Expediting tight oil decline rates top, a growing list of concerns for Permian basin operators, with unexpected production shortfalls provoking producers to contemplate stepping up drilling investment and M&A activity, Wood Mackenzie’s Robert Clarke, Research Director, Lower 48 Upstream, informed delegates on the Unconventional Resources Technology Conference (URTeC) in Denver.
As ultra-low-value undrilled locations change into exhausted and productivity gains throughout more extensive sections of acreage proceed to average, producers ought to shift their focus from new production rates to excellent longer-term efficiency and production optimization, Clarke stated.
The shift is inevitable because the Permian matures, and with it, declines charges are more likely to increase over time.
Clarke advised delegates “Individual well productivity improvements helped to offset decline charges via 2017. However, these gains have weakened over the previous two years. Not do we routinely see operators press-releasing report-setting wells. For wells drilled to date this year within the Midland Wolfcamp, common initial production (IP) rates are down 6%, and we see productivity reductions throughout quite a few benches.”
“Steeper decline rates and smaller IPs within the Permian basin will probably lead to operators needing to drill extra wells than initially planned if they’re committed to hitting beforehand established long-term targets. This will likely be particularly difficult in the close to-term as a result of raising capital budgets today is effectively off-limits.”
He added: “Some companies are embracing economies of scale for both rigs and infrastructure as a technique to improve efficiency nicely and enhance decline charges. However, our evaluation signifies this method is simpler at cutting costs than improving production characteristics.”
The choice of raising capital budgets and drilling more wells is to show to M&A. There was a burst of asset and private-to-public offers during the 2016-2017 “Permania” period. However, that has now cooled, Clarke stated.