January 12, 2016
Authors: Per Magnus Nysveen, Senior Partner & Head of Analysis, and Leslie Wei, Senior Analyst, Rystad Energy
Publisher: Oil & Gas Financial Journal, January Edition
Refracturing of shale wells is a popular topic since operators can apply the latest technology to older wells, thereby increasing production without incurring all the costs of a new well. Well results indicate that the resources per well have doubled since 2012 for the main plays (ref. December 2015 article), making refracturing of shale wells a logical development. Operators are optimistically discussing the possibility of refracked wells in several different plays, but how have the results compared to expectations so far?
To refrac a well an operator goes into an old well, or underperforming well, stops the production and recompletes the well with new hydraulic stimulation. While this is not a new technique, its application to horizontal shale wells is still in the initial phase. As of August 2015, less than 1% of the total ~100,000 horizontal wells in the United States have been refracked. Figure 1 shows the number of U.S wells refracked each year split by play. Currently, the 2015 value is incomplete due to delays from state reporting, and the dotted line indicates the full year expected number. Compared to the overall drilling activity that decreased 40% in 2015, there is a clear interest in refrac opportunities as indicated by the concurrent 30% increase. There have been targeted refracks in almost all the plays, but the majority of the activity has been in Bakken, Barnett and Eagle Ford. Furthermore, the chart only includes horizontal refrac jobs; there has also been a significant refrac campaign for vertical wells, Devon Energy, for example, refracked 150 vertical Barnett wells in 2015, where they report an average production increase of 700%.
In theory, the cost of a refracked well should be similar to the cost of completing the well. On average, about 1/3 of the development cost of a horizontal shale well goes to drilling, while the remaining 2/3 is allocated to completion. This means, by refracking an older well, an operator can save the cost to drill the well. Currently, Bakken is the play with the largest number of refracked horizontal wells. By examining the performance of the ~300 refracked wells, it is possible to quantify the success so far. Figure 2 shows the development of the production for the average Bakken well, one year before and one year after recompletion. The x-axis shows the cumulative months from re-frac, with month 0 representing the first month of production. On average, the process increases the production by more than four times after the new stimulation, with higher production throughout the entire first year.
By comparing the additional production from refracs to the additional costs, it is possible to determine which method is more profitable. Figure 3 shows the development cost per barrel (EUR) for each well type. The values are based on the average capex per well, where the refrac wells incur 2/3 of the total well cost. State data and operator specific decline curves are used to determine the EUR. Since 2013, the average cost has decreased for both categories with the gap closing in 2015. If the trend continues, then refracks may become a more profitable approach for operators. It is also interesting to note that there is not one specific operator leading in the number of wells refracked, rather ~30 operators that are testing the method.
Refracking older wells definitely increases the recovery of the well, but given current results, it is generally more profitable for operators to drill a new well. Recompletion is still an immature recovery technique but once better results are replicable, refracked wells could provide a large potential for low cost production.
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Per Magnus Nysveen, Senior Partner & Head of Analysis
Phone: +47 24 00 42 16
Mobile: +47 99 16 13 09
Leslie Wei, Senior Analyst
Phone: +47 24 00 42 00
Mobile: +47 90 22 00 76
About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in Norway (Stavanger), the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), Africa as well as South East Asia.