn’t look so bad anymore. It ain’t party time, but no one is closing their doors either.

Admins’ and ops supervisors’ days are full. And, many times they leave the office (exhausted) and ask themselves, “what did I really accomplish today? How did I move the company forward? How am I securing a future for myself at this company?”

Rather than comparing sales tickets against oil purchaser statements and clawing back that money, Admin is stuck tracking down missing run tickets. They know they should be sending out reports to managers, investors, and State agencies, but they’re trapped just trying to organize these reports into something workable…

They can’t break the cycle of meta-work. Essentially, work that fills our days but isn’t really that important.

Does it keep us busy? Oh yeah.

Does it move the company forward? Not really.

As for management, it’s a completely different set of issues. Given their current tools, many accept that ‘skimmed oil’ is just part of doing business. They realize they must trust their pumpers (the front line!), and short of going to the field and gauging the tanks themselves they have no way to verify their production numbers. If they knew, many skimming oil purchasers and services companies would be immediately dropped (that said, you may like this write-up we did on The ‘Perfect’ Oil Production Report (and the Magic of ‘Proper’ Pumper Management…)).

oil production spreadsheet template

Sometimes it’s tough to know where to point the finger. Sometimes, drops in tank volumes are simply a function of a change in weather. That being said, randomized quarterly checks by a 3rd party roustabout is a very cheap (and very effective!) form of production insurance.

It sounds funny, but problems are like mushrooms: when it’s dark and rainy they multiply. Under bright light, they diminish. In an organization where there is nowhere to hide, the problems are easily illuminated.

Folks, systemized daily production reports can create that strong light.

We’ve seen examples of pumper production reports from all corners of the country. Some of these gauge sheet templates haven’t changed since the 1940s. Still others are works of art!

To the degree you can clarify your systems and hone them, you will run your business as opposed to having it run you. The culmination of identifying, documenting, and having everyone follow the core processes of your business is the way.

When you have a clear way, you immediately increase the value of your business, strengthen your control over it, and give yourself options. From there, you may grow the business, let someone else run it, sell it, or simply take more time off.

My dad and I both own and operate our own software companies here in Oklahoma. My dad founded SSI (a well-known E&P accounting platform) in 1979, and I built an iPad app (GreaseBook: Production reports that don’t suck!) for oil & gas operators in 2013.

That being said, we take frequent trips between Tulsa and Oklahoma City. On more than one occasion, my dad had mentioned to me an old pump house that he’d seen off the East side of the I-44 Turner Turnpike…

Now, growing up in Oklahoma, I spent a lot of time outdoors. While hunting and fishing with my pops, I got to see a lot of pump jacks up close as a kid.

My dad said he’d seen a few of these — one wheelhouse in Kansas he said ran 5 rods/wells. However, at 32 years old, I’d never come across anything like this…

Due to all the foliage, the old pump house is especially difficult to see during the summer. However, if you look hard enough, you can see it tucked back in a knoll on the NE side of the S 209 West Ave overpass.

Anyways, it was a nice day (and I’m kinda weird and like this oilfield history stuff), so my dad and I thought we’d pull over and check it out.

Check out the video and photos posted below…

After poking around onsite, I immediately did a Google search on the Superior Gas Engine Co (which I found very interesting!)

So, we’ve also included a little background on the Superior Gas Engine Co below…

The Superior Gas Engine Co.

In 1889, the PJ Souvlin machine shop opened its doors in Springfield, Ohio, to accommodate the booming Lima, Indiana, oil field that had been discovered only a few years beforehand.

Souvlin’s machine shop at it’s outset was just a repair facility, but it soon joined the ranks of firms competing to develop an internal-combustion engine that could use well head gas for power. At that time natural gas was viewed as an annoying and sometimes dangerous by-product of production (ahem, North Dakota anyone?)

Photo (and much of the article’s content!) Accredited to Gas Engine Magazine

As you can see, the engine in the pump house was built by Superior Gas Engine Co. From what I’m told, the company relied on its reputation for ‘superior’ quality to promote sales. The oilfield is a small community, and word gets around quick — Superior’s practice of showing-by-doing must’ve worked, as several other manufacturers built engines many people now call “Superior clones” due to their similar design.

