Drilling Data Provide Solution to Horizontal Well Log Costs

Technology Update The revolutionary growth of shale oil and gas development over the past 2 decades has pushed operators increasingly toward a manufacturing approach to resource development. Thousands of wells are drilled in the leading shale plays to offset decline rates as high as 50% in the first year (Oil+Gas Monitor 2014). However, the advancements in drilling and completions methods that have driven the growth of shale plays reflect two different underlying trends in regard to costs. As an example, EOG Resources reported to investors that its average drilling days per well in the Eagle Ford Shale in Texas declined from 14.2 in 2012 to 4.3 in 2015 (EOG Resources 2015), a 70% decrease. However, during the same span, its overall costs per well only declined from USD 7.2 million to USD 5.7 million (The Value Investor 2015), a 20% decrease. So what explains this divergence? The increasing intensity and cost of the completion program is most likely a major factor. The methods that have driven down completion costs have focused on using less expensive and more efficient materials and equipment. However, there is also an incipient, growing industry movement toward evaluating the potential gains by engineering the locations of stages and perforation clusters in relation to the varying geological properties along the wellbore. Historical evidence indicates that between 30% and 50% of perforation clusters do not produce. With each stage costing USD 100,000 to USD 200,000, this area is a substantial source of potential capital expense savings and increased production. Whether the goal is to engineer completions or improve well placement, companies need better information on the geological complexity of the reservoir to advance along the learning curve in shale and improve results. However, the shift from traditional vertical wells to the horizontal wells that have driven the shale boom has dramatically increased the costs of formation evaluation.