HEM - Organizational Learning and Continuous Improvement

Organizational Learning and Continuous ImprovementPresented by Harold E. McGowen III, PE

President & CEO Navidad Energy Partners, LLC

UPTECH Upstream Oil & Gas SummitNovember 8-10th, 2015

Hyatt Regency Lost Pines Resort, Austin

Overview

Navidad ResourcesOil and Gas Exploration

and Production

Navidad’s play was located in the prolific U.S. Gulf-Coast fractured carbonate belt.

Source: McGowen, H. E. (2015, March 17). Case Study: Using Managed Pressure Drilling and Oil Based Mud to Efficiently Drill an Extremely Thick and Highly Fractured Carbonate Sequence Under an Extremely Thick and Highly Sensitive Laminated Shale. Society of Petroleum Engineers. doi:10.2118/173021-MS

MASTERS CREEKAUSTIN CHALKPEARSALL

AUSTIN CHALKBUDAGEORGETOWN

KURTENAUSTIN CHALKBUDAGEORGETOWN

GIDDINGSAUSTIN CHALKBUDAGEORGETOWN

PEACH CREEKAUSTIN CHALKBUDAGEORGETOWN

PLEASANTONAUSTIN CHALKBUDAGEORGETOWN

ICIGEORGETOWN

BROOKELANDAUSTIN CHALK

Target Pay:BUDAGEORGETOWNEDWARDSKIAMICHI SHALEGLEN ROSEJAMES LIME

Navidad fracked and commingled 1,400’ of stacked fractured limestone (carbonate) pay.

Source: McGowen, H. E. (2015, March 17). Case Study: Using Managed Pressure Drilling and Oil Based Mud to Efficiently Drill an Extremely Thick and Highly Fractured Carbonate Sequence Under an Extremely Thick and Highly Sensitive Laminated Shale. Society of Petroleum Engineers. doi:10.2118/173021-MS

Formation Type Characteristics

Austin Chalk Lime Non-Productive

Eagleford Shale

Woodbine Sand Wet/High Perm

Woodbine Dexter

Shale/Sand

Maness Shale

Buda Lime Fractured

Del Rio Shale

Georgetown Lime Fractured

Kiamichi Shale

Edwards Lime Fractured

Paluxy Shale

Glen Rose Lime Fractured

WEAK

SENSITIVE

Managed Pressure Drilling

Managed Pressure Drilling

Managed Pressure Drilling

Managed Pressure Drilling

Managed Pressure Drilling

Oil Based Mud

Navidad had to quickly learn how to drill, complete, and produce economically.

While there are many sources of learning...

QUALITY CONTROLDATA

LESSONS LEARNED

DATA ANALYSIS

CAPTURED ON THE FLY

LITERATURE REVIEW

EXPERT ADVICE

OFFSET WELL REVIEW

Learning

SEMINARS

This is about learning from our mistakes.

Source: CartoonStock

IMPACT ON BOTTOM LINEOrganizational Learning and Continuous Improvement

Organizational Learning has a direct impact on the bottom line.

For example, in drilling, Organizational Learning can:• Reduce Non-Productive Time (NPT)

– and associated trouble cost, i.e. the negative impact of unexpected events on well delivery time and cost.

• Reduce Invisible Loss Time (ILT)– i.e. the negative impact of excessive flat times and general

inefficiencies that lengthen well delivery times.• Increase Rate of Penetration (ROP) & on-bottom drilling time.

SPE/IADC 140333, How to Accelerate Drilling Learning Curves, Eric van Oort, SPE, James Griffith, SPE, and Barry Schneider, SPE, Shell Upstream Americas

Everyone has heard the term “Learning Curve.”

C1 = Excess Drilling Time available for

reduction

C3 = Optimum or

“Factory Well” Drilling

Time

C2 = Learning Coefficient (impacts rate of learning)

Source: SPE 15362

Fast learning decreases time to reach the best case factory well.

