Well Cost Control & Forecasting
Subject to participant requirements
Course overview
The course begins with discussion of the fundamentals of Well Cost Control & Forecasting.
The course refreshes the student in the principles of the well cost improvement cycle.
Starting with an overview of the technical side to well construction and cost, through to the relationship with finance and partners in the well, we then look at the authorisation for expenditure (AFE) process.
We then focus on the importance of cost tracking, how it fits in the finance team's monthly reporting cycle, and how it benefits the well engineering team.
Next we look at the final cost review and post well reconciliation process. Finally we look at how to pull all the disciplines together into the well cost improvement cycle and how this benefits the organisation’s annual budgeting, cost estimation, cost tracking, reconciliations, finance & partner reporting, and overall value adding information to the internal management team.
Learning objectives
- Learn or refresh the principles behind well cost control and forecasting
- Learn the link between the process of well design & drilling execution and cost control/forecasting
- Discuss the practical use of well cost control
- Learn the methods to ensure accurate cost control
- Learn to create financial control documents: AFE’s, Cost Trackers, Well Reconciliations
- Learn how to create the value of work done and apply this to month end reporting and overall project forecasting
- Use what you learn to improve the overall cost improvement cycle
- How to report and present this financial information and add value to your organisation
The course is designed for
Well and Drill Engineers involved in well design and drilling projects, as well as Finance Teams & Cost Engineers with an interest in Well Cost Control & Forecasting principles.Also for attendees with little or no experience in Well Cost Control & Forecasting to pick up the principles and run a Cost Tracking Model for very simple to more complex types of wells (batch drilling).
The course pulls all the principles of Well Cost Control & Forecasting together and shows how the role fits into an Oil & Gas Operator’s organisation, and how it adds value for the management.
Course outline
Building a robust well cost estimating model
- Simple model
- The cost elements, categorised in TRC, DRC and OOC
- Introducing complexities
- Reports and analysis, cumulative cost control
Role of the AFE
- Preparing a well AFE, setting up an AFE tracking system
- Using project management techniques to plan, organise and control resources
- Rig contract and support services for drilling
- Materials and supplies used in well drilling
- Typical well cost breakdown - onshore well
- Typical well cost breakdown - offshore well
Well cost reporting
- Reporting daily, weekly and monthly estimated drilling cost report
- Understanding the array of well cost reporting and how to analyse them
- Preparing drilling cost reports
- Time depth graph – plan vs actual
- Graphs – cost plan v actual, Cost per foot
- Daily action plan and 7-day look-ahead
- Other well reporting
Cost tracking model
- Specific to circumstances
- AFE template, entering data, Using Enterprise Resource Planning (ERP) solutions to develop meaningful well cost control and variance reporting
- Keeping an audit trail
What happens when it doesn’t go to plan
- Stuck pipe
- Overpressures
- Lost circulation
- Kicks
- Impact of above on costing model
Risk management of drilling operations
- Managing risk to raise the bar for operations and well management safety
- Mitigation of risk is directly related to on-target performance and operational excellence
- The role of well costing in risk management
Controlling actual well costs
- Controlling and reporting financial commitments
- Role of the cost tracker in relation to well operations, drilling and the company man
- Comparing invoiced costs to tracked costs and reporting variances
- How to identify cost over-runs and prepare information for an AFE supplement
Post drilling reconciliations
- Methodology for detailed well cost reconciliations to required industry standard
- How to perform monthly materials usage stock reconciliations
- Discussion of audit trails, reporting and liaising with accounting
- Audit rights under Joint Operating Agreement (JOA) and preparation for Joint Venture (JV) audit
- Final well cost review and materials usage reports
Accounting for well expenditure - financial accounting
- Breakdown of costs – internal reporting to partners
- Work in progress – accounting while drilling
- The role of the accountants
How oil companies decide where to drill wells
- Exploring for oil and gas, a process of reducing uncertainty
- Objectives of drilling a well: presence, geology, and evaluation data
Overview of well construction
- Well drilling process from surface to reservoir
- Formation evaluation
- Well design and preparation of the drilling plan
- Well completion
- Roles of operator, contractor and company man
- Technical reporting whilst drilling
Miscellaneous & Geology
- Main categories of well costs: Time Related, Depth Related and One Off Costs (TRC;DRC and OOC)
- Difference between exploration, appraisal and development wells
- Geology and reservoir rocks
- Formation stimulation and acidization
Designing a well
- Geological prognosis and well design
- Selecting the rig and other services
- Permanent and temporary equipment and material
- Rental vs procurement
- Casing and cementing program
- Drilling muds and completion fluids
- Drill bits and other tools (stabilisers, directional, fishing, etc)
- Formation and well evaluation
Drilling rig & services contract
- Tendering for a drilling rig, specifications
- Rig contracts, key commercial terms, standard clauses difference between onshore and offshore contracting
- Contract types; day rate, meter rate and lumpsum contracts – single well and multi-year contracts
- Contracts for other services
Well completion costs
- Wellhead equipment, casing, tubing & accessories
- Wireline logging for cement evaluation
- Perforating, stimulation – acid or fracking
- Testing, pressure surveys, gas/liquids analysis
- Completion fluid
- Snubbing, nitrogen
Formation evaluation costs
- Mud logging, wellsite geologist and cutting samples
- Surveys and electric logging; wireline and LWD
- Coring
- Drill stem testing
Planning and drilling the well
- Key contract awards and commitment timing
- Monitoring drilling operations
- Well control issues
- Mud control and testing
- Casing and cementing operations
Building a well costing database
- The cost-database
- Financial commitments – contracts, purchase and service orders
- Developing cost information relating to key day rate costs for equipment, services & personnel (restocking charge, repair/refurbishment costs)
- Developing cost information relating to materials & supplies
- Drilling supervision, safety, waste management and communications
- Engineering support, overheads, insurance and site clean-up
- Contractor help with costings, helicopter, telex, pay invoices
Well drilling cost
- The well lifecycle
- Overview of planning, preparation and drilling a well
- Pre drill – well permitting, surface survey, access and site preparation
- Rig related – inspection, mobilization, day work, standby and directional drilling
- Crew related – travel, catering, accommodation & subsistence
- Power generation, fuel and water, transportation & logistics
- Materials and supplies
- Equipment, surface, casing handling, solids control and downhole tools
- Site preparation – cellar construction, surface casing and intermediate hole
- Downtime and Non Productive Time (NPT)
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