Can oil and gas companies future-proof land services?

By investing in new operating models, oil and gas companies can streamline land services, increase competitiveness and enhance their workforce.

In brief

• Oil and gas must streamline costs, boost efficiency, improve competitiveness and support decarbonization by upgrading land services functions.
• Investing in technology and adopting new operating models will be critical to progress.
• Managed services are expected to play a substantial role in both integrating new technologies and maintaining legacy systems in oil and gas.

This article is co-authored by:

• Jarret Link, Partner, Technology Consulting, Ernst & Young LLP
• John Schneider, Managing Director, Managed Services, Ernst & Young LLP
• Michael Perbeck, Senior Manager, Business Consulting, Ernst & Young LLP

Managing and tracking land rights is a critically important function for oil and gas companies, which currently hold leases on millions of acres of public and private land in the US. However, the land services function is also traditionally siloed in the business and often behind other functions in terms of technology, operating model or workforce investments. In fact, many of these oil and gas agreements are still tracked manually via spreadsheets by lease analysts, with only a small percentage digitized and enabled by automated workflows. Moreover, these tasks are often difficult to scale, and thus heavy reliance is placed on a select few with intimate knowledge of the lease itself.

Land services plays a critical role that extends well beyond managing and tracking land rights. Serving as a key link between various upstream operations and finance stakeholders, land services teams are responsible for a range of integral tasks, from managing owner relations to executing division orders. Other tasks include processing payments, handling check returns, and supporting litigation.

As oil and gas prepares for a future with significant investments in new digital and decarbonization technologies, as well as a continued focus on operational costs, productivity and value, companies are increasingly recognizing they need to streamline costs and improve their competitive standing. As a result, many are moving to upgrade land services operations with the latest technology advancements and more agile delivery models. To reap these benefits, oil and gas companies must future-proof their current land services operating model. While inherent talent and skills issues, as well as the added complexity of decarbonization will create challenges, companies can leverage technology, address their workforce model and integrate an agile mindset to achieve future success.

Future-proofing the current operating model

It is not uncommon across the oil and gas value chain to see functions operating in siloes with fragmented and disconnected systems in place – including land services. While the sector is technologically innovative, oil and gas companies generally have not integrated the modern front- to back-office technology capabilities that could enable them to connect and integrate at scale. To address these shortcomings, oil and gas companies should consider a comprehensive transformation of their business model for managing land services.

“Traditionally, land services have been considered more of an operations capability tied to the front office. Revenue and regulatory areas, while tax functions, connected to the controllers are tied to the back office. This model often creates bifurcation and affects how transactions get processed in the back office,” says Jarrett Link, Partner, Technology Consulting at Ernst & Young LLP. “This manifests into issues and challenges like redundancy and inefficiency within daily operations, especially when coupled with the fact that there is an aging workforce and new hires don’t want to carry the load of past processes. We know the value chain can be differentiated and executed differently.”

A key part of this is to engage in a coordinated effort to streamline and upgrade traditional and manual business processes, align key performance indicators (KPIs) across different functional areas and add quantitative or qualitative analytics to evaluate and measure the health and performance of the function. In addition, scaling the operating model to focus on land services capabilities and competency knowledge development will help drive agility in the operating model, as compared to the pure basin-centric models of the past, which are very expensive and redundant in nature.