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U.S. Oil Rig Count Rises to Highest Level Since 1993

General discussions of the systemic, societal and civilisational effects of depletion.

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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Tanada » Mon 06 Mar 2017, 08:02:17

asg70 wrote:
Subjectivist wrote:Based on this graph drilling is going up almost as fast now as it was in 2010!


The theory put forward here that there isn't enough recoverable shale to power a second round of fracking seems to be in the process of being invalidated. (And this is taking place at a lower price regime than people here predicted was necessary for shale operations to make money.)


Indeed. Something a whole lot of us missed around here, fracking is too much of a catch all term to use. The number of different formations with their different properties, not to mention spots within those formations will still more differences in their conditions, makes a blanket term rather meaningless.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby ROCKMAN » Mon 06 Mar 2017, 10:26:13

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Tanada » Wed 05 Apr 2017, 10:19:37

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.


Image

http://phx.corporate-ir.net/External.Fi ... U9MQ==&t=1
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Subjectivist » Wed 05 Apr 2017, 12:32:38

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?
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Plantagenet » Wed 05 Apr 2017, 12:43:34

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?

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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby ROCKMAN » Wed 05 Apr 2017, 17:24:21

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Plantagenet » Wed 05 Apr 2017, 18:20:29

ROCKMAN wrote: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.


We already had this discussion---don't you remember?

The wells being drilling today in the Permian and other tight oil shale plays are ca. twice as long and require twice the sand as wells drilled just two years ago ---. One analyst calls the new drilling architecture in use today drilling design v3.0.

tight-oils-growth-potential-fracturing-conventional-wisdom

Here's a quote from the report:

Without getting too technical, Version 3.0 drilling designs ….. twice as much proppant and fracking fluid as v1.0 two years ago; fracking density twice as concentrated and stage spacing – gaps between fracks – twice as frequent. Basically …… each v3.0 well will pulverise the rock near to the well bore to increase the oil flow.

Image
The rapid evolution of fracking…..today's wells are much longer and cracked at a much higher density then wells were just a couple of years ago

Cheers!
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Darian S » Wed 02 Aug 2017, 22:06:24

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby rockdoc123 » Wed 02 Aug 2017, 22:21:04

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.


pay attention...the unconventional wells typically go through a initial phase of high production and decline as the fractures are depleted. This is termed hyperbolic depletion. As the major fractures have been produced the next phase of production is the matrix and microcracks resupply the larger fractures. 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. So think about it if you have 200,000 wells producing at 50 bbls per day, perhaps I'm wrong, but that is a few billion bbls oil per year. And because the decline rate is so small that is significant.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Darian S » Wed 02 Aug 2017, 22:58:34

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby ROCKMAN » Thu 03 Aug 2017, 06:37:48

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby rockdoc123 » Thu 03 Aug 2017, 08:56:35

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.


No as I have said many times production from tight formations that have been fracked follow a predictable curve....as much as 36 months of hyperbolic decline where you can see anything from 60 - 80% decline in rate but that is followed by a flat phase or exponential decline where the well can produce at low rates and very low decline for years. How long that particular well will produce at that rate is a function of the EUR and IP. As to economic or not as has been noted many times here no two wells are identical. There are unconventional wells in parts of the Permian basin and Eagleford that have a breakeven cost of ~$30/bbl and there are other parts that require $50/bbl in order to breakeven. That is a function of drilling and completion cost versus IP and EUR.

Much ado is made on this site by arm chair oil and gas wannabes about the steep declines in unconventional wells without realizing it is the shape of this curve and it's predictability that makes the business attractive. The high initial rates means payout (the point at which all of your investment cost is recovered) is quick, often in the first year and the low decline rates in the exponential phase is predictable. As an example lets say Company A has a well that IP'd at 450 bbl/d and then has plateaued in the exponential phase at 40 bbls/d. That doesn't seem like a lot of production until you consider Company A might have 500 wells with similar rates or 20,000 bbls/d. At current oil price a netback to the producer (ater costs and royalties) of around $25/bbl is a reasonable assumption. Hence Company A generates ~ $183 MM net income per annum from low rate wells. Now you might think the oil and gas E&P folks would rather have a conventional well that produces at a high rate (thousands of bbls/d) and declines at 6% per annum and indeed they would with the exception that the chance of geologic success in exploring for conventional fields is generally much less than 70% compared to the chance of geologic success for a shale well of 90 - 100%.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Darian S » Thu 03 Aug 2017, 09:13:48

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby marmico » Thu 03 Aug 2017, 09:38:50

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/
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby ROCKMAN » Thu 03 Aug 2017, 10:27:06

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Darian S » Thu 03 Aug 2017, 13:08:05

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby Tanada » Thu 03 Aug 2017, 14:18:11

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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby tita » Wed 16 Aug 2017, 03:03:32

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.

I am not an expert on the subject, but I try to rely on the data I have access to. And I'm very skeptical on the depletion of 1-2% you claim (seems a bit miraculous). If I use the work of Enno Peters on this page (compiling production from Hz wells only):
https://shaleprofile.com/index.php/2017 ... pril-2017/

And if I select the 2010 data only, we clearly see that the depletion is much higher than what you say. In facts, the 503 wells drilled in 2010 depleted by 23% between jan 2016 and jan 2017. The average well produce around 10bbls per day.

Maybe 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.
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Re: U.S. Oil Rig Count Rises to Highest Level Since 1993

Unread postby rockdoc123 » Wed 16 Aug 2017, 10:59:41

Maybe 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.


Your analysis is incorrect. As I stated and as you can see from the graph you presented the wells drilled with enough production history went through an initial phase of high decline (hyperbolic) and then gradually eased themselves into flatter exponential decline. The time period by which a given well gets to pure exponential decline is a function of a number of variables including fluid type, wettability, microcrack abundance, and size etc. This is why reservoir engineers use a host of decline curves characteristic of a particular reservoir in order to arrive at a probabilistic range of decline curves. The trick is to understand how much production is coming from those wells which are still in hyperbolic decline versus those wells that are in exponential decline. You are concentrating on the peaks which are due to the high IP's and ignoring the long flat bit where many wells are in exponential decline. The goal of all the shale players is to get enough wells producing in exponential decline that they have that block of production that yields steadily predictable cash flow with minimal operating costs and no needed additional CapEx. Currently, there are estimated 1.7 MM producing wells in the US. If all were doing 10 boe/d equivalent (which they aren't) that's 17 MMboe/d in total. To look at this in reverse the current oil production in the US is around 8 MMb/d and it would take 320,000 wells producing at an average of 25 bopd to get there. Given that all wells are not drilled at the same time and that individual wells have EUR's (currently) generally less than 400 Mboe the problem is somewhat more complex but can easily be modeled in Excel if you are so inclined.
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