Production Decline Curve Analysis — The Road Not Taken
Thursday July 7, 2016
Robert Frost’s poem “The Road Not Taken” concludes with the lines:
“two roads diverged in a wood and I—I took the one less travelled by, and that has made all the difference.”
Having just returned from my Dartmouth Class of ’71 45th reunion I suppose I can be forgiven for tapping into Frost’s poetry, given his connection to my alma mater.
But this is where Decline Curve Analysis algorithms are these days—at a fork in the road, and the one you choose to evaluate your significant acquisition or divestiture candidates will make “all the difference”.
Whether you are a completions engineer who is trying to gauge the outcomes of new completion techniques, or you are reporting to your board of directors with forecasts of the cash flow of operated properties, getting your numbers right has never been more important in these times of tight margins.
With high initial decline rates and maybe long term transient flow characteristics, unconventional decline curve analysis can be especially challenging. Do it too early and you risk “pessimizing” your EURs with algorithmic assumptions that are too pessimistic about future behavior.
Use an inappropriate algorithm—for example exponential vs hyperbolic—and your answers will be widely different. For the lease below, the difference is just over 440,000 BO and 1.7 BCF of EUR. That represents an unacceptable error range of production estimation.
This?
