A strong base production reduces operators’ dependency on continuous drilling and completing new wells.
DEEPROP® lowers decline rates and improves operators’ base production making it less expensive to maintain production.
Operators rely on the expensive practice of continuously drilling and completing new wells because it is impossible to maintain production in unconventional shale otherwise. Trials wells utilizing DEEPROP have shown improvements in production decline rates that make it easier for operating companies to maintain, and grow production, less reliant upon the expensive practice of continuously drilling and completing new wells.
In the past, the number of wells that were drilled by a company was determined by a production target, company’s would use type curves to predict, on average, how many wells they needed to drill to hit that target; If they came up short, they could just drill another well. In todays environment, most companies are looking to keep production flat and engineering teams must work within a budget to achieve this.
New technologies and design changes that lower production decline rates make it easier for engineering teams, and lowers the total CAPEX operators need to spend to maintain production. The economic benefit of lower production decline rates are strongly felt in unconventional shale plays, where the production of a new well can decline between +60% in the first year.
This is shown below, where I created a type-curve from 6 oil wells in the Wood Ford and established a development scenario where I would drill 10 wells a year for the first 5-years and then produce them over 10-years, to see how difficult it is to build a substantial production base in a high decline play; it is impossible to maintain production without continuously drilling and completing new wells.
Woodford (Shale Oil) Type Well: Trying to Build Base Production
To show how lowering decline rates improves base production, I created a type-curve from 3 oil wells in the Wood Ford that were treated with DEEPROP®. I used the same development scenario where I would drill 10 wells a year for the first 5-years and then produce them over 10-years. Lowering the decline rates by using new technologies, like DEEPROP®, makes it easier to establish a strong production base, reduces the CAPEX to maintain and grow production, and improves the plays economics. A plot of the raw production data is given below to show the relative production profiles between the DEEPROP® and Offset trial wells used to create these type curves.
Woodford (Shale Oil) DEEPROP® Type Well: Trying to Build Base Production
WoodFord DEEPPROP® trial, cumulative oil production.
WoodFord DEEPPROP® trial, Flatter oil production decline.
In an unconventional shale play, if an operating company’s objective is to hit a production target, it is easier and less expensive to hit that target when the wells have lower decline rates; operators can drill and complete fewer wells to maintain and grow the production, lowering costs per barrel.
Lowering decline rates and the resulting incremental production can have a large impact on CAPEX costs; it results in a higher profit, and capital efficiency. To show this, assume the same scenarios laid out in the previous blog; that there is an opportunity to increase the total production i.e., incremental production, by 16%, and it requires an allocation of $200,000 in capital. The CAPEX would increase from $4,000,000, to $4,200,000, the OPEX is; $6.05 per barrel, and assume a market price for oil of; $45.00 per barrel. The new cumulative production would increase from 192,000 barrels to 222,000 barrels. In comparison, assume a reduction in CAPEX of $200,000 can also be achieved; resulting in a CAPEX of $3,800,000, the OPEX would remain the same; $6.05 per barrel and the base production is 192,000 barrels. The values were taken from EOG’s corporate presentation.
The 2-year cost per barrel for the base case is $26.00 dollars per barrel, the 2-year cost per barrel for reducing the CAPEX by $200,000 is $25.00 dollars per barrel, and the 2-year cost per barrel for increasing CAPEX by $200,000 and achieving an incremental production of 16% is $24.00 per barrel; a reduction in costs per barrel from an increase in capital expenditure results in an increase in capital efficiency, a lower cost per barrel, and more profit. A visual comparison is shown below to illustrate this and is summarized in the following table.
Increase Productivity, Reduce Cost per Barrel.
In an unconventional shale play, if an operating company’s objective is to hit a production target, it is easier and less expensive to hit that target when the wells have lower decline rates; operators can drill and complete fewer wells to maintain and grow the production, lowering costs per barrel.
Summary of cost per barrel.
In hundreds of trials in 6-major U.S shale plays, DEEPROP® has been shown to reduce production decline rates, allowing operators to establish a stronger production base; less reliant upon the expensive practice of continuously drilling and completing new wells. DEEPROP® lowers the CAPEX costs to maintain, or grow, production by allowing operators to hit production targets with fewer wells and improves the well economics.
If you would like to learn more about how DEEPROP® can be a solution for your company and lower your decline rates, please get in touch with me or send an email to info@deepropfrac.com
We’re also hosting a booth at URTeC, booth 4600 from July 26-28th! I would encourage you to stop by for a chat, we would love to meet you.
Thanks, and we’ll see you next week where I will explore how DEEPROP® works!