Foamy oil flow is known to give unexpectedly high recovery rates in heavy oil reservoirs and has been the subject of extensive experimental study in the lab. Once gas exsolution is initiated, the generated tiny gas bubbles are dispersed along with heavy oil flow, thereby providing the driving force for oil production. Superimposed onto foamy oil flow are other mechanisms, such as failure of the solid skeleton and concomitant sand production. This paper investigates the intertwined effects of failure, sand production and foamy oil flow on the oil recovery process using a finite element-based computational model developed by the authors. Hence, these effects are studied in a perforated oilwell undergoing cold production (non-thermal recovery process). In particular, reference is made to geomechanical issues, such as shear dilation and strain localization. It is found that sand production is a result of two distinct mechanisms: one which involves the material dilating in shear mode under deviatoric stresses, and another one which involves an increase in porosity of the solid matrix under hydrodynamic and erosion actions with foamy oil flow. Some interesting results are presented in which wormhole formation and propagation are captured without any numerical difficulty or instability due to a proper formulation and discretization of the governing equations.