Engineering and Economic Challenges in Shale Gas Production 211 Gas/Electric Partnership Conference Feb 1 th, 211 Rob Sutton
US Gas Well Locations Source: IHS MS Streets & Trips 2
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U.S. Gas Well Gas Production U.S. Historical Gas Well Facts 7, Production 7 Avg Daily Production, MMCFD 6, 5, 4, 3, 2, 1, Well Count Avg Well Rate 6 5 4 3 2 1 Well Count, 's or Avg Gas Rate, MCFD/Well EIA 1965 1975 1985 1995 25 4
U.S. Gas Well Gas Production 7, Avg Annual U.S. Gas Well Gas Production 6, 5, Gas Rate, MMCFD 4, 3, 2, 1, 198 1985 199 1995 2 25 21 EIA Year 5
U.S. Gas Well Gas Production 7, 6, Avg Annual Monthly U.S. Gas Well Gas Production 5, Gas Rate, MMCFD 4, 3, 2, 1, 198 1985 199 1995 2 25 21 EIA & HPDI Year 6
U.S. Gas Well Gas Production 7, 6, Avg Annual Percent Shale U.S. Gas Well Gas Production 35 3 Gas Rate, MMCFD 5, 4, 3, 2, 25 2 15 1 Percent from Shale 1, 5 198 1985 199 1995 2 25 21 EIA & HPDI Year 7
Jan-9 Jan-1 12, 1, 8, 6, 4, Shale Plays 2, 8 Jan-7 Jan-8 Jan-6 Shale Play Rate Comparison Haynesville Woodford Fayetteville Barnett Antrim Legacy Appalachia Gas Rate, MMCFD Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 HPDI
Natural Gas Where It s Produced EIA & HPDI Location 29 Avg Daily Rate, MMCFD % of Total Total Texas USA w/o Gas Barnett Wells 55,342 13,97 25.1 Texas 18,846 34.1 Wyoming 6,578 11.9 Gulf Barnett of Mexico Shale 29 5,144 4,939 9.3 8.9 Oklahoma 4,832 8.7 Lousisana 4,111 7.4 New Mexico 3,292 5.9 Colorado 3,244 5.9 Barnett accounts for 26% of total gas well gas production intexas Total 83.2 9
Gas Price and Rigs $14. $12. Henry Hub Natural Gas Spot Price & U.S. Drilling Rig Count Price US Rigs 3,5 3, $1. 2,5 $/MMBtu $8. $6. 2, 1,5 Rig Count $4. 1, $2. 5 $. Jan-8 Jan-9 Jan-1 Jan-11 Source - EIA 1
Texas Gas Wells 1, 9, 8, 7, Texas Gas - Annual New Gas Wells Well Count 6, 5, 4, Source HPDI 3, 2, 1, 1999 2 21 22 23 24 25 26 27 28 29 11
Jan-1 25, 2, 15, 1, 5, Texas Gas 12 Jan-8 Jan-9 Jan-7 Jan-6 Jan-3 Jan-4 Jan-5 Jan-2 Texas Gas Wells 21 29 28 27 26 25 24 23 22 21 2 1999 1982-1998 Gas Rate, MMCFD Jan-98 Jan-99 Jan- Jan-1 Source HPDI
Jan-1 Barnett Shale 6, 5, 4, 3, 2, 1, 13 Jan-9 Barnett Shale Gas Production Rate 21 29 28 27 26 25 24 23 22 21 2 1999 1982-1998 Gas Rate, MMCFD Jan-98 Jan-99 Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Source HPDI
Well Types and Cost Vertical well cost $3,-4, Horizontal well cost $2,5,-7,, Multistage hydraulic fractured completions 1, 9, Comparison of Vertical and Horizontal Well IP Barnett Horizontal Barnett Vertical 8, 3 Day Well IP, MCFD 7, 6, 5, 4, 3, 2, 1, Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 HPDI 14
Barnett Shale Horizontal & Vertical Wells 1. Barnett - Fraction of Annual Wells Drilled as Horizontal.9.8 Fraction of Total.7.6.5.4.3 HDPI & SPE 138447.2.1. 21 22 23 24 25 26 27 28 29 Year 15