Superior engines were favored for their somewhat better fuel efficiency. They used a four-cycle mock-up in the oil field where gasoline production was scarce. And, some of you folks who’ve been around for awhile in the oilfield may be able to confirm this, people tend to agree that Superior engines were at the higher end in the world of oil field engines.

Basically, if Reid and Bessemer engines were similar to a Chevrolet or Ford, then Superior engines might be the Cadillac or Lincoln of the oil field — not really any better, but definitely had all the bells and whistles…

Superior, All Grown Up

PJ sold his first engine for oil field use to the Ohio Oil Co. based in Findlay, Ohio (the predesescor of today’s Marathon Oil). Originally, all Superior engines were sold directly to the customer. However, as the engine maker continued to grow, so did the need for a distributor.

A deal was struck with the newly organized National Supply Co. to become exclusive sales agents of Superior engines to the oil industry. As both companies continued to grow, National Supply acquired another oil field engine builder: Spang, Chalfant & Co.(one of the oldest names in the US oil industry, dating back to 1828).

During World War II, Superior employed nearly 2,000 men and women. It received the Maritime Commission ‘M’ award and Victory Fleet Flag for its record of building the diesel engine for the U.S. Liberty ships.

In April 1955, National Supply Co. sold its Diesel Engine Division to the White Motor Co. of Cleveland, which was among the leading manufacturers of large, heavy-duty trucks and tractors. Several years later, National Supply was acquired by the Armco Steel Corp. of Middletown, Ohio.

The Superior plant in Springfield became known as the White Diesel Engine Division. In the 1950s and 1960s, the company’s engines were being used in nearly every type of application you could conceive: marine, defense, transportation, municipal and, of course, the oil industry. And, in 1964, Ohio experienced another oil boom not far from Springfield, and Superior engine-compressor units were installed.

With gas engines re-established as important products, the name was changed once again from White Diesel Engine Division to White Superior Division. When the company was purchased by Cooper Industries in the early 1970s, the majority of Superior markets were in the oil and gas industry, with some sales among municipalities and occasionally to government groups. Additionally, the division completely withdrew from marine diesel production.

It’s a cool piece of Oklahoma history — better yet, of Oilfield history.

Do you see a lot of these pump houses around the Ohio area?

Any Texas or Kansas folks who wanna chime in??

Better yet, do you know if any are still in use??

If you have insight or a cool story, please leave it in the comments below!! We’ve got tons of great stories already, I’m sure we’re not the only ones who’d like to hear about it! 🙂

Man, do we like to talk about productivity.

What’s the newest software? What’s the latest horizontal drilling technique? What’s the best way to manage my field staff? How should I manage my oil and gas production data? What should I do about delegating? OMG, i need a admin assistant!

However if we take a step back and we’re honest with ourselves, how many of these things have positively influenced our business in the past month? In the last year? In the last 5 years?

Do we ever just search for the latest app, the latest tactic, the latest tool without ever asking ourselves what the real fundamental challenges are with productivity?

A Good ‘ol Boy (from Italy)

Born in the late 19th century, Vilfredo Pareto was an an engineer by training, and controversial economist-cum-sociologist. Vilfredo began his career overseeing coal mines, and was later named chair of political economy at the University of Lausanne in Switzerland. His seminal work, Cours d’economie politique, explored a then unexplored “law” of income distribution… it later became to be known as “Pareto’s Law” or the “80/20 Principle”.

The 80/20 rule is powerful because it’s a law of nature – much like the Golden Ratio, the Butterfly Effect and chaos theory are laws of nature. In fact, it’s driven by the same underlying causes…

How in the world does this apply to the oilfield?

Basically, Pareto’s Law can be summarized as “80% of the outputs result from 20% of the inputs.”

Other ways of phrasing this might be:

  • 80% of your company’s production comes from 20% of your production assets
  • 80% of your engineer’s headaches come from 20% of your wells
  • 80% of your administrator’s headaches come from 20% of your pumpers
  • 80% of your skimmed (ie ‘unaccounted for’) oil comes from 20% of your purchasers & service companies

We could come up with an exhaustive list to apply this principle to in the oilfield. Heck, you may have even encountered this principle as being skewed even more severely: 90/10, 95/5, or even 99/1 aren’t unheard of.

