The rise and fall of a natural gas producer’s performance should not be seen in isolation, but assessed relative to a host of variables, particularly the activity of market peers. Bill Gwozd of Ziff Energy Group turns to the analogy of golf for a colourful explanation of the intricacies of performance analytics.

While a golf player may brag that he is planning to play 30 rounds of golf this year, up 20 percent from 2007, several nagging questions remain: what is his new handicap, and is his performance changing as he ages? For the golfer, a scorecard may include the number of pars, birdies, bogeys, double bogeys and trophies won. By comparing scorecards, performance can be measured over time, and against peers.

Just like golfers, Canadian gas producers find themselves asking similar questions every year: What are the results of this year’s drilling program? Are finding and development (F&D) costs improving? And is performance changing as the gas production basin matures? While the gas producer scorecard may include proven gas reserve replacement rates, year-end gas reserves remaining, F&D and operating costs, and remaining gas reserve life, the key benefit to analyzing the scorecard is what the producer learns by monitoring annual performance in the maturing basin.

For decades, producers participate in detailed assessments of annual drilling programs through analysis of proven reserve additions, gas produced, F&D and operating costs, and reserves remaining. Reserve replacement reflects the proven reserves added, adjusted to reflect revisions (positive or negative), and improved recoveries, all divided by the amount of gas produced that year. When replacement rates (or scorecard metric) are greater than 100 per cent, the gas producer has added more gas reserves than produced, and reserves are growing – which augurs well for the sustainability of that business area.

The Past Decade

Collectively, the top 25 golfers and gas producers account, respectively, for most of Western Canada’s golf trophies and gas production. Thus, by measuring their collective results, an assessment of overall performance is possible. In both cases, keeping operating costs low to maximize cash flow, while getting great results on the prized golf game or production field, ensures they maximize their long-term profit. Figure 1 illustrates the net results for the producers as a group for the past decade. On average, the top gas producers have averaged 90 percent reserves replacement. This means that collectively they are producing more gas each year than they are adding.

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