CD-ROM TECHNOLOGY ENHANCES ECONOMIC ANALYSIS OF LEASE OPERATING STATEMENTS

Incorporating historical lease operating statement (LOS) data with the I[ technology of CD-ROM provides engineers and managers with an economic evaluation tool that continually increases in effectiveness. One such system was specially developed by Dwight's Energydata Inc. for Apache Corp.

The project provides Apache personnel, from pumpers to managers, a way to evaluate economics of any or all of the company's leases through a versatile database and CD-ROM LOS.

Through its experience and applications as a supplier of monthly historical production data, Dwights created a Windows- based application on CD-ROM to fit Apache's needs. The result is a monthly updated, continuing history of lease operating data instead of a cumbersome mainframe reporting system accessible by only a few personnel.

A key to the system is, of course, the nearly limitless storage capacity of a single CD. And the LOS database can be digitally manipulated via personal computer (PC) for any lease or set of leases.

EXPANDED CAPABILITY

Apache's previous LOS reporting system was similar to many other producers' systems in that detailed records were archived off the database regularly. Access was limited to mainframe users required to turn around report requests in I week.

With historical LOS information stored in a database format on CD (one CD stores 660 megabytes of information - equivalent to 1,500 floppy disks), a PC user can review years of journal entries at any time.

Dwights' new system is a repository of Apache's lease data, as well as ananalytical tool by which the company's management can derive operating economies. At the end of the LOS is a summary called lease level income (LLI), which is basically revenue less expenses. A negative LLI indicates that the lease is losing money.

The LOS, as a profit and loss statement, is used by engineers, managers, operations accounting, and district employees throughout Apache who wish to key in on the financial viability of leases in their geographic areas.

QUICK TURNAROUND PROJECT

With Dwights creating the LOS database and converting the data to a CD environment, Apache needed to devote only three employees as liaisons to the project. Although Apache had the in- house expertise to create its own LOS database, it relied on Dwights for completion of the project.

Discussions with Dwights regarding the project's specifics began in March 1994. The development phase took 6 months, and the project was completed in December 1994.

Apache determined which data would be incorporated in the new database. Historical record compilation began in May 1994.

Confidentiality of the data was not an issue, even though LOSs indicate a company's financial stability. Dwights had internal procedures in place-user names, passwords, and access codes unique to specific projects-for protecting another company's proprietary data. The long-standing working rela- tionship between the companies voided concerns over data integrity.

One initial stumbling block was the downloading of Apache's data. This "data-transfer" problem was resolved through efforts by both companies. Apache revised the initial format of the data it was sending, and Dwights found a new method to incorporate it into the LOS database. The solution was to transfer fixed-length report files via Internet file transfer protocol (FTP).

INTERNET UPDATES

The LOS data are updated throughout Apache's general ledger close cycle, which concludes around the 15th of the month following the production period. LOS statements are generated via the general ledger reporting system but are not automatically printed. Apache is working toward a "paperless environment" so the report images of the LOS statements are captured in a mainframe report database which can be used to search, view, or print reports.

Selected LOS statement report images are extracted from the mainframe report database and downloaded to a network. The ASCII report images are passed through a parsing routine and reformatted into ASCII fixed-length text files. ASCII fixed- length files are easier to import to databases than report images.

The fixed-length report files are compressed and transferred to Dwights via the Internet FTP. Dwights then decompresses the files and loads the data to the LOS database developed for Apache.

After Apache transfers the LOS data to Dwights each month, Dwights processes it in the database, writes it to a recordable CD, and sends the CD to Apache's Houston office. Individual data sets are then culled and recorded on CDs so each Apache office is provided with the necessary information.

The power of a database tool means that once the cycle has run, management can selectively view and summarize current data. Since CD access includes a lease history, tables can be generated and viewed, or Apache users can construct historical plots through Microsoft Excel. Users have found that analyzing these plots on a PC, versus reading hard copy reports, is a more efficient way to review history and evaluate future actions on a lease-by-lease basis.

A hard copy report of LOS detail is available on request and includes the current 6 month actuals, year-to-date total, and year-to-date monthly averages for the current and previous years.

Summarizing data by field or pumper with the old system was cumbersome and required the accounting department to perform the report request function. Often the request had to be repeated from miscommunication between employees in the field and accounting department. However, by using Dwights' LOS database, Apache's accounting group and regional employees can inquire and receive information via PC.

BEYOND GOALS

Users of the Dwights/Apache LOS system continue to find additional applications due to the flexibility with which the data can be requested and manipulated. The results have gone beyond the project's initial goals, which were to:

• Provide easy and immediate access to LOS data via PC.
• Summarize information by operator, field, pumper, etc.
• Incorporate data into spreadsheets and plots.
• Eliminate paper.
• Digitally manipulate the data.
• Store historical data beyond 6 months.
• Perform PC analysis.

The goal relating to digital manipulation of data shows how the system has improved information transfer. Previously, users forwarded requests for special reports through the company's management information systems (MIS) group, which then generated the paper reports.

With the old system, a full set of statements was sent monthly to each field office, where the set was photo-copied for every user. In some cases, only a page or two of a report was needed immediately; a different format would have been more useable.

Not only does the LOS system allow users to select and search only the specific data of interest, it also allows the data to be incorporated into spreadsheets, where analysis of ongoing operations is easier to comprehend.

Viewing LOS data via CD-ROM also aids users in eliminating other methods associated with paper reporting, including routing and approval processes. Quicker report generation not only produces less paper but also gives users exactly what they need.

Apache's need for a historical picture of its operating expenses created a means to fully manage them. With CD capacity, storing multiple years of data on a single CD provides an improved picture of a lease's operations. As more historical data is input, analysis becomes more effective.

Apache can now look at a graph of a well's expenses and analyze how this compares to revenues. This instant analysis is accessible to all users, from corporate managers to field personnel. For example, a field foreman can review the well's income and expenses in a variety of sorts and look for oppor- tunities to run the operations more efficiently.

Each year Apache determines what each foreman is expected to produce and spend. With the LOS system, a summary of production and expenses by foreman includes a list of wells, total expenses by month, and the LLI by month. Employees from the field or corporate office can readily notice any errors before they become a major difficulty.

CLOSE AT HAND

Dwights' LOS project provides a means to deliver decision- making criteria to Apache efficiently. To see the big picture on expenses, LOS data can be sorted and summarized by field or dis- trict. In this respect, the LOS database is being used as a tracking system.

It's also being used to reveal the economics of acquisition and divestiture candidates. For example, if Apache is considering selling its interest in well X, the LOS provides the current eco- nomics for that well. It can also be used to summarize a group of wells being considered as a divestment package.

An especially versatile use of the data was found when Apache decided to sell some of its Rocky Mountain properties. With the historical lease data on CD, the compilation of data for various groups of leases was made available at the data rooms for direct on-line viewing and sorting by prospective buyers.

Apache used the system's sort and search capability for a particular data set, wrote the information to a recordable CD and quickly provided it to an interested party. One-half gigabyte of data can be recorded on a CD in 30 min.

APPLICATIONS

The LOS report is an example of successful data management. Every company is inundated with a mass of internal accounting data that employees in various locations need to access. Many companies still physically transfer reports between offices.

With CD technology, the possibilities for data management are endless. Any large data set that is difficult to manage becomes a potential candidate for future CD application. The Dwights-Apache LOS project has laid the groundwork for an infinite number of similar applications.