Companies spending too much time and money on their AFE processes

Most companies’ AFE processes are costing them time and money because they rely on manual processes that can move only as fast as the slowest employee.

To illustrate the real costs of this manual process, let’s take a look at an operator I recently met with. They operate throughout the Ukraine, Russia, Hungary, Bulgaria and Slovakia, producing in excess of 11,000 barrels of oil equivalent per day.

Over the last four years its annual capital expenditure has ranged between one and two hundred million US dollars.

Despite their large and complex business, when it came to managing capital expenditure the company largely relied on manual, paper-based method for the “Authorisation for Expenditure” (AFE) process.

With manual AFE processes in place, they spent more than 1,000 hours last year on the administration of AFEs, costing them over $80,000 on AFE creation, cost estimation, project iterations, and duplicate data entry.

There was also no single audit trail, with multiple templates across countries. As a result, different templates were being used and this resulted in inconsistent – and sometimes incomplete – information being received.

How can this operator achieve the same cost-reducing and time-savings goals of their competitors? By streamlining processes.

The company approached TouchstoneEnergy and we recommended our industry-tailored Business Process Management Platform.

Upon implementation, they have immediately started to operate more efficiently and look forward to more gains thanks to these best practices:

• Integration of existing solutions: the platform dynamically links to the company’s other applications. All information is now stored in a central database and a number of reports have been built providing them with key information that they did not have readily available before. By removing duplicate data and using their integrated tools they can drive real, cross-team collaboration.
• Automated, Consistent and Accessible AFE Approvals: Giving staff access to accurate and integrated data will make their data-gathering a smooth process. Manually moving information from location to location will be a thing of the past. Further, automation will give them the ability to fine-tune their workflows and easily identify any lingering bottlenecks.

A lot of companies continue to experience AFE challenges similar to these. AFE management isn’t often seen as an area ripe for cost-reduction, but it is a relatively easy way to eliminate unnecessary work and get AFEs processed quicker and more accurately. The streamlining of processes can really make a difference in cutting costs when budgets are low.

In short, improvements to your AFE processes can make a big difference for your organization … no matter the price of oil.