Vertical Wells and “Conventional” Activity Update
Tuesday February 2, 2016
Most of our attention during the past 18-months of sliding oil prices has been on the impact on US unconventional operations, and for good reason. The very technological advancement that brings future energy security to our beck and call has a very specific price: cash money. For all the efficiencies that a modern pad-drill operation adds to the equation, each well drilled and zipper-fracked costs a not insubstantial amount of money. And even with the 30% cost reduction at the expense of oilfield service providers to do those frack-jobs, operators are still having to pay 70% of a lot of money for every horizontal multi-stage well.
Market Realist recently pegged the total cost to produce one barrel of crude oil in the US at $36.20, which puts us unfortunately high on the chart versus most other producing countries and, for the past month or so, on the wrong side of the price of oil.Now that most of the long term high-value hedges have expired, the reduction of OFS costs has been baked into the balance sheets, and Q4 2015s series of redeterminations and write-downs have taken their toll, what else are operators doing to keep costs down and output up?
We have explored conventional E&P a little bit recently – Glenn R. McColpine’s excellent piece on optimizing stripper well performance and Mark Nibbelink’s great post on conventional E&P come to mind – but I thought it would be a good time to explore activity in the vertical/conventional realm.
Occasionally we’ll use vertical wells as a proxy for conventional activity, though in the modern oilfield we see operators discussing combining multi-stage hydraulic fracture jobs and comingled production with less expensive vertical drilling, particularly in areas that have heavily stacked hydrocarbon formations – like the Permian Basin. Rather than split hairs today we will just discuss vertical activity.