According to a recent study of data from oil and gas wells in Texas, accounting heavy-weight Deloitte suggests that Eagle Ford and Permian Basin shale operators could generate capital efficiency gains of 19% and 23%, respectively, if they were to fully optimize their well designs.
Source: Reuters
The Deloitte study, entitled “Deciphering the performance puzzle in shales: Moving the shale revolution forward”, performed meta-analysis of 80,000 wells in the Permian and Eagle Ford basins. The data revealed that up to 67% of completions were either over, or under-engineered and that better well optimization could increase financial returns of as much as $24 billion for shale drillers.
“The findings clearly show that a one-size-fits-all approach to well design and completions is wasteful, and that it’s time for the industry to choose the right well design, not the biggest, to maximize efficiencies and profitability,” said John England, partner, oil, gas and chemicals, Deloitte & Touche LLP.
Other key findings in the study include:
- Rock quality is important but is not necessarily the main performance differentiator. According to Deloitte’s analysis of all drilled wells in the Eagle Ford and Permian, the ranking of acreage (e.g., “Tier 1, Tier 2, Tier 3”) does not influence well performance to the extent previously assumed. More than 40% of wells drilled outside the core of the western Delaware area reported initial 180-day normalized productivity of more than 1,000 barrels of oil equivalent per day (boed). In the Eagle Ford, a comparable number of high-performing wells exist across acreage tiers.
- Bigger is also not always better. The statistical analysis further notes wells drilled over the last two to three years, with complex and intense completion designs (i.e., longer laterals, more proppants, etc.) actually led to diminished productivity, explaining some of the concerns from investors and financial markets. During this period, more than 3,000 wells that were completed with massive volumes of proppant (in excess of 1,800 pounds per foot) yielded productivity below 750 boed per 10,000 feet of perforated interval. Despite an increase in completion intensity of more than 40%, approximately 50% of U.S. horizontal wells had the normalized 180-day productivity of below 750 boed in the past four years.
- Optimizing well designs can boost capital efficiency. Deloitte found approximately 67% of wells in the Permian have been under- or over-engineered. A more balanced formation-and-engineering equation could improve the capital efficiency of Permian operators by approximately 23%. Similarly, approximately 60% of Eagle Ford wells have been under- or over-engineered. An optimal completion design strategy could increase capital efficiency of Eagle Ford operators by 19%.
- $24 billion could be at stake via optimization. Improving well-designs has the potential for U.S. shale drillers to reduce capital requirements by $24 billion. If achieved, E&Ps could achieve economic targets in a broader range of price scenarios, and thereby revive investor interest, per the analysis.
In summarizing the study’s conclusions, Deloitte suggests that to succeed, shale companies should utilize more sophisticated data analytics and balance experimentation and standardization. Technology is king, and knowing the reservoir is critical. Deloitte suggests that E&Ps should consider investing in
advanced technologies to understand how and why the reservoir is behaving in a certain fashion and then appropriately make changes to drilling plan and well development approach.
The study also notes that the significant capital savings available through optimizing well designs would go a long way toward E&P’s ability to reduce debt and win back capital market investors.
About the Author – Dan Genovese is a Director at the energy consulting firm EnerCom, Inc. with experience in corporate strategy, investor relations, ESG, government relations and policy. Mr. Genovese has worked in capital markets and has experience in upstream production and downstream energy demand. Contact: [email protected]
EnerCom, Inc. is the energy industry’s leading energy communication experts. We can help you with corporate strategy, ESG, media and government and stakeholder relations to effectively communicate your company’s story.
Contact: [email protected]
