As the old adage goes, “The difference between stumbling blocks and stepping stones is the way a person uses them.” This is a saying I often heard in my household while growing up to help deal with difficult times. Now, even to this day, I live by this mantra, and after some digging, I found that this dates back to as early as the 19th century. It can still apply to everyday life, and even to navigating today’s oil and gas industry.
Over the last 10, 15 and even 20 years, many businesses have made significant advancements by using stepping stones to move past what appears to be a roadblock. For example, the oil and gas industry in North America has made many technological progressions in a short period. Now, many operators are feeling pressure to re-evaluate expenditures as well as completion methods to identify areas where costs can be cut. Active operators have honed their approach and fine-tuned their methods to produce at an optimal rate while achieving lower costs.
Why the Haynesville Stands Out
What better way to assess results of these advancements than to evaluate well level production? Below, we have identified horizontal completions from 2015 and compared barrels of oil equivalent (BOE) to lateral length. Out of all 2015 completions, we incorporated only wells with at least six months of oil or gas production, then took the sum of only the first six months of production data. This ensures an even comparison of production amongst all wells in the sample, eliminating the possibility of comparing a well with 24 months of production to one with only six months of production, for example.
Narrowing down our full list of completions by these parameters leaves about 4,500 producing horizontal wells in basins throughout North America, with about 4,000 in the U.S. The number of producing wells fracked in 2015 is expected to grow to account for the wells fracked in the second half of 2015, which have not yet reported the six months of production.
Diving into the data, Figure 1 highlights a selection of wells, within the red box, that have lateral lengths between 4,000 and 8,500 feet, which have produced higher BOE per lateral foot than average throughout the first six months of production. It appears that a significant number of these wells come from the Haynesville region, representing 35 percent of the top producing wells that are highlighted in the red box.
Figure 1. North American basins (Graphics courtesy of NavPort)
Next, to drill deeper into the data, we analyzed all of the Haynesville region completions by looking at the state where the completion took place and the operator who performed the completion. The chart was divided by state and showed that all wells highlighted in the red box in the Louisiana region of the Haynesville.
Operators Gaining Their Footing in the Haynesville
Splicing the data by operator, we see that there were two primary operators exceeding the average production results for wells with lateral lengths between 4,000 and 8,500 feet. Figure 2 illustrates that the Haynesville wells that were outperforming the average BOE per lateral length were fracked by Chesapeake Operating Inc. and Comstock Oil and Gas in Louisiana.
Figure 2. Haynesville operators
Chesapeake Operating Inc. has completed significantly more wells than Comstock Oil and Gas. Throughout 2014 and 2015, Chesapeake Operating Inc. held a 34 percent share of horizontal completions in the Louisiana portion of the Haynesville region.
In comparison, during the same period Comstock Oil and Gas held approximately 5 percent of the horizontal completion market. Figure 2 shows that Chesapeake Operating Inc. accounts for 58 percent of wells that have produced more than 200,000 BOE during the first 6 months for wells with 3,000 to 8,500 lateral feet. Similarly, Comstock Oil and Gas is responsible for 10 percent of the wells that have produced more than 200,000 BOE in the first 6 months with lateral lengths between 3,000 and 8,500 feet.
To explain the difference in production volumes in this timeframe, completion methods were analyzed, but yielded no results. Both Chesapeake Operating Inc. and Comstock Oil and Gas relied on raw sand proppant and slickwater or crosslink frac jobs.
One likely cause for Comstock Oil and Gas’ results (compared to the other operators in the region) could be the increased amount of proppant used per well, coming in at two times the average. However, with only a small set of data, a statistically valid conclusion could not be identified. Looking into Chesapeake Operating Inc.’s wells, they continue to have a higher BOE per lateral foot than average. So what other factors could explain the difference?
Location of a well, both its geography and geology, is a crucial factor that affects production. The majority of wells completed by Chesapeake Operating Inc. were located in the Caspiana field, which includes the Haynesville and Cotton Valley formations, among others. In fact, all of the completions that Chesapeake Operating Inc. performed in the Caspiana field have resulted in higher than average BOE per lateral foot.
A Balancing Act Moving Forward
The only other wells that are highlighted in the red box in Figure 3 are from the Thorn Lake and Swan Lake fields, both of which are only slightly southeast of the Caspiana field. Noticing that these production results were so closely tied to the wells from the Caspiana field, we researched recent publications about that area.
Figure 3. Cheseapeake operations by field
Ultimately, the results were limited. However, the Shreveport Times published an article on May 4, 2015, that addressed the completion activity seen in the Caspiana field region in 2015. In the article, it was pointed out that John Kalmbach, of Cook Yancey King & Galloway, believed the activity in the Cotton Valley could be seen as a “mini-boom” due to the capital it was attracting.
Kalmbach went on to say “It’s the wave of the future. We need to be paying attention.” It is unlikely that Kalmbach meant this as literal as it sounds. But I, for one, would be interested in his feedback after hearing about the production coming out of this region for wells fracked right around the time of this article.
As the market adjusts to more efficiently produce on a tighter budget, we expect to see lots of companies finding their footing and leaping forward. It's clear that Operators like Chesapeake Operating Inc. and Comstock Oil and Gas are just two of the operators using the technological advancements as “a stepping stone” to better position themselves in today’s climate.