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Software helps track capital costs, complete the "financial face" for oil and gas producers
The oil and gas industry is a highly capital-intensive business, with companies spending millions of dollars drilling wells each year. In a volatile world where producers are beholden to wild swings in commodity prices, it’s critical that companies are able to track their spending. This allows them to react quickly to changing market conditions.
To help producers do this, and be able to accurately forecast future spending, Calgary-based software company COGS Solutions earlier this summer released the new 6.0 version of its flagship interCALM (Integrated Capital Life-Cycle Management) software. It’s a commercial software application tailored to the upstream oil and gas industry, to provide full life-cycle management of current and future capital programs.
The company is also developing new software, interVIEW, which will put in focus the overall financial picture for an oil and gas organization.
Glen White, president of COGS Solutions, says the company’s applications are designed to “eliminate the chaos” so that producers always have a pulse on their organization’s financial status, and to be able to forecast future spending.
“Integration is key to us,” he says. “Everything we’ve built on this whole platform is about being able to integrate with other industry-standard applications. InterCALM builds bridges between established business processes and embraces the concept that capital management should never exist in isolation from the rest of the company.”
InterCALM 6.0 allows producers to define their long-range plan, carry out annual programs and greatly reduce the time spent reconciling budget to actuals, and aids in making proactive decisions to ensure publicized targets are met.
“With integrated budgeting, forecasting, resource scheduling [among other features], there is no other tool on the market that brings together more business processes into one centralized application,” noted Duncan McDonald, technical director with COGS. “Aside from the obvious cost savings of replacing several disparate systems with one, interCALM simplifies the jobs of…project teams while providing the truth in the numbers that management, directors and shareholders today demand.”
John Yeo, business development engineer with Birchcliff Energy Ltd., says the company started using interCALM software because it needed a budgeting solution to replace its Excel spreadsheet–driven tool that met several criteria. Some of those prescribed standards included that the software must be straightforward and robust, it must be multi-user, it must conform to the company’s business process and it must have capital/production forecasting at a daily granularity.
“[We] chose interCALM as it met our criteria, plus it was able to integrate very well with our accounting data and Hyperion Essbase [multi-dimensional database technology], and helped to further improve our business process,” he says. “The support/development team at COGS are also very easy to work with and quick to incorporate necessary changes.”
The software has helped Birchcliff with standardization and reliability, allowed for tighter capital forecasting and tracking, and it has reduced the budget-cycle time because of a repeatable project setup.
“[It has allowed for] easier and faster corporate forecasting,” Yeo says. “[It’s] tightly integrated with our corporate forecasting model, allowing us to capture major changes or model alternative scenarios within a couple of hours.”
Lawrence Backmeyer, manager, exploitation engineering,with PetroBakken Energy Ltd., says the producer started using interCALM in mid-2010 to track its capital expenditures, and the associated volumes and reserves. The main benefit of interCALM is that it allows for detailed information/variance associated with capital being spent, compared to production on a barrel-of-oil-equivalent (boe) basis per day and reserves per boe.
“The company can see how changes in capital affect the [per boe] production and reserves for the year, or monthly, exit-rate production,” he says. “The company can also accurately track capital spending on a month-to-month, project-by-project basis throughout the year.”
The product is fully integrated into PetroBakken’s accounting system where expenditures are automatically updated every month, allowing the company to track expenditures monthly against its forecast. “Each project—well or facility—is tracked separately so everyone involved in the project can see how the project is progressing from a capital expenditure/timing prospective,” Backmeyer says.
Eric Ewin, senior consultant with COGS, adds that the soon-to-be-released interVIEW software will help to complete a “financial face” for oil and gas companies.
“InterVIEW is a finance-focused application that enables oil and gas companies to put a complete financial face on their capital plan and operating activities. In addition to capital and volumes, interVIEW covers revenue/price modelling, royalties, detailed fixed/variable operating expenses, G&A [general and administrative expenses], debt and cash flow modelling. It provides complete income statement, balance sheet and cash flow statements.”
Key features of interVIEW will include flexible price modelling capabilities with an ability to apply corporate assumptions with detailed wellhead pricing factors.
Integration with interCALM, industry leading economics engines and financial applications, along with other source systems, will allow for automatic updates of the latest capital expenditure, production volumes, royalty rates and historic data to speed up the budget or forecasting process, eliminating redundant data entry and errors. It will incorporate detailed production/operating, general and administrative, transportation and other expense calculations, either based on per-boe or fixed amounts, pre-seeded or based on historic actual costs.
The software will feature a “what-if” analysis based on different capital plans, pricing scenar-ios or acquisition/disposition activity. InterVIEW will also feature full cash flow and debt modelling to provide a snapshot of the overall company financial forecast based on current operational plans, among several other features.
McDonald adds that the company’s applications are highly configurable so they can be matched to a particular company’s workflow and business process.
“Though our support is second to none, we provide our clients with the knowledge and tools they need to operate as they see fit and on their own schedule. That model allows us to maintain close communication with our clients to discuss real-world user experience and garner feedback, which we use to continually improve our software.
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