HOUSTON—For players in the oil and gas industry, keeping it simple could be a smart move when it comes to capital allocation and strategic planning for E&P projects.

The volatile nature of the market has prompted some companies to upend the traditional annual planning cycle driven by a bottom-up approach. As lower oil prices cut into profits, causing many to idle rigs amid plentiful supplies, some operators have added being less complex and more flexible to their survival kit. Gaining more insight into each shale asset—but with less effort—is a target.

“Complexity doesn’t necessarily generate deep insight,” Greg Guidry, executive vice president for Shell’s Upstream Americas unconventionals, said during KPMG’s recent Global Energy Conference in Houston.

He explained how operational processes that typically work in the conventional business don’t necessarily work well in with the unconventional business; however, lessons learn in the latter could be applied to the former. The general theme for Shell is stress-testing processes in unconventionals to study their weaknesses and find solutions, he said.

Given today’s technology tools, companies tend to go to the limit of complexity that IT teams allow, not to the level that gives the depth of insight needed to make the proper decisions, Guidry said. Instead, he implied thinking more in the direction of what needs to be done instead of what all can be done, given today’s low price environment. “Only go to the level of complexity that you need,” he said. But “pay as much attention to some of the unknown unknowns as we do with the known unknowns that we spend a whole lot of time trying to work on.”

For Bill Frank, general business manager for Chevron, every asset team should know its break-even costs.

“That’s not a complicated question,” he said.

He admitted that Chevron has been capital constrained for a number of years, with more E&P opportunities than money. “That creates a lot of discipline,” he said. Coping with today’s market forces requires “being reactive and being ready to go or not to go.”

Delays on an expensive megaproject in West Africa, for example, could free up spending elsewhere. “You can’t have a portfolio full of giant deepwater projects,” he said. “You just don’t have enough flexibility. Within reason the unconventionals can provide that buffer.”

Richard Burnett, vice president and CFO for Exco Resources, echoed those words. He added that a willingness to listen to what data reveals to make decisions is important because companies don’t always get it right the first time.

When Exco devised its capital budget, it used a rating system essentially based on wellhead return and how each dollar spent came back to the company. One of the positive outcomes of this downturn is that it has led to a disciplined approach, Burnett said, later adding that it has also increased dialogue among project partners who may have different views.

Challenging times have also called for changes in other areas.

Some companies focused on unconventionals are no longer making annual promises when it comes to capital. Instead, they are taking it one quarter at a time.

“In many cases we are learning by doing and a lot of information we put into this annual model by definition is going to change three months later and yet the capital is fairly limited,” added Guidry.

Independents are inherently more flexible, Guidry said, turning to a fellow panelist.

“You’re starting on one extreme trying to figure out how to make [the process] more scalable. We’re on the other extreme trying out how to make it more adaptable,” he said. “I don’t think anybody has found the sweet spot.”

Contact the author, Velda Addison, at vaddison@hartenergy.com.