MCKINSEY | Unconventional drilling has come of age, and US independents are more effective than ever. Average feet drilled per day has risen by nearly 20 percent since 2015,1 a testament to the technical advances fueling the shale revolution. Yet unconventional exploration and production (E&P) companies have consistently suffered negative cash flow and weak balance sheets, even during upswings.
To achieve financial sustainability, companies need to focus on capital efficiency across the value chain. The recent collapse in oil prices brings a sense of urgency to this endeavor. Previous articles have outlined steps to improve capital efficiency in well design and development planning and to sustain base production. In this article, we consider how to embed capital efficiency in well delivery—an activity that accounts for 80 percent of capital spending—and suggest tactical improvements for independents to adopt. Although some may not see a need to increase their investment in operational excellence and cost management, our experience indicates that the value created more than justifies the money, time, and effort involved.
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