So, as an operator we must make a choice: we can continue to shovel more coal, or begin the dissection of our operations and workflow through the lens of Pareto.

Elimination before Delegation

Oil and Gas data management, oil production software

Scotty: She’s all yours, sir. All systems automated and ready. A chimpanzee and two trainees could run her!

Captain Kirk: Thank you, Mr. Scott. I’ll try not to take that personally.

— Star Trek

Delegation from the office to the field is to be used as a further step in reduction, not as an excuse to create more work and add to the unnecessary. Remember, unless a task is well-defined and important, no one in your operations should be doing it (you can also check out our post on Why it’s Crucial You Organize Around Data (Not Personalities) in Oil and Gas Asset Management.

We must eliminate before we delegate.

Remember: never automate something that can be eliminated, and never delegate something that can be automated or streamlined. Otherwise, we’ll waste your employee’s time as opposed to our own.

Before attempting to automate the field (not just workover reports, well history files but production reporting, run ticket reconciliation — the whole enchilada), principle number one must be to refine rules and processes before adding people. Adding people to a refined process multiplies output, however using people as a fix to a poor process multiplies your problems…

While working toward increased efficiency and effectiveness, let’s keep two truisms in mind:

  1. Doing something unimportant well does not make it important.
  2. Requiring a lot of time does not make a task important.

If you’re an independent operator and you take the long view on oil, understand one thing: What you do is infinitely more important than how you do it. Efficiency is still important, however it’s useless unless applied to the right activities.

And, the ‘right activities’ when managing the oilfield isn’t the collection or organization of production data. It’s enabling your admin and ops supervisor to conduct revenue-generating activities by presenting them information about your production in the right kind of way (check out this post on eliminating human error in the oilfield…)

Folks, there is a far better option than a ‘results-by-volume’ approach, and it will do more than simply increase your productivity, it’ll increase your profits, too. Believe it or not, it is not only possible to accomplish more by doing less, it’s mandatory.

The time is never right

Focusing on the 20% of your workflow that delivers 80% of the results is the name of the game. You, your administration, and your operations supervisors must put aside everything seemingly urgent and undergo the most truth-baring analysis possible — you must apply this principle to everything, from how you organize your people to how you manage your production assets.

Don’t expect to find you’re doing everything correctly (or that everyone is operating honestly). The truth often hurts. The goal is to find our inefficiencies (problem pumpers or a skimming vacuum truck operator) and eliminate them. Then, find our strengths so that we can multiply them.

These simple changes can be difficult, even emotionally challenging for the independent producer. But no doubt it’ll effectively change the way you operate forever. After all, the idea is to enable your company to run more efficiently or grow exponentially, depending on your goals.

Do you know the secret of the most effective, cost-efficient oil producers in the game today?

It’s not some new age approach to their hiring practices. It’s something much simpler, folks… these teams have mastered the art of elimination, automation, outsourcing, and delegation.

These four methods are very, very powerful. In fact, each one of them used alone will increase the bottom line of your operations. However, using all of them in combination on a regular basis will bring about rapid operational reprogramming. The sooner and more rapidly we get on-board with these methods, the more rapidly you’ll bring operational effectiveness. And, operational effectiveness is where the money is at…

Stupid Simple

It’s so simple in theory, but how many operators put these cost-slashing activities into practice?

“But this boom is different!” they cry…

“Why count nickels and dimes in the office when there are dollars to be made in the field?!”

Look folks, if you take the long view on oil, you understand the importance of running an effective operation. When distributing responsibilities to your team, it’s important you work through your list of responsibilities and tasks.

Essentially, it’s the perfect opportunity to utilize the 80/20 rule to throw out non-essential tasks. Rather than distributing 100% of the work of the manager, the savvy operator will divide the work into two groups:

  1. the 20% that is the most important to keep within the company, and
  2. the 80% that can be eliminated, automated, or outsourced.

How do we do this? It could be as simple as throwing the company’s tasks on a whiteboard and striking a line between the “crucial 20%” and the “other 80%”. You must ask yourself what can we eliminate? What can we automate? What can we outsource?Then (and only then!) should you delegate what is left…

In an another post entitled “Field Data Capture (and the secret of the most effective, cost-efficient Oil Producers in the game today…)“, we outline how automation applied to efficient operations magnify the efficiencies, while automation applied to inefficient operations magnify the inefficiencies.

