Analyzing and following industry “best practices” can helponshore gas producers reduce operating costs and achieve greateroperating efficiency. Two studies recently completed by Ziff EnergyGroup suggest producers in South Texas and the Midcontinent can dowell by turning to their peers for advice.

In South Texas, contract services, lease fuel, labor and fieldsupervision and taxes represent more than 70% of field operatingcosts for gas production, according to Ziff. The study analyzed1998 production data from 45 fields operated by nine companies inthe South Texas area. A majority of the main costs can be targetedfor significant reductions. A total of 11 broad cost categorieswere examined along with a number of detailed cost subcategoriesselected by the participated companies at the outset of the study.

“Producers traditionally have found it difficult to locate thekind of meaningful peer properties for comparison that can lead totangible and quantifiable operating improvements,” said Paul Ziff,CEO of Ziff Energy. “The level of analysis in these studies goeswell beyond traditional benchmarking studies by showing specificopportunities for reducing operating costs in each field in aparticular region based on the actual experiences of the wide rangeof producers participating in each study.”

In the Midcontinent, external processing costs, lease fuel andtaxes represent more than 77% of field operating costs for gasproduction. The Midcontinent study analyzed mid-year 1997 throughmid-year 1998 production data from 47 oil and gas fields. The studytargeted six peer asset groups. They are the Hugoton Field, thePanhandle Field, shallow/medium depth gas, deep gas, primary oiland waterflood oil. The South Texas study targeted four groups: theUpper Wilcox/Lobo Trend, Middle Wilcox, WilcoxNorth/Frio/Miocene/Yegum and Vicksburg.

The studies also focused on compression, tax strategies andregional variations and similarities. South Texas gas producersaveraged 39 cents/Mcfe in field operating costs for gas productionin 1998. Taxes represent 13 cents of that amount. Midcontinentproducers averaged 57 cents/Mcfe in field operating costs forproduction in the 1997-1998 time period. Of that amount, 18 centswent to taxes.

“Availability of this kind of information helps producers set abetter-tuned cost-performance threshold to evaluate currentcommitments and decide where their future investments are likely topay off best,” Ziff said. “Some mature producing regions, such asthe Permian Basin, have a high number of fields where cutting costswon’t necessarily lead to higher production efficiency.Consequently, any steps taken have to be targeted very carefully tohave the desired impact.

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