Exporting American Shale Experience to Australia: Lessening The Learning Curve Richard Stoneburner Managing Director: Pine Brook Partners Director: Newfield Exploration, Yuma Exploration and Cub Energy DUG Australia August 27, 2014 Brisbane, Australia Stoneburner Consulting Services, LLC 1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 BCF/D The Shale Gas Revolution: A Graphical Depiction The advent of isolated, multi-stage hydraulic fracturing in ~2006 was the game changing moment. 90,000 85,000 80,000 75,000 70,000 65,000 60,000 U.S. Natural Gas Production Isolated Multi-Stage Hydraulic Fracturing Stoneburner Consulting Services, LLC 2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 MBOP/ D The Shale Oil Revolution: A Graphical Depiction The discovery of the Eagle Ford Shale, development in the Bakken Shale and onset of Permian shale exploration has driven this growth 8,000 7,000 6,000 5,000 4,000 U.S. Crude Oil Production Stoneburner Consulting Services, LLC 3
Emerging The Maturity Index for American Shales Evolving Mature Utica Tuscaloosa Marine Shale Eagle Ford East Texas Basin STACK Niobrara Wolfcamp Delaware Basin Wolfcamp Midland Basin Woodford Anadarko Basin Barnett Fayetteville Haynesville Marcellus Bakken Eagle Ford Gulf Coast Basin Stoneburner Consulting Services, LLC 4
Trends Associated With Emerging Plays Geologic and petrophysical data gathering All inclusive open hole log data critical Calibration of the log to core is also critical Variations to the drilling practices Work toward removing early time conservatism Experiment with variables as early as possible Variations to the completion practices Optimal fluid system and proppant type need to be validated Completion geometry variations need to be tested Micro-seismic data should be acquired, but beware of reading to much into it Stoneburner Consulting Services, LLC 5
Emerging Play Status: Utica The Search For the Core What once was thought to be huge does not appear to be the case Stoneburner Consulting Services, LLC 6
Emerging Play Status: Tuscaloosa Marine Shale Engineering, Not Geology, Is The Key The resource is there, but can we get it out economically? Stoneburner Consulting Services, LLC 7
Emerging Play Status: Eagle Ford East Texas Basin Related, But Different The log character is a mere shadow of its more famous brother, but results have been good Just how good and how big remains to be seen Oil leg is fairly well proven, but gas condensate leg is just getting going Stoneburner Consulting Services, LLC 8
Emerging Play Status: STACK STACK Not To Be Confused With The Miss Lime Meramec Woodford While Mississippian in age, the rocks bear no resemblance Hybrid rock type with interbedded carbonates and shales Potential for multiple stacked laterals Stoneburner Consulting Services, LLC 9
Trends Associated With Evolving Plays Geologic and petrophysical modeling Integrate core calibrated log data 3D seismic data acquisition Acquire 3D covering prospective acreage position Regional appraisal drilling Contract a multi-rig program to determine how much needs to be HBP (held by production) Optimization of wellbore design and construction Most all aspects of the well bore design are understood Learning curves and continuous improvement need to occur Stoneburner Consulting Services, LLC 10
Trends Associated With Evolving Plays (continued) Variations to the completion design Fluid system and proppant type have been established Geometric changes to completion design should continually be tested Variations to production practices Production logs and radioactively tagged proppant and fluid are critical Restricted rate production testing should be tested as pilots Stoneburner Consulting Services, LLC 11
You Better Be in the Core Evolving Play Status: Niobrara Wattenberg and N. Colorado is where its at Non-Core N. Colorado Wattenberg Stoneburner Consulting Services, LLC 12
Evolving Play Status: Wolfcamp Delaware Basin Up Was Down and Down Was Up Tilted basin has created inverted maturities Deepest part of basin is least mature and shallower is the most mature Where the core is remains to be seen, but it is getting pretty clear (gas condensate window) Stoneburner Consulting Services, LLC 13
Evolving Play Status: Wolfcamp Midland Basin Down Was Down and Down is Good Basin center provides highest pressure gradient and highest EUR Stacked reservoirs totaling as many as 8-10 target reservoirs Stoneburner Consulting Services, LLC 14
Evolving Play Status: Woodford Anadarko Basin CANA or SCOOP? The Results Are In CANA SCOOP As the structure narrows to the south, the maturity and pressure result in a perfect storm of economics with high ratio gas condensate production Stoneburner Consulting Services, LLC 15
Trends Associated With Mature Plays Geologic model is generally known and accepted Optimal drilling practices are generally known and accepted Pad drilling efficiencies are recognized Down spacing pilots Understanding the proper spacing is probably the most challenging of all the learnings More extensive and radical variations in completion design and implementation Geometric completions vs. geologic completions Incorporate Silicon Valley type technologies to assist in data analysis Stoneburner Consulting Services, LLC 16
Mature Play Status: Barnett It is Not Just About The Reservoir The core is more defined by what s beneath than what is in the middle Bottom seal makes the difference between good and great Stoneburner Consulting Services, LLC 17
Mature Play Status: Fayetteville It s Not Just About the Reservoir Part II Structural complexity drives performance Goldilocks theory Source: The Bureau of Economic Geology (BEG) at the University of Texas at Austin Stoneburner Consulting Services, LLC 18
Mature Play Status: Haynesville Which Way Do I Turn? There were three areas that on the surface looked fairly equal Pressure, TOC and mineralogy made Louisiana the winner Stoneburner Consulting Services, LLC 19
Mature Play Status: Marcellus Heads or Tails, But Nowhere Else NE Pennsylvania and SW Pennsylvania are the clear cut winners in a play that initially looked to be connected Reservoir quality wins out, as usual Stoneburner Consulting Services, LLC 20
Mature Play Status: Bakken The Oreo Play Middle Bakken dolomitic siltstone sandwiched between two organic rich black shales with as much as 12 percent TOC Stoneburner Consulting Services, LLC 21
Mature Play Status: Eagle Ford Gulf Coast Basin It s All Good! Over 7 million acres with as much consistently commercial production by area as any shale play All product mixes from 6000 to 12,000 Stoneburner Consulting Services, LLC 22
Non-Technical Challenges for Operators: Regulatory and Environmental Hydraulic fracturing debate Has it been contrived? Frack! Need for State regulations over Federal. Education of the ill-informed and misinformed public Air emissions Carbon Dioxide (CO2) Methane (CH4) Transportation issues Oil Pipelines Vs. Rail. Exporting LNG. Exporting Crude Oil/Condensate/NGL products. Stoneburner Consulting Services, LLC 23
Non-Technical Challenges for Operators: Cost Control Acquisition Costs Most shale plays have seen a drastic moderation in acquisition costs since the 2008-2009 time frame Exception: Eagle Ford (2010) followed by Permian (Current) Drilling and Completions Costs Since 2000: Global increase of 5%, North America increase of 48%* Service companies have looked at the boom as an opportunity to test the ceiling * Operating Costs Most shale plays have relatively low op costs as a result of high volume flowing wells and relatively low water production *: IHS Stoneburner Consulting Services, LLC 24
Non-Technical Challenges for Operators: Commodity Prices Natural Gas Can weather, like North America had last winter, actually materially effect the mid-term price? Increased demand: Electricity, transportation, and LNG Crude Oil and Condensate Geo-politics still has the most influence, particularly near term Can North American supply increase materially influence price in the mid to long term? NGL Products Increase demand through expanded product base and export Stoneburner Consulting Services, LLC 25