--> Abstract: To Be or Not to Be (An Operator), by V. C. Gunn; #90937 (1998)
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Abstract: To Be or Not to Be (An Previous HitOperatorNext Hit)

GUNN, VINCENT C., Gunn Oil Company

Introduction

There is no easy answer to this conundrum or one that is correct for everyone. The question of Operatorship must be answered individually and only after consideration of a number of issues: expertise, temperament, financial capacity, need for control, staff size, long range goals, and a host of others.

Discussion

The only absolute reason to operate is because no one else will, and even then a consultant can usually be found to help you out. Some of the advantages of operating, however, are that it allows for control over wellsite processes (formation evaluation, logging, etc.), control over expenditures which allows you to align them with cash flow, control over completions and production rates, as well as the ability to determine who the investors will be. Operatorship generates income which can help defray some of your overhead costs, if one already has a staff or could justify building a staff, which should then generate additional business opportunities. Having your name or your company's name on a map, even if it is associated with a dry hole, serves as an advertising vehicle, and a discovery well makes future deals easier to market.

The rationale for avoiding Operatorship is oftentimes the reciprocal of the justifications above. The amount of expertise required to operate effectively and efficiently, is staggering. The accounting and record keeping requirements can be daunting by themselves, but the financial responsibilities of obtaining credit from vendors and extending credit to your investors can place you in jeopardy. We should also look closely at ourselves to see that we have the temperament and social skills necessary to cope with the constant interruptions from partners and salesmen. A working knowledge of oil & gas law is an important skill for an Previous HitOperatorTop and an encyclopedic knowledge of the workings of Joint Operating Agreements is an absolute necessity. Completion designs, stimulation parameters and production problems are beyond the scope of the experience of most of us. To accomplish these things, you will need to acquire a staff that has the requisite skills or, alternatively, to engage consultants to perform the tasks for you. Many consultant services are unbillable under most Joint Operating Agreements, and a staff requires a large number of operated wells to justify its existance.

Summary

Ultimately, most of us who choose to operate do so out of need for control, desire for recognition, or to build a company. Most of us fail to realize that when we don the mantle of Operatorship, whether we perform the tasks ourselves or merely supervise the employees and consultants who do, we are spending that most precious commodity - time. As a result, we have less and less of it to spend on the practice of geology.

AAPG Search and Discovery Article #90937©1998 AAPG Annual Convention and Exhibition, Salt Lake City, Utah