How efficient are your operations? How much extra work are you creating for yourself and your team by not first reviewing the validity and importance of each task?

Basically, you need to distribute responsibilities throughout the team (or to outside the team) in ways that aren’t going to add a lot of extra work. That’s why it’s so important to eliminate, automate, and outsource before delegating to your team members.

Transparency: Holding Lease Operators and Production Teams Accountable

For core activities that simply can’t be eliminated, oftentimes we can still cut 80% of the field reporting, production monitoring, well checking, and performance auditing.

Understand, the oilfield has been run the same way for a long time. However, there’s no reason why we can’t get a little creative. For example, rather than having a process to pre-approve expenditures, have you considered eliminating the approval process all together?

Before you knock it, why not try it? It’s a great example of effective elimination and transparency. On a wall, post everyone’s expense reports or team expenditures against budgets. Not only does this breed transparency, but with type of expenditures method in place you also create a process in which employees must seek advice from others before spending money. It could be a process in which a peer — not a manager — must approve the expenditure.

One of our favorite examples we’ve seen of effective elimination and transparency was a company that posted the performance of the routes of every lease operator. Monthly overhead averages that were necessary to maintain a pumper’s wells and daily average production numbers for the route were on display at the field office for all to see.

Sure, some wells were going to produce more than others. And you’re right, a few outlying wells were going to be more troublesome (read: cost-intensive) than the others. However, spread out over a pumper’s route of 15-40 wells, a company is able to see a distinct differentiation of performance among its employees (and thus reward production teams accordingly!)

Both the ‘old pros’ and the ‘young know it alls’ are difficult to manage. Getting them to understand how their engagement (or lack thereof) with their route affects the bottom line of the company can be difficult. However, when companies are fully transparent, poor performers are left to argue with the numbers (and we all know that ain’t much fun! ;-P)

These methods of peer review may be reserved for only the most progressive companies in the oilfield, but we believe that transparency is a much more powerful and productive combination than administrative rules and regulations.

Automation of Your Production Reports

After eliminating and reducing as much as possible, go through and map out what you can automate or outsource, in ways that will both free company time and improve your results.

Most great oil companies have come up with crafty ways to eliminate paper. Have you ever asked yourself what conditions would have to exist for the team and executives to get all the reports and analysis they need with the click of a button? By submitting production numbers in real-time (such as with an app like GreaseBook), ask yourself whether you could eliminate the need for someone to do reporting altogether…

In doing a lot of this elimination and automation, understand “data-addiction” is a real issue. As a company, you need to ask yourself which reports are nice-to-have versus completely necessary. It is common for executives and board members who ask for reports to forget that many take considerable time and energy to produce, and that time isn’t free because it takes people away from the true business at hand (ie pumping oil).

Rather than blindly producing reports, ask them their business goal for the report. It’s not uncommon that they need something other than for which they’ve asked. Help executives understand the cost of the reports they want, so they can prioritize their requests.

Ask yourself how you can reengineer your reports to be more useful. Reports are often created just because someone wants it without a clear idea of its purpose. Ask, “What decision will this report help you make better? What is the goal of this report?” If a report doesn’t help you prioritize your energies or make better decisions, it should probably be reworked or thrown out. In doing so, staff is able to automate oil purchaser reports, and push out many of the duties that were originally intended for in-house admin to the pumpers in the field.

Never Give Up

Why does it feel hard to develop self-managing people and teams? Assuming you have hired good people (which many times isn’t the case), a main cause of failure is giving up too soon.

No doubt, adhering to elimination, automation, outsourcing, and delegation requires patience and practice. For some of you, it might take eight weeks to make a team self-managing. For others, it could be eight years. But if you give up along the way, you for sure will never make it happen. Stay committed, your bottom-line depends on it!

Picking up from our last installment, you should now know that when it comes to our VOC emissions, “what gets measured gets managed”. Essentially, you should understand the importance of (1) how to measure your VOCs, (2) whether you fall under QuadO rules, and (3) what to do about it (if anything!) so that you can rest easy at night.

If you missed that post or just want a refresher, you can check it out by clicking here.

Are VRUs the answer?

The short answer: “Possibly”.

