What You Didn’t Know About Land Administration in the Oil & Gas Industry
The land administration department of your average oil and gas company manages the crucial back-office functions for the firm’s exploration and production efforts. This critical work involves all manner of land asset care, including negotiating agreements, maintaining leases and contracts, analyzing their production and profitability, and more.
In this article, we will discuss:
- The three core features of land administration
- How to know when your land department is succeeding
- Common misunderstandings about this business function
- Common roadblocks and how to manage them
- How outsourcing land can help your business
What are the Essential Features of Land Administration for an Oil and Gas Company?
No matter the company, the land team should retain advanced geographical knowledge and industry expertise for managing contracts, leases, and related legal situations. Three fundamental elements of ensuring a successful land department include:
- Maintain the accuracy of the data
- Have transparent, robust reporting with accurate data
- Have clear procedures for how to use the data
From a pure business perspective, good data means making more deals and preserving, growing, and developing the acreage of your current ones. To do that, you must maintain the accuracy of your land rights with clear lines of sight into your data so that you can make more informed business decisions.
Additionally, you must have good procedures and standards in place that chart the company in the right direction and determine the day-to-day work of the operations team. You may understand what needs to be represented and classified, but unless it’s written down, other departments may have a different understanding of what needs to occur.
Without open communications between operations and land administration, you will have inaccuracies in your data, which leads to inaccuracies in the classification of your acres.
How Can Oil and Gas Companies Conduct Effective Land Administration?
Every high-functioning land department relies upon data analysis, the right people, and the right technology in equal measure. You can’t have one without the others. Good technology means nothing if it’s fed poor data. All the good data in the world is pointless without knowledgeable people parsing it so stakeholders can make the right choices.
When combined, they will meet the needs of your business, no matter the context. For example, your land administration team needs exposure to the basin where you’re working. You can’t assume what worked in another basin will work where you are now. The leases, timing, and provisions can be interpreted differently. Thus, having the right people to know the nuances of your current situation will help you avoid using good data to blindly address incorrect assumptions.
Common Misconceptions in the Oil and Gas Industry
Too many companies assume that the lease administration process is easy and straightforward. Such assumptions create a gap in understanding as there are so many nuances to a lease to consider, including amendments, ratifications, extensions, and supporting documents. Just pulling the original lease to interpret acreage and ownership is a mistake.
Additionally, senior leaders often forget that data is extremely complicated. Even worse, they just want reports and often don’t care or understand the work level required to maintain it accurately. We preach to our clients that land administration requires an analytical skillset with people who can put puzzles together and locate missing pieces.
Specifically, this means investing in continuing education and knowledge about the present and future of land administration. The complexity of the industry has increased dramatically in the last 10-15 years. Your business needs long-term experience and up-to-date knowledge to deal with the modern-day challenges of data-centric lease maintenance.
What are the Biggest Roadblocks to Successful Land Administration?
In our experience, the biggest obstacle to improving your land administrative processes is a “legacy mindset.”
“We’ve done it this way for so long, so it’s fine. We don’t have to change the status quo. We don’t have to analyze anything or do any lookbacks.”
According to industry tradition, it’s the technical team — engineering, geologists, and landmen — that creates value. Other departments aren’t perceived as driving the most profit. Everyone else is seen as belonging to a service department, which means they cost money. Hence, when companies think they can do the work internally, they don’t invest in those costs by hiring the right people or finding the right resources.
If you’re an older company (or you’re acquiring an older one) with outdated technology, resources, and methods, you can’t use old data. Not only are old data sets limited in reporting capability, they literally can’t be adapted for new systems. However, as technology has improved, the data that the industry can capture has increased. More importantly, what the industry can do with that data has improved. But
The solution? Leadership should set more specific expectations on conducting land administration processes, especially in terms of new technology and resources. The oil and gas industry as a whole has been slower to adopt technology. It’s time that companies should be more aware that each department does drive value for the company and adopt a new perspective that maximized the potential for them to create even more value.
To be clear, these companies are intentionally ignoring new technology. In many cases, they genuinely don’t know there is a better way. They’ve been doing the same things for so long, so it’s not always a disregard for what’s new. Sometimes they just don’t know what’s out there.
How Can Outsourcing Improve Your Efforts?
An increasing number of oil and gas companies are turning toward back-office outsourcing to help run their land administration departments more effectively. By deploying business efficiencies and technology provided by these outsourced experts, companies can leverage more sophisticated technology through outsourcing. By working with an experienced third party, you will only pay for what you need while also receiving valuable advice, insight, and counsel.
Outsourcing delivers:
- Land experts available on an as-needed basis
- Reduced technology costs
- Decrease in over-hiring
- Standard best practices and clean data
By hiring a knowledgeable outsourcing firm as you scale up, you experience the efficient use of technology.
Increase the Success of Your Land Administration Functions
Your oil and gas company needs insight into what’s happening with its assets. To get the correct information you need in the most efficient manner, invest in the right people and technology. The people must understand the depth and nuanced nature of running a land department while leveraging technology to drive the business.
EAG Inc., can transform your land department by offering best practices, technology, and land subject matter experts at a fractional rate. We pride ourselves on being a true outsourcing partner that enhances your land department and adds value to your company overall.