Technology Is Making a Big Difference in the Oilfield

Technology is increasing production and cutting costs, which is making a big difference for oil and gas companies.

Apr 21, 2014 at 12:00PM

Technology in the energy industry is evolving more rapidly than ever before. It took the industry nearly 60 years to figure out that hydraulic fracturing when combined with horizontal drilling was the key to unlock our massive shale resources. Advancements since that time have been coming fast and yielding increasing amounts of oil and gas production at much lower costs.

Going DEEP
ConocoPhillips (NYSE:COP) recently highlighted how technology is improving its results at its Analyst Day. One technology that is really providing a boost is called Drilling Execution Efficiency Platform, or DEEP. As the following slide shows, the company uses real time analysis in the wellbore to optimize its drilling so it can increase its drilling rate.

Conocophillips Deep

Source: ConocoPhillips Investor Presentation (Link opens a PDF)

By knowing what's happening in the wellbore ConocoPhillips can determine when it can speed up drilling. By using DEEP, ConocoPhillips has been able to increase its drilling rate by 20% in early tests in the Permian Basin and Eagle Ford Shale, which is saving it money. The company actually sees this technology, which was first utilized in shale plays, as being applicable across its global portfolio. That could allow the company to save $250 million per year, which is a substantial amount of money even for a company as large as ConocoPhillips.

Staying connected
Another innovation by ConocoPhillips is its integrated operations centers. The company has nine of these centers across the world, including a new one in the Eagle Ford Shale. These centers use real-time data, which alerts the company of trouble before it knocks a well offline and thus these centers work to reduce production shut-ins. These have been highly successful in the Eagle Ford as the chart in the right-hand corner of the following slide shows.

Conocophillips Oe

Sources: ConocoPhillips Investor Presentation 

As that chart demonstrated, ConocoPhillips was experiencing several hundred wells shut in per quarter before the center in the Eagle Ford opened. Now it's experiencing very limited well shut-in events despite more wells coming online all the time. Because of this success, the company sees these centers as being the standard model for emerging unconventional assets, which is important for the company as its growth is really being fueled by the unconventional portion of its portfolio. 

Overall these excellence centers enabled ConocoPhillips to realize an additional 6,600 barrels of oil equivalent production per day last year. While that's a minuscule amount compared to the company's 1.47 million barrels of oil equivalent production per day, every little bit still helps.

Further, it serves as a model for shale focused peers like Pioneer Natural Resources (NYSE:PXD), which experienced significant production shut-ins last year. At one point in late November over 50% of Pioneer Natural Resources' more than 7,000 wells in the Permian Basin were shut-in due to severe winter weather. While those production shut-ins are largely unavoidable, many other shut-ins are avoidable as ConocoPhillips has seen through its addition of integrated operations centers across its portfolio. As more of its peers like Pioneer Natural Resources realize the power of these information technology centers it should yield greater improvements to oil and gas production in the U.S. 

Investor takeaway
ConocoPhillips is one of the few global energy companies able to make high returns from America's unconventional resources. A good portion of the credit goes to technology, which is enabling ConocoPhillips to save money and improve production. That's yielding exceptional results for its investors. 

OPEC is absolutely terrified of this game-changer
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Matt DiLallo owns shares of ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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