DEVELOPMENTS IN UTICA SHALE ECONOMIC POTENTIAL

Transcription

1 DEVELOPMENTS IN UTICA SHALE ECONOMIC POTENTIAL Michael Morgan, P.Eng., Ph.D.

2 THREE MAIN POINTS How are new technologies implemented in the oil and gas sector? Which new technologies and/or new applications are the most promising? How can technologies best be used in Quebec?

3 NEW TECHNOLOGIES ARE IMPLEMENTED INCREMENTALLY Conventional oil and gas resources Reservoir quality dominates Technical improvements cannot keep up with decreases in reservoir quality Overall results worsen over time Unconventional oil and gas resources Well stimulation dominates Technical improvements exceed decreases in reservoir quality Overall results improve over time General progression: incremental everything Drilling rate (bit selection, weight on bit) Cost control Pumping rates Working fluids Proppant Number of fracture stages Frac job sizes

4 MILK RIVER/MEDICINE HAT (CONVENTIONAL) PRODUCTION Gas Type Curve (Rate vs Time) 25 Filter: Milk River/Med Hat Verticals (798 Wells 125 Hidden) - Group By: Date - Completion Year - CD Avg Gas (mcf/day/well) 2 Rate (mcf/day/well) 15 1 Impact of Frac ing 5 Well Results Generally Decrease Period Oct 28, 216, 4:9 PM VERDAZO >= 21 (1654) >= 25 to < 21 (18281) >= 2 to < 25 (25249) >= 1995 to < 2 (736) >= 199 to < 1995 (486) >= 1985 to < 199 (569) >= 198 to < 1985 (7419) >= 1975 to < 198 (7614) >= 197 to < 1975 (1862)

5 MONTNEY WELL PRODUCTION Gas Type Curve (Rate vs Time) 5, Filter: _GLJ Resource Play - Montney (4528 Wells 16 Hidden) - Group By: Date - Completion Year - CD Avg Gas (mcf/day/well) 4, Rate (mcf/day/well) 3, 2, Well Results Still Improving 1, Period Oct 28, 216, 12:18 PM VERDAZO 216 (316) 215 (84) 214 (939) 213 (69) 212 (54) 211 (524) 21 (36) 29 (262) 28 (93)

6 SPIRIT RIVER WELL PRODUCTION Gas Type Curve (Rate vs Time) 5, Filter: _GLJ Resource Play - Spirit River Horizontals (1656 Wells) - Group By: Date - Completion Year - CD Avg Gas (mcf/day/well) 4, Rate (mcf/day/well) 3, 2, Well Results Still Improving 1, Period Oct 28, 216, 12:12 PM VERDAZO 216 (182) 215 (383) 214 (371) 213 (233) 212 (178) 211 (173) 21 (13) 29 (22) 28 (11)

7 THE MOST PROMISING TECHNOLOGIES INCREASE COMPLETION PRECISION More selective fracturing Openhole bullhead Plug and Trust multi-frac Individual stage sealing Increasing number of stages Vertical (1) Single-stage hz (1) Multi-stage bridge plug hz (4) Plug and perf (8 to 16) Ball drop (12 to 24) NCS (4 to 9+) More sensitive monitoring Pressure and rate monitoring Mini-frac tests Micro-seismic Experimental DTS and DAS Increasing frac job sizes Tighter spacing between wellbores (4 m to 3 m to 2 m)

8 MONTNEY COMPLETION TRENDS Completion Trends - Gas 3 Filter: _GLJ Resource Play - Montney (4544 Wells) , , Avg Frac Spacing (m) Avg Proppant Placed per Stage 2 15 # of Stages 4, 3, IP Gas (mcf/day) , , Date Proprietary information of GLJ - Oct 28, 216, 11:33 AM VERDAZO WCFD - IP 9 Gas (mcf/day) Array 61 1,687 2,827 3,42 3,599 3,24 3,161 3,65 3,422 3,88 3,61 WCFD - Stages Actual (#) Array WCFD - Avg Proppant Placed per Stage (t) Array WCFD - Avg Frac Spacing Array

