Technical questions can arise in disputes involving wells, facilities, pipelines, or reservoirs. For example, the parties may disagree about which wells are relevant to the claim, how production should be allocated, what production was technically achievable, or how an operational constraint affected output. When such questions affect a material input to the damages analysis, an engineering review can help evaluate the underlying evidence and provide a credible basis for the assumptions used in the economic model.
Case Example: Technical Review of Well Locations in a Directional Drilling Dispute.
In one directional drilling dispute, a landowner alleged that wellbores from a neighboring development passed beneath their acreage and claimed a share of the revenue from the associated production. The initial claim identified approximately 70 potentially relevant wells based on surface proximity. Econ One’s experts reviewed directional survey data, well trajectories, and lease boundaries to evaluate which wells had a technically supportable connection to the claimed acreage. That review narrowed the well set to 30 (down from 70) wells, which provided a more supportable well population for evaluating production and the resulting financial loss.
As illustrated in the diagram below, the key technical question was not where the wells were located at the surface, but where the wellbores traveled underground. Directional surveys provided information about each well’s subsurface trajectory, while lease and property boundaries established its location relative to the claimed acreage. Reviewing these records together provided a more technically grounded basis for identifying the wells relevant to the damages analysis than surface proximity alone.
How Technical Findings Feed an Oil and Gas Damages Model
Technical findings can inform a damages model in different ways depending on the issues in dispute. Engineering analysis may help identify the relevant wells or production volumes, assess production capability or operational constraints, evaluate equipment performance, or estimate reasonable repair and recovery periods. These findings can provide support for the physical and operational assumptions considered by the economic expert in developing the damages analysis.
In this role, an engineering professional can provide focused support on technical questions relevant to the damages analysis without separately quantifying the resulting economic loss. The economic expert then evaluates those findings together with the financial, economic, and other evidence and determines how they should be reflected in the damages analysis. Clear communication between the two disciplines can help the economic expert understand the scope and limitations of the technical findings and appropriately incorporate them into the economic analysis
The economic expert selects and applies the appropriate methods to quantify loss. Depending on the claim, the analysis may involve measuring lost revenues or profits, calculating royalty interests, estimating incremental costs, evaluating mitigation, or determining the present value of future losses.
When Engineering Support Adds Value
Engineering support can be particularly useful when a disputed technical issue could materially affect the damages estimate. Depending on the case, this may involve interpreting directional surveys or reservoir studies, evaluating production capability or operational constraints, assessing equipment performance, or estimating reasonable repair and recovery periods. The relevant question is whether specialized technical analysis would provide meaningful support for an assumption that matters to the damages calculation.
The directional drilling dispute illustrates this distinction. Because the location of the wellbores affected which production was relevant to the claim, technical review provided important support for the damages analysis. By contrast, a dispute centered primarily on prices, contract terms, or financial records may require little or no specialized engineering analysis.
Engineering support can also help an economic expert respond to an opposing expert’s damages analysis. An engineer can review the underlying records to assess the production levels, well performance, or operating conditions assumed in the opposing model. That review can help the economic expert identify assumptions the records do not support and explain how they affect the damages estimate.
In-House Engineering Support for Economic Damages Experts
Econ One’s economic experts can draw on engineering expertise within the firm when specialized technical support would benefit the damages analysis. Engineering professionals can serve in a consulting role, working with the economic expert to review technical records, evaluate relevant assumptions, and address technical questions as they arise. This in-house capability allows technical and economic issues to be considered together while the economic expert remains responsible for the damages analysis and resulting opinions.