Solid Planning Fuels Success in the Oil-Rich Permian Basin of Texas and New Mexico
The Permian Basin is a vast area that covers approximately 86,000 square miles of western Texas and southeastern New Mexico. Before the 20th century, it was mostly home to ranchers, farmers, and historically, the Comanche Indian tribe. Then in the 1920s commercial drillers struck oil.
The Basin has seen its share of good times and bad in the decades since. But today, business is once again booming in the communities of this oil-rich part of the country. A recent research report indicates the region has the potential for more than 100 years of production and that it could hold well over a billion barrels of oil.
This is great news for local residents and companies like Concho Resources Inc. Concho is an independent company engaged in the acquisition, development, and exploration of oil and natural gas properties. Headquartered in Midland, Texas, it has around 5,000 operating properties in the Permian Basin and is the largest oil producer in New Mexico.
Concho Talks Planning at the Best Practices for Oil & Gas Conference
Proven reserves are vital to success in the upstream oil and gas business. But solid financial and operational planning is also crucial to any company trying to harness the considerable resources of the Permian Basin. Recently, I had the opportunity to talk to folks from Concho about the importance of good business planning at this year’s Best Practices for Oil & Gas conference in Dallas, Texas.
Concho was among the many industry leaders who attended this 4-day event. Concho financial analyst Willson Beebe and assistant controller Jeff Berglund presented at the conference on how their company is using the SAP Business Planning and Consolidation application to maximize cash flow for capital investments.
As it turns out, Concho has been using the application for almost two years to boost the efficiency of its financial reporting and planning. “We can now complete our financial closing processes faster, report more accurately, and distribute this information to management and operations more effectively,” says Beebe.
Deeper Analysis and Greater Detail
But the real strategic advantage is what Concho is doing with the time it is saving. “Allowing our staff to be more efficient has freed up time for more value-add analysis,” explains Beebe. This timelier financial insight is particularly helpful as the company looks to reinvest its high-margin cash flows back into new projects, offering robust rates of return.
Concho is also starting to use the planning and consolidation application to address budgeting and forecasting. “In addition to speed,” says Berglund, “we also hope to get more detail.” This includes such granular insights as budget and actuals comparisons at a property level.
This level of detail will also help Concho collaborate better with its partners along the supply chain. Concho, for example, does not own or manage the pipeline assets. Rather, it typically sells its oil and gas at the wellhead or pipeline. “If we’re better able to see where we are going in regarding future production, we can better address capacity issues with our purchasers,” notes Berglund.
Beyond the Oil Fields
All these planning efforts should go a long way in helping Concho continue to grow in the region. And the oil company’s continued success is good news for communities throughout the Permian Basin. As one of the region’s largest employers, Concho is committed to helping ensure the well-being of its employees and neighbors. Concho’s social commitment includes support for local environmental causes and funding for cultural facilities such as libraries, museums, and a performing arts center.
Investing in the community? That’s another example of good planning.
And join me on Twitter at @JohnGWard3.