9 SPIRIT RIVER COMPLETION TRENDS Completion Trends - Gas 3 Filter: _GLJ Resource Play - Spirit River Horizontals (1656 Wells) , , Avg Frac Spacing (m) Avg Proppant Placed per Stage 2 15 # of Stages 4, 3, IP Gas (mcf/day) , , Date Proprietary information of GLJ - Oct 28, 216, 11:34 AM VERDAZO WCFD - IP 9 Gas (mcf/day) Array 1,469 4,19 3,744 4,45 4,327 5,83 4,865 5,3 5,263 WCFD - Stages Actual (#) Array WCFD - Avg Proppant Placed per Stage (t) Array WCFD - Avg Frac Spacing Array

10 ECONOMIC FACTORS Longer horizontal wells 1 mile was common 1.5 mile is now routine 2+ mile has been successfully demonstrated Reduced need for well pads and other surface disturbances Greater offset distance from neighbours More wells per pad 12 wells was planned 24+ wells now planned Reduced completion time Overall reduction in surface operations Dedicated water pipelines and centralized water handling High initial cost, but expect economy of scale Reduced road traffic

11 MONTNEY DRILLING COSTS Drilling Cost Per Meter (percentile) Filter: _GLJ Resource Play - Montney (4526 Wells 18 Hidden) - Group By: Date - Rig Release Year - WCFD - Drilling Cost per Meter ($/m) 2 Costs Still Decreasing 4 Percentile , 1,25 1,5 Drilling Cost per Meter Proprietary information of GLJ - Oct 28, 216, 11:57 AM VERDAZO 216 (122) 215 (63) 214 (141) 213 (746) 212 (562) 211 (531) 21 (467) 29 (262) 28 (165)

12 SPIRIT RIVER DRILLING COSTS Drilling Cost Per Meter (percentile) Filter: _GLJ Resource Play - Spirit River Horizontals (1656 Wells) - Group By: Date - Rig Release Year - WCFD - Drilling Cost per Meter ($/m) 2 Costs Still Decreasing 4 Percentile , 1,25 1,5 Drilling Cost per Meter Proprietary information of GLJ - Oct 28, 216, 11:58 AM VERDAZO 216 (114) 215 (364) 214 (386) 213 (252) 212 (183) 211 (196) 21 (122) 29 (26) 28 (13)

13 MONTNEY COMPLETION COSTS Completion Cost per Stage ($K) Filter: _GLJ Resource Play - Montney (4528 Wells 16 Hidden) - Group By: Date - Completion Year - WCFD - Completion Cost per Stage (K$) 2 Costs Still Decreasing 4 Percentile Completion Cost per Stage ($K) Proprietary information of GLJ - Oct 28, 216, 11:45 AM VERDAZO 216 (316) 215 (84) 214 (939) 213 (69) 212 (54) 211 (524) 21 (36) 29 (262) 28 (93)

14 SPIRIT RIVER COMPLETION COSTS Completion Cost per Stage ($K) Filter: _GLJ Resource Play - Spirit River Horizontals (1656 Wells) - Group By: Date - Completion Year - WCFD - Completion Cost per Stage (K$) 2 Costs Still Decreasing 4 Percentile Completion Cost per Stage ($K) Proprietary information of GLJ - Oct 28, 216, 11:44 AM VERDAZO 216 (182) 215 (383) 214 (371) 213 (233) 212 (178) 211 (173) 21 (13) 29 (22) 28 (11)

15 TECHNOLOGIES CAN BEST BE USED IN QUEBEC BY: Facilitating access to data Geotechnical Environmental baseline Production and operational results Capital costs Integration with existing datasets Transparency is critical when there s elevated public scrutiny

16 EAGLEFORD WELL PRODUCTION Gas Type Curve (Rate vs Time) 4, Filter: Eagleford Wells - ALL (18571 Wells 269 Hidden) - Group By: Date - Completion Year - CD Avg Gas (mcf/day/well) 3, Rate (mcf/day/well) 2, Database Error from USA 1, Period Proprietary information of GLJ - Oct 28, 216, 12:44 PM VERDAZO 216 (52) 215 (2985) 214 (4627) 213 (4257) 212 (3539) 211 (214) 21 (565) 29 (45) 28 (19)