Basically, the Vapor Recovery Unit takes non-product output (hydrocarbons that aren’t making you any money) off the top of your storage tanks, collects the gas, compresses it, then pushes it back to the sales line.

In the past, the oil & gas industry considered type of revenue stream as “non-core function” — essentially, oil companies were oil companies, and they didn’t really care about the associated gas. Gas companies made gas, they didn’t care about the condensate. But, that’s quickly changing…

And, even though operators must keep an ever more watchful eye on the compliance of their facilities, there is still only one criteria you need to determine when contemplating to install a VRU. The simple question you must ask yourself is: “will it make me money?”

If installing a VRU doesn’t pay out, don’t install it. If it does, go for it. Just make sure you let the numbers make the decision for you.

But what you must understand, a VRU is not a control. It’s classified as a piece of “process equipment” (which basically means it’s not in the rule books). Basically, when we install a VRU system and collect these emissions, any emissions returned back to the sales line won’t count toward our annual total allowed by the EPA.

The Savvy Operator understands the benefit of returning emissions back to the salesline are threefold. First, you’ll be able to profit from these emissions. Second, you’ll be 100% in compliance with QuadO. And third, by “selling your emissions”, VRUs will drop your tanks below the 6 tonne threshold allowing you to drop out of the EPA system altogether. All in all a pretty sweet deal.

Over the past several years, VRUs have received quite a bad rap. A lot of people have gotten burned because they simply didn’t work (facilities with rich gas and liquids will cause VRUs not to work…) Even most VRU dealers will tell you it’s probably one of the most complicated pieces of equipment on site.

Understand, VRU systems are ‘closed systems’. They’re set to kick on under specific pressures in the tank or when they sense gas. Oklahoma & Texas both classify VRU systems as only 95% efficient.

Why do they fall short of a 100% solution? The reason OK & TX state that the VRUs are only 95% efficient is because the VRU will probably fall offline sometime during the year, and the States want to know what you’re doing with your gas when the unit is down…

That being said, if you can prove you’re sending that gas somewhere else (ex: a combust or or some sort of redundant system), you can make that VRU 100% compliant.

The cool thing here is that the ‘burden of proof’ isn’t on the State — the Feds won’t tell you how to run your leases. The ‘burden of proof’ that you’re capturing everything is on you. Prove it to them, and use it to your advantage.

First rule of thumb for VRUs: don’t. go. cheap. There are different VRUs that serve different purposes. And, inexperienced installers will get you into trouble by not sloping lines correctly and accidentally trapping liquids which will cause your VRU to go offline.

What happens when that (p.o.s.) VRU goes down? You fall out of compliance, and you open yourself to being fined… exactly the sort of stuff we’re trying to avoid by installing a VRU in the first place!

The story generally goes like this: independent receives proposal for a $30K VRU unit. Instead, they go low-bid and spring for the $20K system. Eventually, the VRU shuts down, and the independent operator now finds itself out of compliance. What’s worse, the $10K that was saved could cost the company $100K+ in fines…

Basically, don’t buy cheap — that means no compressors from Home Depot. Get an expert. Better yet, get someone to train your field guys on the proper maintenance of the unit. Also, be damned sure they offer ongoing support (why? because you need someone who has replacement parts that can get out there and fix it in 24 hours… you can’t be offline any longer, it’s gotta be up and running…)

We realize this sounds like a lot of work, but a properly installed VRU can pay for itself in a very short amount of time.

Also, large operators take note, too: refinery spec VRUs are overkill. Many times, large independents will spend $250K on a unit when a $30K unit would put them exactly where they need to be. Standardized systems are all that’s required (from what we’ve put together, we’re recommending no custom VRUs, and no one-offs…)

Enter: The VR Tower

Developed by Anadarko in the 1990s in the Giddings Austin Chalk Field, the VR tower netted Anadarko $7-8MM per year from 1993 to 1999 in gas sales and eliminated 99% of their headaches caused by compliance.

The VR tower is a new twist on an old industry standard: basically, it’s a glorified gun barrel. The VR tower is an atmospheric flash vessel, generally about 30 ft tall, 36 inches in diameter, with a capital cost of about $30,000. Now remember, 90% of our gas breaks out during flash. From your heater treater or low pressure separator, you bring in your crude, it splashes — boom! (kinetic energy) — and you get your flash.

