Six months of cash gone

This post is brought to you by one of our information partners, Proven Reserves Exploitation Ltd.

If your application is not approved, what will it cost you?

One operator's plans for a horizontal well water flood were put on hold. It was because he didn't understand the regulator's hot buttons in approving spacing applications.

The service he used to submit the application should have known better. Because of a tightening in regulatory policy, he had to reconsider how to get the spacing and flood he needed. Unfortunately, he lost six months revenue from the fiscal year because of this error.

To make things worse, he submitted a net pay map showing drilling locations off his land. He practically invited offsets to drain him. And his application service didn't warn him not to do it.

And now you can see his application documents and his mapping within moments by clicking on the button below labelled, 'Buy these application documents now.'

Four 'Thou Shalt Nots' of applications

There were several errors that caused the hold-up. But you can learn from his mistakes.

They are not really commandments of stone, but if you don't pay attention to these, it will bring you lots of pain.

1. Don't hire a cheap service that doesn't care about mapping

That's what happened this time. The maps were generated by the operator and showed corner shot drilling opportunities on their pool. The application service didn't care, they just submitted those maps. And now you can see the drilling opportunities in the application.

If a service is willing to take your maps and submit them, they don't care about letting your secrets into the public domain.

Some services are cheap because only take your materials, put their name on it, and submit it. You create all the maps, write all the geological discussion, and come up with all the ideas. Since you are not paying them to create the materials, they don't take the time to review them for accuracy, consistency or fitness for purpose.

2. Don't hire a low quality service that will cut corners

It happened this time. The regulator had been requiring a certain piece of information for this type of application for months before this application was submitted. But the low quality service (which is one of the most popular in the industry) didn't care and didn't submit the required information. The application was stalled and the operator lost 6 months of cash flow.

This may sound obvious, but the application service you hire should get your application approved -- and quickly.

Would it surprise you that some of the most popular services get a lot of applications refused by the regulator?

You may ask yourself, why is that?

It's not because they submit the tough applications. We've read them. The toughest applications are submitted by operators.

It's because these poor application shops cut corners to charge low prices to keep the volume up. They use their boiler plates templates and do little thinking about how to get an application approved.

Slap it together. Slip it in. Forget about it.

In order to make a living at submitting applications for a very low price, they can't spend very much time on the application. They must slap it together and send it in with as little effort as possible.

Their cut corners leaves you exposed.

The only way to know for sure that a service cares about getting your application approved is by looking for a service with a guarantee.

3. Don't just go by the guides

That's what happened this time. The regulator stalled this application because it didn't have a piece of information that they wanted, but that requirement wasn't in the guides.

Fifty percent of what you need to know to get an application approved isn't in the guides.

The service should have known about the extra requirement, but they didn't think about it.

4. Don't forget about your application

It happened this time, the operator and the service ignored the application after it was submitted. When the regulator finally came back with supplemental information requests, the operator wasn't ready and didn't know how to quickly resolve the concerns.

Once it's submitted, your application still needs work. On over 50% of applications, the regulator engages the submitter with additional information requests.

Many services submit applications but expect you to answer questions from the regulator. They will take your answer and submit it to the board under their name. If there are many rounds of SIRs, this can become quite tedious.

A good service is ready for the questions, knows how to resolve them quickly and knows how to help the regulator move forward with approval. We call it stick handling to the goal. And it comes only with lots of care and practice.

And one positive idea -- the Richter Scale

Some applications are harder to approve than others. We invented a Richter Scale to determine how difficult an application is to approve.

If you know an application is more difficult, you might take more care with it. You might look for additional helps for approval. You might prepare for supplemental information requests and a longer approval time.

If an application has a higher Richter Scale, it will shake more people up at the regulator.

Tags: AER application, Tight, Flood

Granger Low   14 Feb 2017

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