Four Quick Ways You Can Improve Cash Flow to Combat Low Commodity Prices

Date PublishedMarch 12, 2015
CompanyEnergy Navigator
Article AuthorRandy Freeborn
Article TypeMarch 2015 Issue
Tags, , , ,
HUB SEARCHEnergyNavigator
PULSE Interactive

Four Quick Ways You Can Improve Cash Flow to Combat Low Commodity Prices

Improve Cash FlowIn our current environment of low commodity prices, producers are taking hard looks at their operations to wring as much cash flow as possible out of existing projects. Without an influx of cash coming from prices themselves, or new capital projects that are commonly put on hold, producers must get more creative to ensure profitability.

The good news is that the search for increased cash flow within your existing operations need not be difficult. Before you go down the route of difficult cost-cutting measures, try these four simple steps to identify opportunities for improved production and cash flow.

Breakeven Analysis

Improve Cash FlowPerhaps it’s a good time to do a breakeven analysis on your producing wells to find the wells that can survive low prices, and review wells requiring high prices to break even. It’s important to understand why some wells are able to withstand significant price changes and why others can’t. This means you should be looking at the economics of wells that require $30 oil to break even vs those that need $80. What makes them different? Is there something that you can do to improve on the high priced wells to make them more like the low priced ones?

Understand the sensitivity to prices that your wells have. By checking several price points you can plot a breakeven price slope to better understand these sensitivities.

Identifying PotentialProject economics vs well economics

Run project/field level economics to make better decisions rather than looking at just well level economics. Sometimes shutting in wells where there are significant fixed costs to be covered will just overburden your good wells and you may end up no further ahead.

Identify wells that should be abandoned and lower your liability.

Identifying potential

Compare your well production to other operators in the area. Using public data and a bubble map is a good way to quickly visualize differences and zero in on anomalies.

Review A&D opportunities

Low price environments can create some excellent acquisition opportunities. They can also suggest a review of your portfolio and perhaps a sale of non-core assets.

This blog was originally posted on Energy Navigator’s website on March 3, 2015.

Randy Freeborn

Randy Freeborn is Chief Research Engineer for Energy Navigator.