Vertical vs Horizontal Well Attrition Barnett - Well Attrition 1. 21 Wells Fraction of Total Wells.98.96.94.92.9.88.86 Vertical 22 Wells 23 Wells 24 Wells 25 Wells 26 Wells 27 Wells 28 Wells.84.82 Horizontal 2 4 6 8 1 12 HDPI & SPE 138447 Months 16
Well IP Comparison IP Comparison - Reported vs 3 Day 35, 3, Reported Data Simulation Reference Reported Gas IP, MCFD 25, 2, 15, 1, 5, HDPI & SPE 138447 5, 1, 15, 2, 25, 3, 35, 3 Day (Peak Month) Rate, MCFD 17
Well EUR and IP 1, Well EUR at 3 Years, MMCF 1, 1, 1 4 Stage 8 Stage Comparison of Well EUR with IP 4 - Ft Horizontal Well 12 Stage 1 Stage 16 Stage 2 Stage 5, 1, 15, 2, 25, 3, 3 Day Well IP, MCFD 24 Stage 3 Stage 1 Nano Darcy 1 Nano Darcy 1 Nano Darcy 1 Micro Darcy 1 Micro Darcy 18
Cumulative Gas and IP Relationship HPDI 19
Cumulative Gas and IP Relationship HPDI 2
Cumulative Gas and IP Relationship HPDI 21
IP Distribution Comparison Fraction of Total 1.9.8.7.6.5.4.3.2.1 IP Rate Distribution Comparison (28-21) Legacy Appalachian Antrim Barnett Horizontal Woodford Horizontal Fayetteville Haynesville/Bossier Horizontal 35-7,927 HPDI.1 1 1 1 1 1 1 3 Day Well IP, MCFD 22
Example Use of Cum vs IP & IP Distributions Well cost $4.5 MM Gas price $5./MCF Desired payout 3 years Calculate Vol of gas = 4,5,/5. = 9 MMCF 23
Gas Production to Payout Well Costs Required Gas Reserves for Payout Cumulative Produced Gas, MMCF 7, 6, 5, 4, 3, 2, 1, 2 $/MCF 3 $/MCF 4 $/MCF 5 $/MCF 6 $/MCF 7 $/MCF 8 $/MCF 9 $/MCF 1 $/MCF 11 $/MCF 12 $/MCF. 2. 4. 6. 8. 1. 12. 14. Drill & Complete Cost, MM$ 24
Estimated Required Well IP 3 Day Well IP, MCFD 18, 16, 14, 12, 1, 8, 6, 4, 2, 2 $/MCF 3 $/MCF 4 $/MCF 5 $/MCF 6 $/MCF 7 $/MCF 8 $/MCF 9 $/MCF 1 $/MCF 11 $/MCF 12 $/MCF Well IP for 3 Year Payout (Barnett Average) HDPI & SPE 138447. 2. 4. 6. 8. 1. 12. 14. Drill & Complete Cost, MM$ 25
Probability of Payout IP Rate Distribution Probability of Comparison 3 Year Payout (28-21) Chance Fraction of Success of Total 1. 1.9.8.7.6.5.4.3 Legacy Appalachian Antrim Barnett Horizontal Woodford Horizontal Fayetteville Haynesville/Bossier Horizontal 2 $/MCF 3 $/MCF 4 $/MCF 5 $/MCF 6 $/MCF 7 $/MCF 8 $/MCF 9 $/MCF 1 $/MCF 11 $/MCF 12 $/MCF.2.1 HDPI & SPE 138447..1 12 14 16 18 11 112 Drill 3 Day & Complete Well IP, MCFD Cost, MM$ 26
Summary Shales provide a significant amount of the natural gas produced in the U.S. Approximately 2% of U.S. gas well gas production Premier plays currently Barnett, Fayetteville, Haynesville/Bossier & Woodford Use care when looking at well IP s Use 3 day IP rates Cumulative gas vs IP relationships Viable means to rank wells using early time data IP can be manipulated by completion techniques Not recommended for estimates of EUR Application to short time periods Putting it all together Cumulative gas vs IP relationships IP rate distribution Simple economic evaluation (probability of payout) 27
Questions 28