Posted onOctober 5, 2017
Longer Laterals are Not a Fad
In early April Hart’s E&P published an article from DrillingInfo that looked at the relative performance of operators in the Delaware Basin. The Delaware Basin in West Texas/East New Mexico has become the most active play in the US. Currently, 20% of rigs in the US are drilling in the Delaware Basin. The thesis for the brief article was that in evaluating company performance in the Delaware, the average lateral length for the operator may be more indicative of performance than just well count.
Source: E&P Magazine
The graphic above shows the top 20 operators in the Delaware and compares the average cumulative 12 month production (Mboe) to the well count. As you can see the well count fluctuates significantly and doesn’t really provide a relationship to production.
DrillingInfo then provided the graphic below that shows relationship between the average perforated interval to production.
As you can see the average lateral length has almost a perfect direct relationship to the production performance for the companies. Fundamentally, the longer lateral that can be drilled and stimulated, the better the performance of the well and ultimately the company.
This fact isn’t lost on the market, reading through the annual reports and investor presentations of some of the largest operators in the Permian Basin, for instance, everyone is working to extend their laterals to increase their contact with the reservoir. Oxy recently reported that their average lateral in the Permian Basin was up 20% from a year ago (Oxy Investor Website). Concho Oil and Gas reported in Q1 that their average lateral in their Southern Delaware Basin play was 8,184’ (Concho Investor Website) which was up 29% from the 6,142’ drilled in Q1 of 2016 (Concho Investor Website).
In the Utica formation Eclipse Resources drilled an 18,544’ well and stimulated 124 zones. This averages about 150’ per stage. (Oil and Gas 360 Article)
As operators increase the lateral length and shorten the length of each stage, it will greatly increase the amount of completion hardware in each well.
Longer Laterals = More Plugs
The dominant completion methodology in the US Market is Plug & Perf. With this method, for each stage, a wireline Bottom Hole Assembly (BHA) comprised of a composite plug, wireline setting tool, and perforating guns are pumped into the well. When reaching the appropriate depth the plug is set and left in place. The wireline perforating gun assembly is then pulled up to perforate the zone. After pulling the remainder of the wireline BHA from the well, the zone is frac’d and the process is repeated until the entire lateral is completed. Once fully stimulated the operator will then drill up the composite plugs prior to putting the well on production.
With the exponential increase in stages pumped comes an increase in the amount of debris that must be removed from the well. And, as laterals get longer the efficiency of milling goes down. Operators need a completion solution that significantly reduces the amount of material in the well, and therefore the risk associated with removing it.
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