S&OP/IBP Manages Mature and Developing Production Wedges From the Field to the Midstream
Global Energy – Exploration and Production
Integrated Business Planning manages the components of the production wedge to integrate planning across exploration, operations, finance, and marketing
- Aggressive growth plans and commitments
- Recent land acquisition, the knowledge of the field was developing
- Improve coordination and decision-making across functions
- Integrate operational, marketing, and financial plans around a linked set of KPIs
This business unit of a global corporation is a large operator in the DJ Basin with rights to more than 800,000 acres and planned investment of $10B over a five year period. The region had committed to deliver an aggressive production plan that required improving production performance of existing wells and executing on a large portfolio of new wells that would leverage horizontal drilling and hydraulic fracturing technologies. Our project team needed to improve processes and coordination across functions to enable more efficient planning and execution to reduce cycle times and meet capital and LOE budgets.
After training the leadership and project teams on the principles of IBP, our team developed a design that aligned with the financial reporting and organizational structure of the business. The organizational structure was also changing and our effort integrated accordingly. IBP is about planning and managing performance across the business by disaggregating the plan amongst major components, managing within each component, and then bringing them together at the management team level for integration, cross-functional decision making, and management of the overall integrated plan. IBP also helps to define boundaries for decision making at middle and upper management levels.
We defined IBP components to manage exploration, new development production, existing base production, marketing and infrastructure, and a leader level component across the top.
For each IBP component and the overall business, we defined the key planning drivers (e.g. wells, rigs, capital, production, reserves) and brought data together from various systems to provide a report set with a view of the data appropriate for each component to manage their respective part of the plan. These are then rolled up to manage at the asset level. While managing historical KPIs and performance to budget is a key goal, the emphasis is also on the forecast and the implications for the set of planning drivers when a decision must be made for the business.
The IBP process now provides the framework for managing the intermediate-term business:
- Establishes a single plan of record
- KPIs and a view of the plan that manages the underlying processes for each IBP component
- Structured means to raise and address cross functional issues
- Improved definitions for roles & responsibilities and structure for budget inputs and development
In combination with improvements to underlying process improvements, the effort produced a cash acceleration exceeding $200 MM.