[Tanada]

$this->bbcode_second_pass_quote('asg70', '')$this->bbcode_second_pass_quote('Subjectivist', '
')Based on this graph drilling is going up almost as fast now as it was in 2010!

[ROCKMAN]

T - Not just the misuse of "frac"ng" as a catch all term but also something as seemingly simple as a "commercial shale well". So many folks constantly use that term as if all such wells are the same and most don't even think to question such statements as "it takes $X/bbl to justify drilling "shale wells." There are unconventional reservoirs worth drilling at $25/bbl and others that lose money at $100/bbl. The concept that a shale formation is a viable play at a specific price point is ridiculous. Imagine if someone claimed conventional oil prospects were economic to drill at ONLY a price of $X/bbl or greater: how many would accept such a claim? But a lot of folks who would reject that claim would believe it about a shale play.

Yes: there were many shale wells that lost money when oil was $90+/bbl just as there are profitable ones being drilled at $50/bbl.

[Tanada]

U.S. 31 March 2017
Working rigs------824---------------+15------------24 March 2017
Year ago rigs-----------------------+374---------------1 April 2016

Compared to April 1 last year there are 374 more rigs working today in the USA.




http://phx.corporate-ir.net/External.Fi ... U9MQ==&t=1

[Subjectivist]

Wow I didn't realize we are still below even 2000 level of active rigs drilling! Has the technology changed because of multiple bores from the same pad, or is the difference really as it looks at first glance?

[Plantagenet]

The technology of drilling Tight Oil Shale has been evolving quickly. These days the horizontal extensions on drill holes are twice as long as they were just a few years ago.

If there is twice as much hole per well, maybe not as many drill rigs are needed?

[ROCKMAN]

Plant - "The technology of drilling Tight Oil Shale has been evolving quickly.". Now you've stepped in deep dodo, buddy. LOL. Now back up that statement: what tech are they using today that wasn't being used a few years ago? Remember I do this for a living so be very careful describing those details.

And BTW: all shales are "tight" (low permeability) so "tight oil shale" is redundant. Of course, even that's not technically correct: the shale matrix (the actual rock itself) has extremely low permeability. OTOH the fractures in the matrix has some of the highest permeabilities found in nature.

[Plantagenet]

$this->bbcode_second_pass_quote('ROCKMAN', 'P')lant - "The technology of drilling Tight Oil Shale has been evolving quickly.". Now you've stepped in deep dodo, buddy. LOL. Now back up that statement: what tech are they using today that wasn't being used a few years ago? Remember I do this for a living so be very careful describing those details.

[Darian S]

Question do these new wells exhibit high production for decades or just 1 year rapidly dropping to a trickle?

Thats the difference between last dying throes and a true boom.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'Q')uestion do these new wells exhibit high production for decades or just 1 year rapidly dropping to a trickle?

Thats the difference between last dying throes and a true boom.

[Darian S]

So it differs from the view presented here
http://amp.timeinc.net/fortune/2015/01/09/oil-prices-shale-fracking/

And in other articles where it is claimed 50-70% drop in first year similar drop in second year and some wells becoming unprofitable by the third year.

[ROCKMAN]

Darian - I don't see anything in your link that conflicts with what Doc just posted. There's a huge difference between production economies (of existing wells) and that of drilling new wells. Lower oil prices had a huge negative impact on new well economics...not so much on existing wells. That includes both conventional and unconventional completions. Understand that the average US well was producing less then 15 bopd before the shale boom and doing so profitably at $30-$35 per bbl. And post-shale boom the average is still less then 15 bopd and obviously generating positive cash flow otherwise they would not be producing.

But also understand that a shale well generating a nice positive cash flow at $45/bbl may still be a money loser. IOW it will ultimately net less revenue then the cost to drill and complete it. Thus positive production economics doesn't necessarily mean the investment in drilling, completing and producing the well was positive.

That even comes into play in the completion decision. I've seen many wells once drilled and evaluated that were never going to recover 100% of their total cost. For instance a drilling cost of $6 million and completion cost $1.5 million. Analysis indicates it will only net $5 million in revenue. So at $7.5 million it's a money loser. But the decision to spend $1.5 million completing it to net $5 million is a good investment. That $6 million is a "sunk cost" and is not part of the completion decision process.

And here's the difficulty with the decision making process of a shale well vs a conventional well: post drilling it can be very difficult to impossible to determine if a shale well is worth completing and frac'ng. A critical factor given that a well costing $6 million to drill might cost $7 million to complete and frac. IOW the decision to drill a shale well almost always includes a commitment to complete it. And then even a nice initial flow rate doesn't prove the investment will be profitable. Takes 2 to 3 years to determine that. But even if after 3 years it becomes obvious a well will never recover 100% of the cost it could still produce for another 10 years as long as its generating positive cash flow.

