Examining the Benefits

 
 
By Bob Violino  |  Posted 2009-10-21
 
 
 

Cano Petroleum, a fast-growing, independent energy producer, owns oil fields across Texas, New Mexico and Oklahoma that possess significant proven reserves as well as a high ratio of probable reserves. Cano increases oil production from these properties by using enhanced oil recovery methods, recovering an additional 10 percent to 50 percent of the original oil in place over the 10 percent to 15 percent typically recovered by primary drilling.

But the Fort Worth, Texas, company, which was founded in 2004, relied on an outdated, disjointed accounting application that wasn’t supporting Cano’s rapid growth and increasingly complex finance operations.

Cano needed to consolidate real-time financial and performance management reporting across five geographically dispersed oil fields, and needed to implement a scalable and flexible system that was specific to the oil and gas industry.

Without upgrading its financial system, Cano would not be able to quickly and effectively develop and execute sound business strategies based on accurate information, putting the company at a competitive disadvantage.

Earlier this year, Cano deployed Optimize FinanceOne, an SAP Business-All-in-One-based system that will provide the company with the advanced financial planning, reporting and governance capabilities it needs to eliminate waste and identify profitable areas of its business.

The company selected Optimize FinanceOne in large part because of its reporting and purchasing capabilities, its ability to work well for oil and gas applications, and its scalability. Cano also wanted a “turnkey” solution that would be up and running quickly without disrupting business, and that would have a low total cost of ownership.

“The main driver in our upgrade was to move from a reactionary accounting system built for a small oil and gas company to one that would handle increasing growth demands while giving a real-time insight into capital expenditures,” says Jon Morgan, manager of IT at Cano Petroleum.

Cano implemented the product, which consists of preconfigured, prepackaged software from the SAP ERP (enterprise resource planning) Financials system including SAP General Ledger, SAP Financial Supply Chain Management and solutions for governance, risk and compliance, with help from SAP partner Optimal Solutions Integration.

Optimal Solutions has more than 15 years experience working with clients in the oil and gas business, and that was a key to the successful implementation of the technology, Morgan says. So was getting senior executive management support for the project.

Morgan says the expected benefits of the system include real-time enterprisewide visibility of information that enables faster, more informed strategic and opportunistic business decisions; a tighter alignment of production goals with supporting financial, human and equipment resources to drive greater efficiencies and productivity gains; and reduced risk and associated costs of financial restatements and legal/regulatory noncompliance.

The expected operational benefits include the elimination of disparate, manual, spreadsheet-based financial reporting processes; consolidation all financial reporting onto a single system; improved accuracy, efficiency and speed of financial operations; a 25 percent reduction in financial close, reporting and auditing processes; a 20 percent time savings in monthly payment cycle processes; and real-time, accurate visibility into service date accruals.

ERP packages such as those offered by SAP, Oracle, JDE, Baan and other industry-specific providers, are integrated systems that link together information across business relationships, applications, infrastructures, and corporate cultures regardless of department, distance or function, says Jacoby Garcia, an independent consultant in Houston who has followed technology trends in the oil and gas industry for more than 25 years.

“The goal is for the company to use one software package with a number of integrated modules,” rather than multiple and conflicting systems, each with its own language, database standard, user interface and data format, Garcia says. “When this integrated model is applied to an oil and gas exploration and production [company], a user in materials management could see the same data on his or her screen as a colleague in accounting. An executive could then monitor inventory levels throughout the company and drill down online and view real time accurate data.”

Data is entered only once for the entire enterprise, instead of continuously being recaptured or re-entered, Garcia says. “As this flow goes through a logistical supply chain, the chain runs the risk of breaking down if data must be re-keyed at any step along the way,” he says. “ERP systems help companies react quicker to economic pressures [and] market opportunities, reduce inventory and develop new business opportunities.”