17 BARNETT WELL PRODUCTION Gas Type Curve (Rate vs Time) 2,5 Filter: Barnett Shale Horizontals (193 Wells 522 Hidden) - Group By: Date - Completion Year - CD Avg Gas (mcf/day/well) 2, 1,5 Rate (mcf/day/well) 1, Database Error from USA Period Proprietary information of GLJ - Oct 28, 216, 12:38 PM VERDAZO 216 (45) 215 (168) 214 (614) 213 (884) 212 (1263) 211 (174) 21 (1843) 29 (1574) 28 (2835)

18 UTICA PROPERTIES 4-2 m thick 2.5 to 5.% TOC Mostly methane 3 to 5 m deep at northwest edge 1,8 m deep at southeast edge This is shallower, often thinner, than other gas resources Average of 6 Bcf/section 85 Bcf/section for best Ohio Utica 15 Bcf/section for best Marcellus 25 Bcf/section for best Montney

19 REPORTED PLANS FOR WELL LENGTH Company Formation Length (ft) Length (m) Consol Energy Ohio Utica 7, 2,135 Gulfport Energy Ohio Utica 8, 2,44 RICE Energy Pennsylvania Marcellus 7, 2,135 RICE Energy Ohio Utica 9, 2,745 PDC Ohio Utica 6, (1, proposed) 1,83 (3,5 proposed) Eclipse Resources Ohio Utica 13, (proposed) 3,96 (proposed) Eclipse Resources Ohio Marcellus 1, (proposed) 3,5 (proposed) Cabot Oil and Gas Corp Pennsylvania Marcellus 7, 2,135 Range Resources Ohio Utica 7, 2,135 Range Resources Pennsylvania Marcellus - Dry 7, 2,135 Chesapeake Resources Marcellus 7,9 (1, proposed) 2,41 (3,5 proposed)

20 REPORTED PLANS FOR WELL SPACING Company Formation Spacing (ft) Spacing (m) Consol Energy Ohio Utica 1,1 335 Gulfport Energy Ohio Utica 1, 35 RICE Energy Pennsylvania Marcellus RICE Energy Ohio Utica 1, 35 PDC Ohio Utica Eclipse Resources Ohio Utica Eclipse Resources Ohio Marcellus Cabot Oil and Gas Corp Pennsylvania Marcellus 7 to to 245

21 REPORTED WELL COST ESTIMATES Company Formation Cost per Well (USD) Cost per Length Consol Energy Ohio Utica 6.5 $MM Gulfport Energy Ohio Utica 9.6 $MM 1.2 $MM/1 ft RICE Energy Pennsylvania Marcellus.925 $MM/1 ft RICE Energy Ohio Utica 1.38 $MM/1 ft Chesapeake Resources Marcellus 8.2 $MM 1.4 $MM/1 ft Eclipse Resources Ohio Utica 11.5 $MM 1.17 $MM/1 ft Eclipse Resources Ohio Marcellus 7.4 $MM Cabot Oil and Gas Corp Pennsylvania Marcellus 6.7 $MM Range Resources Pennsylvania Marcellus - Dry 5.2 $MM Antero Resources Pennsylvania Marcellus 1.14 $MM/1 ft Antero Resources Utica Ohio 1.29 $MM/1 ft

22 CURRENT ANALYSIS (TECHNICAL) 8 wells per pad with 2,4 m horizontals at 4 m spacing Each well is estimated to drain 3/8 sections (square mile) Limited data set with very preliminary test results that are encouraging Four years ago, expected 3 to 4 Bcf per well Now expect 6.5 to 8 Bcf per well Recovery factors estimated between 2 and 4%

23 CURRENT ANALYSIS (ECONOMIC) Drilling cost of 8 $MM Premium price for gas: $.5/Mcf to $1.5/Mcf over Henry Hub Expect solid economic results if development allowed Half cycle economics (drill, complete, tie-in) have expected development IRR of greater than 4% Full cycle economics (pipelines, plants, drill, complete, tiein) have expected development IRR of greater than 2%

24 MOST ALBERTAN S DON T KNOW: QUEBEC EXPLORED FOR GAS FIRST!

25 QUESTIONS AND COMMENTS Mike Morgan, PEng Manager Specializing in Montney (43) Chad Lemke, PEng Manager Specializing in Shale (43) Jodi Anhorn, PEng COO (43) Warren Bindon, PGeol Specializing in Shale (43)