And not all unconventional wells are equal. It all depends on the LOE (Lease Operating Expense), the oil production rate and the price of oil. On average Bakken wells will produce longer (even if they are net money losers) then Eagle Ford Shale wells which have significantly higher LOE's.

So you see when you say: "...some wells becoming unprofitable by the third year." it's not clear what you mean: unprofitable to keep producing or a well that will never recover 100% of its total investment.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'A')nd in other articles where it is claimed 50-70% drop in first year similar drop in second year and some wells becoming unprofitable by the third year.

[Darian S]

Both Rocks if you have say 8 million barrel production from wells in the stabilised decay phase alls fine and dandy. But if that high production is the result of constant drilling of new wells, that is bringing brand new ones online, I hope you can see the issue.

The rapid decline will mean that if thousands of new wells cant be constantly drilled, the production will drop by 80 to 90% to the stable decay phase production level. That deficit in production can likely not be sustained or made up by the global market and will lead to economic chaos. The claims made is that a good chunk of production is from brand new wells constantly coming online.

If your production level cant sustain an ever growing economy the great depression caused will threaten your business.

[marmico]

Enno Peters maintains data on all the tight oil basins. For instance, his interactive Bakken page shows cumulative yearly flows and initial production.

https://shaleprofile.com/index.php/2017 ... -may-2017/

[ROCKMAN]

Darian - "But if that high production is the result of constant drilling of new wells..." And that's the problem when you see someone report "X million of bbls currently being produced from shale wells". That number includes new wells and "heritage" (older wells) production. IOW that number doesn't really tell you anything about the dynamic at play.

Here's a PDF that gives you a sense of new vs legacy production for oil and NG in the major trends and how the trend lines have been changing.

I still haven't figured out how to post a PDF link. Search "EIA shale production" on google and look for:

"U.S. Energy Information Administration - EIA
https://www.eia.gov › pdf › dpr-full

The seven regions analyzed in this report accounted for 92% of domestic oil production growth and all domestic natural gas production growth during 2011-14. July 2017. "

Notice for the Eagle Ford Shale: production from new wells added 136,000 bopd. But production from heritage wells decreased 109,000 bopd. So the net change in the EFS was an increase of just 27,000 bopd.

[Darian S]

So assuming no new wells were added after this we'd see another 100+k drop in barrels per day within a few years from these new wells.

Or around 4 million drop in annual production. Youd have to add just as many new wells again to make up for that drop, but these new wells will also drop production requiring yet more new wells.

If you tell me they can viably keep adding that many wells year after year for decades, we could see it as a relative long term solution.

[Tanada]

Given this thread is nominally about drilling levels, not productivity levels, let us look at the drilling data.

According to Baker-Hughes in the USA this week there are 958 rigs working compared to last week when 950 were working. The year over year levels are even more telling, 495 were added to last years number for this week of 463. IOW drilling activity more than DOUBLED between the last week of July 2016 and July 2017.

http://phx.corporate-ir.net/phoenix.zht ... portsother

The truly telling factor IMO is the fact that with prices at or above $40/bbl for the last twelve months things have fundamentally gotten much better for the drilling and fracking sector. A lot of high paying jobs that disappeared in late 2015 have returned and are once again pumping money into the economy of the good old USA.

[tita]

$this->bbcode_second_pass_quote('', ' ')There is a rate at which this stabilizes vs production and that is the exponential part of the depletion curve at which point the year on year depletion is closer to 1 - 2%. This is supported by theory as well as historical data.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'M')aybe a single well may have a production profile of 50bbls per day with a slow depletion after initial production phase... Depending on how the fracking was made, on the geology of the well, etc. Some old wells are good candidates for refrack. But a single well doesn't tell us about the global production. 2/3 of actual production comes from wells drilled and fracked in the last 3 years.

[Tanada]

Rig count summary this weekend,
USA 909 active rigs, one year ago 557

North America 1100, one year ago 710

Top 7 basins by active rigs this week, remaining basins have 10 or fewer working rigs.
Permian 379
Cana Woodford 66
Eagle Ford 65
Williston 49
Marcellus 42
Haynesville 41
Utica 30

Three of these, Williston in ND/SD/MT and the overlapping Marcellus/Utica in PA/NY/OH/WV are in the north while the remainder are in the south in TX/OK.