American Oil and Gas Reporter - May 2015 - 50

SpecialReport: Industry Success Strategies
powered platform that will allow us to
grow more efficiently from a back-office
support standpoint."
Mariani says the system will provide
greater efficiency by automating processes and generating reports the company previously had to prepare manually. He describes the conversation as a major project, noting it will require 20-40 dedicated employees.
"Another project, which is not as big but
still significant, is a complete gas measurement field automation conversion," Mar-

These overarching drivers are guiding
both big-picture strategies and more finescale operational decisions all along the
corporate chain of command.
EnerVest Ltd., a private company that
buys, optimizes and sells assets, is one of
many operators that is using the activity
slowdown to turn itself into the oil and gas
equivalent of a finely-tuned Formula 1®
race car. "We want to be better positioned
for future growth when we come on the
upturn of this cycle," explains Ken Mariani, the company's president.

"We are doing a lot of the current
industry condition basics, focusing on highticket items and renegotiating contracts
with our vendors. We also are looking at
processes, trying to be more efficient in
how we manage our physical and human
resource assets."

Ken Mariani
"We are spending time with all our asset teams focused on initiatives to reduce
costs," he reports. "We are targeting a 10
percent reduction year-over-year on our
lease operating expenses by doing a lot of
the basics, focusing on high-ticket items,
and renegotiating contracts with our vendors. We also are looking at processes, trying to be more efficient in how we manage
our physical and human resource assets."
In its negotiations with service companies, Mariani says EnerVest hopes to use
its size. "We operate 29,000 wells in 15
states, and we are trying to leverage our
size not only in the regions we operate, but
across the company," he details. "We are
looking at all the major products we use
across our asset areas, and seeing if it
would make sense to form broader relationships with service companies where we
would commit to buying from them in exchange for a higher discount."
At the same time, EnerVest is optimizing its internal processes. "With the reduction in activity, our company is focused on
enhancing major systems," Mariani relates.
"For example, we are converting our
land and accounting system to a higher50 THE AMERICAN OIL & GAS REPORTER

iani continues. "Through acquisitions, we
have come to use a variety of automation
systems. We are going to consolidate a lot
of them into one system that will interact
with our new accounting and land system.
That way, our employees will need to learn
only one method of operating, which will
allow us to be more efficient and enable
better procedures and controls."
High-Grading Drilling

Like most operators, EnerVest is
drilling far fewer wells this year. "Our
overall capital budget is reduced 60 percent from 2014, so we have a much
smaller, high-graded drilling program,"
Mariani says.
EnerVest is organized into six geographic asset regions: the San Juan-Uinta basins, the Permian Basin, the Austin
Chalk, the Barnett Shale, the Anadarko
Basin, and Appalachia-Utica Shale.
"At today's prices, the areas that have
attractive drilling economics include the
wet gas window in the Utica and a very
small area of the Barnett," he reports.
"Some areas in the Mid-Continent, which
have a tendency to have oily components,

make sense as well. However, in all these
plays, we are focusing on the 'core area
of the core area' and being far more selective where we drill."
The company also is trying to reduce
its drilling costs. "We are targeting a 25
percent reduction in the overall cost of a
generic type well in each asset area," Mariani details. "We hope to achieve 5-10 percent of that total reduction through efficiency improvements."
Many of those improvements will result from careful planning, Mariani says.
"One of the big challenges in a drilling program is getting the locations ready to be
drilled. For the past few years, we have
been running so fast that we have had rigs
come into an area, drill one or two wells,
and then leave because the land or the permits for the next well were not ready," he
recalls.
"Now, with the reduced activity levels,
we are trying to do the preparatory work
upfront and create an inventory of drilling
locations so we can do a better job of
scheduling services," he says. "This
should improve efficiencies and ultimately lead to lower service costs."
Looking To Buy

EnerVest is positioned to be a major
buyer in the oil and gas properties market,
according to Mariani. In April, the company had its first close on its 14th private
equity fund. "The fund will have $2.5 billion in equity, which with some conservative leverage, will give us $4.0 billion in
buying power," he reports.
Although open to entering new areas,
Mariani says EnerVest is most interested
in acquiring acreage where it already operates, particularly Appalachia, the Austin
Chalk, the San Juan Basin, and the Permian Basin. "With the oil price drop over the
past year, we anticipate good oil purchase
opportunities in the second half of the year,
including opportunities in areas that historically have been difficult to get into because of steep competition, such as the Eagle Ford and Permian," he comments.
A wide disparity in asset valuations between buyers and sellers has kept property acquisition activity historically low in
the first half of 2015, but Mariani says that
should change going forward.
"For the past five years, the industry has
averaged $55 billion a year in transactions.
Through the first quarter of this year, there
was only $1.3 billion in transactions," he



American Oil and Gas Reporter - May 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - May 2015

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