Events such as market changes, shifting internal strategies, staff turnover, and new acquisitions can impact a company’s operational efficacy and require different resource allocation. No group in an E&P company is more familiar with rapidly changing priorities than the land department. Maintaining the right resources in the land department can be a challenge for companies that must keep up with ebbs and flows of the development cycle and daily land work. Here are three common challenges that we see facing many in-house land departments.
Challenge 1: The Fluctuating Demands in Workload
For many E&P companies, there can be significant flux in the workload throughout the year. Changes to the company's strategy, a new acquisition, staff losses, or technology changes can all impact the workload requirements for a land department.
These occurrences can lead to one of two undesirable situations:
Skill sets that are mismatched to the workload or suboptimal use of premium talent;
An understaffed and overwhelmed land department struggling to perform essential components of their jobs, leading to land-related risks such as losing leases, failing to meet development obligations, or missing opportunities for upside.
The scope of landwork is tremendous and continues to evolve as companies enter new geographies, adopt new technologies or change objectives. Skill gaps reduce a company’s ability to be nimble and impacts decision-making.
At the same time, relying on a skeleton crew or a few unicorn employees is not sustainable. Constant “triage mode” leads to value-added functions falling through the cracks, missed opportunities, or unmet deadlines and obligations. In a divestment scenario, poorly maintained land and title records will diminish value and negotiating leverage for the seller.
Challenge 2: Investing in Foundational Projects
In addition to the staff, the quality of the systems, processes and data in a land department will drive the group’s performance. When starting a new land department or acquiring assets from another operator, management will have an opportunity to address foundational land administration work, data management practices, and the land software system.
Any such foundational work will be integral in the daily activities of many people and processes. It will pay dividends to dedicate experienced and focused resources to getting the work done correctly upfront instead of depending on in-house staff who have other important responsibilities. The latter case has a high opportunity cost and is associated with protracted or incomplete projects that lose momentum and team buy-in.
Challenge 3: Lack of In-House Expertise
For an E&P, a staff vacancy for a full-time function is disruptive but can be easily remedied through a new hire. What if you need support for a few key functions, for a limited amount of time? How valuable would it be to have on-demand resources with relevant domain expertise? Full-time staff doesn’t always make commercial sense and training is costly.
Similarly, for non-operating companies that invest in oil & gas, in-house land expertise is likely to be limited. Nevertheless, investment decisions and risk management protocol demand oversight, peer review and independent assessments from a specialist. These relationships can also shed light on opportunities that may have been missed otherwise, such as enhancing the quality of a data set or optimizing certain practices in a portfolio company.
The Alternative to Shifting Land Department Demands
Giving land departments greater agility in handling the changing landscape of their responsibilities allows key staffers to contribute their talents and skills where they best produce results for their firm. Many E&Ps outsource special projects and/or regular support functions to achieve greater enterprise agility and capital efficiency.
Some of the benefits these E&Ps are realizing include:
Access to authorities in every level of land management
Reduced in-house staffing requirements
Reliable and experienced advice and support
Improved results in both exploration and acquisition
At Cinco Energy, we help our clients bridge the gap and right-size their land departments with flexible, solutions-oriented land support. Our team ranges from senior land advisors to functional specialists in land administration, acquisitions and GIS. Cinco brings 30 years of experience and knowledge to players large and small, across North America.
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