Additional risk is a considerable burden for any producer. While the looming threat of drilling a dry hole and gambling on a costly well is an inherent challenge for an operator of any size, the financial constraints are especially true for smaller E&P companies.
When a small independent was looking to take its production portfolio to new heights, the company’s Head of Exploration used Drillinginfo to more than quadruple the production of one of the company’s existing assets by drilling an unconventional well in the same formation of an already producing vertical well.
Although his company did not have the capital to fund a horizontal well - nor the experience and confidence to produce tight oil - he was determined to capitalize on the opportunity by sharing the risk with an operator that had a proven track record in horizontal drilling.
Uncovering a Goldmine
While the company had achieved nearly a decade of success from their vertical wells, the competition nearby had been reporting significantly higher production levels from directional wells. The Head of Exploration wanted to compare the estimated reserves of his producing assets with nearby horizontal wells.
Using Drillinginfo, the executive was able to quickly analyze the competitive landscape surrounding his producing assets, determine if there were unconventional wells nearby and compare production estimates using an easy-to-use search tool.
Within minutes, he discovered that there were several operators with horizontal wells that were producing up to four times the amount of oil compared to one of his company’s vertical wells in the Bakken.
The exploration manager would have to rely on more dated methods like print and word-of-mouth to uncover operators near all of their producing assets. He would have to contact the regulatory agency of each state, request well data for his competitors’ assets and manually perform a thorough, time-intensive and costly process of vetting through the obtained information.
Generate & Review Type Curves
The company officer was now aware of the impressive production figures being generated by the competition in a nearby field, but he wanted to confirm that the land he was leasing was capable of generating similar production.
The executive was able to simply zoom in on the area of the lease, pull production bubbles and easily create a visual comparative analysis to see how other wells were producing in the area. By creating a production scenario with DI Analytics, he quickly analyzed type curves and the estimated recovery for the subsurface formation contained within his lease.
The director would have to utilize a wide array of data sets that he obtained from the state’s regulatory agency. Due to a lack of uniformity, the information he collects would be in a variety of disparate file types that would required extensive reformatting.
After spending hours collecting, extrapolating and organizing the information, his already resource-constrained team would also have to take the time to perform rigorous manual calculations to analyze and compare cumulative production results and decline curves.
Analyze the Economic Landscape
Although the exploration manager had confirmed that the shale formation within his lease could generate comparable production results, he was concerned about the additional challenges and costs of drilling and completing an unconventional well.
Because of his company’s tight cash flow position, he began to entertain the idea of sharing the risk and rewards with a nearby producer that was familiar with the region’s geology. He decided to analyze the economics of a shared prospect.
Using DI Analytics, the executive was able to quickly generate a well level economic analysis by adding production streams, commodity pricing and appropriate net revenue and royalty sharing interest for the area.
He quickly generated a rate of return, sensitivity analysis, projected payout and the net present value for the well. Because he did not have to source competitor data, he was able to quickly analyze various economic factors to determine the potential gains for a royalty shared negotiation.
The officer would have to locate any available data, import the information into a less intuitive software platform, or manually calculate the potential costs for drilling the horizontal well. Without an accurate and all-encompassing data set, his company’s determinations could be based on inherently flawed data, leading to additional costs, unintended results and costly downtime.
Locate Potential Partner, Negotiate Interests
The Head of Exploration had determined an appropriate net revenue interest for the prospect, but he needed to define a small set of seasoned operators that had unconventional wells in close proximity to the company’s asset in the Bakken.
The executive used DI Analytics to quickly zoom in on a digital, color-coded map of the areas surrounding his field. Utilizing specific search criteria, he easily located nearby producers, selected the nearby unconventional wells and analyzed the production efficiency of their wells.
He located a prominent producer with optimal well performances in the area and contacted them to negotiate a partnership for the prospect.
The director and his team would have had to rely on word of mouth, local newspaper articles and drive-bys to determine producers in close proximity to the field. He would have to obtain any data they had filed with the state’s regulatory agency, and review and vet through their production data by performing a rigorous analysis.
The executive would then have to reach out to the operator to negotiate an interest based on limited knowledge and potentially flawed data sets.
Optimally Plan, Drill and Complete the Well
After the Head of Exploration and the mid-sized operator had negotiated revenue sharing interests and initiated a partnership for the prospect, the organizations set out to plan, drill and complete the well for optimal production and efficiency.
Using DI Analytics, he quickly determined the most optimal number of perforation stages, spacing and lateral length for drilling a horizontal wellbore in the area using well information from producers in the region. Because the datasets had been rigorously scrubbed, the enriched data helped the companies plan an optimal horizontal well.
Although the mid-sized operator had their own proprietary records, the executive was also able to quickly determine the prime number of completion stages, how much proppant and fluid that went into each frack stage and other best practices.
Based on their interpretations, they used Transform to create a detailed 3D visualization of the drilling horizon and avoid geo-hazards. The drilling team improved collaboration, reduced costly downtime and geosteered the well using real time drilling updates.
By creating an optimal wellbore, remaining in the sweet spot and incorporating the best completion tactics for the formation, the well was able to produce over 450 barrels of oil per day shortly after going online.
The organizations would have to visit the state’s regulatory agency to review completion records, research optimal techniques for the region in industry publications and rely on their own data for planning, drilling and completing the horizontal well.
The company would have to rely on antiquated methods and limited data for the entire drilling and completion process, resulting in added costs, wasted resources, less optimal production results and a tremendous amount of lost time.
The Head of Exploration and his company were thrilled with the results. Through an effective partnership, he had more than quadrupled the oil production volume of his company’s Bakken field by successfully drilling the organization’s first unconventional well.
Although he had to share the gains and fruits of his labor with another operator, the executive had successfully spearheaded his company’s first directional well, thrusting his organization into the unconventional spotlight and creating a landmark asset for his company.
By minimizing production risks and partnering with an experienced unconventional producer, the Head of Exploration was able to generate immense profits to bankroll another prospect.
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