Oil and gas markets have seen both offshore and onshore capital investment strategies shift focus. Reserve replacement and production volume growth have given way to lowering breakeven points through capital efficiency. As a result, leading companies have improved their ability to profitably develop assets in a wider variety of price scenarios. Sustaining this level of performance will require maintaining discipline even as prices recover above $50.
From a capital project perspective, capital efficiency requires defining a clear corporate capital investment strategy; optimizing an organization’s portfolio to align with that strategy; developing internal processes, procedures, and capabilities to execute projects that align contract strategies; establishing how “value” is measured; and enabling technology with an organization’s capabilities and risk appetite.
Ongoing measurement of value from capital investment is standard practice. This return fluctuates with commodity price, resulting in inconsistent and unpredictable revenue forecasts. Successful E&Ps will differentiate themselves from their competitors by optimizing the return from each capital dollar invested.