VRT VRU.JPG

However, in a VR tower, not only does crude drop 30 feet (that’s some serious flash!), but you also have a 10 ft of vapor headspace. There is a liquid seal — this means there’s no way to ever get oxygen to your sales line. All the gas and live oil is turned to dead oil, and your stock turns to dead stock.

What’s more, is that when you open that lid to take a gauge measurement, you don’t get that ‘whoosh!’ of gas anymore — it’s all been broken out in the VRU tower. That being said, it’ll save you from worry of being fined because a purchaser or pumper accidentally leaving a thief hatch open. So, when oil falls from 50psi to about 5 psi in the VRU, it completely switches the compliance equation to benefit the operator. Your tanks no longer fall under Quad0, and you now drop out of the EPA’s system!!

Towers are (relatively) cheap. In fact, some consultants think it’s the future of the oil & gas industry. Basically, instead of having a heater treater and separator dumping straight into a tank, oil will flow through a flash vessel / VRU tower first.

Remember, the more headspace you have (i.e. the taller the tower), the better. Essentially, it’s a cheap way to comply with the rules… everybody wins: you, the EPA, and the environment.

Again, this isn’t for those stripper wells, it for those higher volume wells producing 50-100 bbls a day w/ a lot of gas flashing off.

Side Note: We’ve heard Chesapeake is starting to install these towers. They’re flaring off the top, and using this method as a very effective means of reducing the gas coming off their tanks.

What’s that you say? You’re nowhere near the size of Chesapeake? While you may not be able to afford a VR tower at every site, we always encourage the idea of ‘plug-and-play’ equipment. A VR tower only be economical during the first few months of flush production. That being said, over the lifecycle of a well, you’re going to need 2-3 different types of VRU units. That’s why we so strongly discourage ‘one offs’ customized to each site and promote the idea of moveable, skid mounted equipment.

Essentially, the idea is as soon as one well starts to fall off (and you bring another one on), you shift this equipment around. Mounting your VRUs and combustors on skids lowers your CAPEX, and enables you to use the right tool for the job.

Think about it: this doesn’t just apply to your VRUs and combustors… the idea is just as easily transferable to expensive sensors and SCADA equipment. There are many different camps of thought around the use of SCADA and at what level of production is necessary to justify the costs. Although technologies like remote operations and SCADA have sought to address productivity and efficiency issues, many independent operators are of the mindset that a mature well is going to produce what it is going to produce regardless of whether its production is monitored or not.

Even in the case of high-flow wells, most operators require that their pumpers visit these sites several times a day, trumping some of the potential benefits a wireless monitoring device may tout… but I digress, we’ve written about oil well monitoring with a smartphone app a lot, even in an article published by E&P Magazine which you can check out here:

https://www.greasebook.com/blog/oil-well-monitoring-with-an-ipad-app/

VOC Detection via Drones

Ever been in the field before? (ok ok dumb question) Ever smelled gas before? We thought so. Usually, that means you’re crossing a gas trail. The interesting things about VOCs is that they generally don’t disperse; they often hang tight and travel along a specific trail. These gas trails will travel along 4-5 miles crossing highways, fence lines, and backyards.

Like in every other aspect of the oilfield, technology is changing. Infrared cameras used to detect emissions are now old technology. Yes, it came from the military. Yes, it’s $100k per camera. But, they’re labor intensive and fail to find many of the leaks.

New tech to detect emissions is now commercially available. In fact, many folks are talking about these new emissions sensors being attached to fixed wing aircraft or drones. When combined with meteorological instrumentation and sophisticated software, these technologies can detect methane plumes and quantify emission rates from your tanks — all from authorities sitting inside a parked van controlling the drone.

Drone from the movie Terminator 3: Rise of the Machines

And, while these technologies aren’t quite ready for prime time, the fear they incite may be used by your local VRU dealer to conjure up a few early sales ;-P

Looks like we’ve got two choices: (1) open season on drones, or (2) get compliant. Understand, a new playing field is quickly evolving. Rest assured that the EPA will be checking it’s list, checking it twice… gonna find out who’s. . .

Got something to add in the comments below? If so, post it!! Other independents like you wanna hear it!

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