ZIFFPAGE TITLEDesktop Drilling DecisionsBy Mel Duvall | Posted 2005-10-01 Email Print
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Mapping software pinpoints new sources of oil and natural gas for fast-growing company.
Desktop Drilling Decisions
Not long ago, engineers would have to gather information from dozens of sources before they could calculate the best prospects for drillingwell logs, which detail various types of soil and rock encountered during drilling; production records from wells in a targeted area; and seismic readings, which use small explosions to map underground geological formations.
Today, Peyto engineers use an online hosted application from Denver-based IHS Energy to deliver that same information in minutes to their desktops.
Gray's long-held dreams of launching his own exploration company were kick-started in 1998 when his then-employer, Pinnacle Resources, was taken over by a rival. Not long after picking up his severance check, Gray formed a new energy venture with his next-door neighbor, Rick Braund, a landman (someone who negotiates with landowners for drilling rights).
Only 33 at the time, Gray became CEO of Peyto Energy, named after Wild Bill Peyto, a legendary Rocky Mountain guide.
He didn't come into the venture empty-handed. For several years, Gray had been formulating a hunch. By examining computerized well logs and production records of gas-producing wells along the eastern slopes of the Rocky Mountains in central Alberta, Gray had detected an enticing pattern: a number of high-producing, long-life gas wells in a zone known as the Cardium Formation. Drilling wells deep enough to hit the formation, about 6,500 feet down, is expensivean effort that involves about 18 days of drilling at a cost of at least $1 million.
Private investors came through with enough funds for Gray to drill two wells. The first, at the south end of the Cardium Formation, was a bust. The well was projected to take 20 days to drill, but took 50 days and didn't produce enough gas to make it commercially viable. But the second, at the north end of the formation, hit the target, producing a generous stream of gas without water contamination, as Gray had predicted.
Now, Peyto rarely misses, keeping eight drilling rigs going at a time in search of similar high-producing, long-life targets.
"We benefit from the learning curve. We're doing the same things over and over again," Gray says. Peyto's engineers have learned which geological formations provide the best results.
AccuMap from IHS Energy is the key piece of technology that allows Peyto to score drilling success time after time. Christine Bovaird, AccuMap product manager, says the industry benefited from a full-scale digitizing effort in the mid-1990s to make historical and ongoing industry data available online. By working with industry information providers and combining previously separate sources of data, such as pipeline information and production records, an engineer can use AccuMap to access all of the information he needs from his desktop.
Bovaird demonstrated how to show all of the gas wells in central Alberta that have produced more than 500 million cubic feet of gas per day for 15 years or more. An engineer can obtain increasingly detailed information on those wells, right down to an aerial photograph of the exact location. "It took days for engineers to gather the data they can now get at their fingertips in minutes," she says.
Peyto pays out half of its free cash flow (revenue from the wells after Peyto pays government royalties, operating costs, office costs and interest) to shareholders as dividends. The rest is plowed back into the ground through exploration. Peyto's success, Gray says, is measured by how well it uses those funds to find the most productive, lowest-cost sources of oil and gas.
With the exception of seven finance employees, all staffers at Peyto are dedicated to the single-minded task of producing exploration plans to find new sources of energy and tying those finds into third-party pipeline systems. All other non-core functions are outsourcedthe drilling of wells is outsourced, primarily to a company called Crest Energy Consultants of Calgary, while information-technology management is handled by a local firm called Servis.
Achieving a stellar revenue-per-employee figure was never the goal, Gray says, just the result of sticking to the game plan.
"There are no set numbersno employee ceiling," he says. "Employees are responsible for looking at their own workflow and deciding what they need. But when I show them our figures [costs per barrel of oil equivalent] compared to the rest of the industry, they take pride in what they've achieved."
Peyto Energy Trust 450 First St., Calgary, Alberta, Canada T2P 5H1 Phone (403) 261-6081 URL www.peyto.com Business Oil and gas exploration Key Business Executive Don Gray, chief executive officer Revenue, 2004 $193 million Revenue Per Employee $11.4 million Challenge Maintain low cost structure in the face of rising competition for land rights, oil and gas drilling rigs, and services Key Productivity Application AccuMap from IHS Energy
Peyto Energy Trust 450 First St., Calgary, Alberta, Canada T2P 5H1
Phone (403) 261-6081
Business Oil and gas exploration
Key Business Executive Don Gray, chief executive officer
Revenue, 2004 $193 million
Revenue Per Employee $11.4 million
Challenge Maintain low cost structure in the face of rising competition for land rights, oil and gas drilling rigs, and services
Key Productivity Application AccuMap from IHS Energy