C1 Excess Drilling TimeC2 Learning Curve CoefficientC3 Minimum Drilling Time

Maximum (C1+C3)

Minimum Possible

(C3)

LearningCoefficient

(C2)

Ratio =Our

=1.78

Source: SPE 15362

Example: Fast learning decreases time to reach the best case horizontal well.

1 2 3 4 5 6 7 8 9 10 11 12 $-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Projected Learning Curve

Total Cost $MM

Learning typically accounts for 55% of cost of first 6 wells in a Program.

Brett, J.F. and Millheim, K.K.: "The Drilling Performance Curve: A Yardstick for Judging Drilling Performance", SPE 15362, presented at 1985 SPE Annual Technical Conference, New Orleans, Louisiana.

Gains are harder to

achieve here…

New technology can cause a step change in performance.

• C3 represents the limits of the current technology and organizational ability, not necessarily the fastest possible time to drill wells in the area.

C3 with Old Technology

C3 with NewMore Efficient Technology

Source: SPE 15362

If prices turn-around the challenge will be: Organizational Forgetting!

• FORGETTING: Organization overcame serious stuck pipe on the first and second wells, forgot about the stuck pipe problem during the seven year hiatus

• LOSS OF KEY PERSONNEL: Key members of the drilling organization left. New team re-learned the hard way.

Forgetting Loss of Personnel Source:SPE 15362

METHODS OF IMPLEMENTATION

Organizational Learning and Continuous Improvement

RapidOrganizational

Learning requires a managed process…

Source: CartoonStock

Learning requires time, resources, and management support.

• Coach on location to capture and teach lessons– E.G. “What lessons learned apply to this section of the hole and

what did we learn in the past 24 hours?”• Review existing records and generate risk factor/lessons

learned database.• Capture lessons learned during meetings at every tour.• Generate a standard operating procedure.• Review procedure/lessons learned in spud meeting, tour

changes, hand-off meeting between well-site supervisors, etc.

Learning is an iterative process.

The process has distinct phases.

Phase 1 – Analyze

Data

Phase 2 – Plan, Do, Measure,

Learn

Phase 3 – Discuss,

Document, Challenge

Phase 1 – Analyze

• FACTS not just OPINIONS• Identify areas of most variance and poor

performance through historical analysis.• Compile an overall consensus on which

questions need to be answered to produce the most efficient result in performance improvement.

• Implement Plan-Do-Measure-Learn continuous learning cycle using performance coaching in field.

• Perform Planning and After Action Review sessions.• Review Daily Task List with rig crews.• Make Performance Visible displaying daily graphics.• Capture Learnings and share throughout all

operations.

Phase 2 – Plan, Do, Measure, Learn

• Transfer daily capture of lessons learned to organizational leaders and shift focus of coaches towards creating Operational Best Practices (“OBP”).

• Discuss all operational phases with rig leadership and office team.

• Document each operational phase imbedding learnings and operating procedures.

• Challenge the OBP to achieve final copy status.• Begin using OBP for Pre-tour reviews, Planning & After

Action Sessions, and capturing Learning’s.• Maintain OBP as “Living Document” continuously reviewed

and updated with current “Best Practice”.

Phase 3 – Capture:Discuss, Document, Challenge

IMPORTANCE OF TRIBAL KNOWLEDGE

Organizational Learning and Continuous Improvement

Great ideas often come from unexpected places…

The Industry is good with Viral Knowledge but often loses critical Tribal Knowledge.

LEVERAGING I.T.Organizational Learning and Continuous Improvement

Learning can be accelerated through information technology.

• Web-conferencing– Application Sharing– Video

• Web-based project management tools

• Cloud-based document storage

• Lessons Learned Database Tools

• Mobile Applications

Source: CartoonStock

REAL WORLD RESULTSOrganizational Learning and Continuous Improvement

Navidad had great results with Organizational Learning/Continuous Improvement.

• 13 Month Program• Direct savings of $9.2MM+• ROI of 10:1 on learning intiative• 2 String Design (completed well) improved

by $42.79/ft.• 3 String Design (drilling only) improved $36.63/ft.• Play covered 100,000 acres, so individual well

cost savings had ~200 Fold impact.

Questions?

Source: CartoonStock