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Strategic Partnership through Crisis: How Sproule Helped an E&P Company Navigate Wildfire Disruptions

Canada / 2023 / Asset Management

An exploration and production (E&P) company faced significant challenges when wildfires disrupted production operations, decreasing cash flow. Sproule’s Asset Management provided a comprehensive suite of services to assist the company in reducing General and Administrative (G&A) expenses to better match the new scenario. In this paper, we explore how Sproule effectively supported our client during this crisis through a flexible service model.

Project Highlights

  • Mid-sized E&P company with daily production of over 5,000 boe/d.
  • Operations are held in a challenging environment prone to natural disasters.
  • Wildfire disruptions led to personnel evacuation shut-in of wells, facilities,  and reduced corporate revenue.
  • Sproule operated Assets included five different expertise areas.

Challenge

  • Situational Analysis: Environmental threats to people, livestock, property and equipment need to be quickly and thoroughly evaluated and clear action plans delivered.  This evaluation is not a simple task, but one that demands an integrated approach, fusing operational expertise and execution with land, accounting and production accounting activity to mitigate secondary threats and unintended consequences. This approach necessitates a deep dive into every aspect of the company’s operations, finance, and strategy, requiring personalized analyses and tailor-made solutions.
  • Safety Concerns: Active wildfires necessitated evacuation orders from active facilities. Proper shut-in procedures were enacted to preserve life, protect equipment, and minimize fire losses, resulting in theft and vandalism.
  • Production Impacts: Wildfires in Northern Alberta severely challenge local industries, including Sproule’s clients’ operations. The immediate crisis was a disruption in production capability, leading to an associated decrease in revenue. This situation underscored the vulnerability of such businesses to environmental factors and the need for effective risk management and mitigation.
  • Revenue Reduction: With decreased production and associated reduction in revenue, the client found itself in an unforeseen financial position relative to budget.  It required quick, strategic decisions to ensure operational continuity while conserving cash to sustain the business through this unpredictable period. The situation demanded a thorough examination of all expenses, requiring the company to prioritize and reduce non-essential expenditures while seeking ways to maintain production within the constraints of the wildfires.

Solution

  • Operational Integrity: Due to their operational experience, Sproule experts were able to assess and proactively shut-in assets to preserve the health, environment and integrity of production equipment without a loss of time incident.  In addition, Sproule collaborated closely with the client to identify areas where services could be temporarily reduced or deferred without compromising operational integrity. The company could sustain its core operations by focusing on essential services and leveraging Sproule’s extensive industry expertise. This careful balancing act ensured that the client could continue to meet regulatory commitments and maintain the trust of stakeholders, laying a solid foundation for resuming entire operations.
  • Cost Flexibility: Sproule’s flexible service model emerged as a crucial solution, allowing the adjustment and prioritization of services based on the situation’s complexity and the client’s immediate needs. This adaptability proved valuable in the client’s dynamic and unforeseen situation. Sproule was able to reduce and defer their services during production interruption to assist the company in its efforts to reduce G&A and better match cash flow. This strategic flexibility helped navigate the financial challenges and ensured efficient resource allocation, emphasizing critical areas for the client’s operational stability and future growth.

Value

  • Strategic Risk Management: Sproule’s integrated approach to evaluating environmental threats and mitigating secondary risks demonstrated their capability in comprehensive risk management. By providing tailor-made solutions that encompassed operational, financial, and strategic dimensions, Sproule helped the client mitigate unintended consequences and maintain operational readiness for future disruptions.
  • Long-Term Growth and Resilience: Through detailed situational analysis and personalized support, Sproule assisted the client in maintaining operational stability amidst the crisis. This not only addressed immediate challenges but also fortified the client’s position for long-term success. The strategic flexibility and expert guidance offered by Sproule helped the client emerge stronger, with a more resilient operational framework capable of weathering future uncertainties.



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Richard Wade, P.Eng.
Managing Director, Asset Management

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