LOE Cost Control System
Operators have been trying to get a handle on their Lease Operating Expenses for many years, and few have had great success. The primary reason for this failure is the focus on LOE management has been vested with the Accounting and Finance departments. This is quite counter intuitive, as accounting systems have 2 significant deficits vis-a-vis LOE management - timeliness and granularity. Most accounting systems have a several month cycle before all costs make their way through the system, and these costs are collected at a level that is not conducive to operational management.
As Easy As 1-2-3
Operational transparency
In order to make operational decisions on LOE Management, engineers and managers must have transparent access to accounting data in a format that is complements their operational decision making. At BOE, we have the combination of accounting and operational expertise, allowing us to deliver the information to those who can make the most impact. The LOE data is delivered through a fully customizable dashboard (Arsenal), allowing the necessary transparency and flexibility needed to get a handle on expenses.
Control the granularity
With full operational transparency, engineers and managers can start to control the granularity needed to manage LOE at the level necessary to affect real changes. The changes typically made in this phase are to the reporting hierarchy and the grouping of costs into operational groups that align more closely with operations than accounting. All of the custom groupings and codings are persisted in a database application (Concordia), linked to the accounting system.
Reduce the time frame
With the transparency and operational groupings in place, the next step is to reduce the temporal nature of the LOE process. The typical time frame for accounting groups to report LOE data is several months, which does not give engineers and managers a proactive approach to handling costs. Using Mercado, every step in the procurement process is documented and approved, complete with the ability to code any good/services before the ordering or delivery of said goods/services.
You have the ability to initiate the procurement process from the field, with approval of each requisition by an appropriate person in the decision-making process. Coding the work (both Chart Of Account/Cost Center) will eliminate many potential errors down the road.
Mercado gives your company complete control over the procurement of goods/services for your company. It tracks the 5 Ws for the process:
Who?
What?
When?
Where?
Why?
Using Cost Tracker, cost estimates are collected in the field, tied to the Chart Of Accounts from the accounting system. In this way, engineers and managers can use the daily cost estimates to manage LOE, as well as improve their LOE accrual process. Tight integration with the Mercado procurement system allows for field costs to be booked to a project as soon as the goods/services are delivered to the field. LOE accrual accuracy is dramatically increased, as costs are entered in a :real time" manner.
