Niobrara Tight Oil Success in Colorado: What Do The Numbers Indicate?

Transcription

1 Niobrara Tight Oil Success in Colorado: What Do The Numbers Indicate? Chris Eisinger Colorado Geological Survey Jim Milne Colorado Oil and Gas Conservation Commission 2012 AAPG Rocky Mountain Section Meeting Grand Junction, Colorado September 9 12, 2012

2 In the news... New Era for Drilling Raises Tensions in Fast- Growing Areas... 10/24/2011 New York Times

3 Motivation Assess performance of Niobrara shale play in Colorado, with emphasis on horizontal well activity since the Jake well in October, I) Production II) Value III) Patterns of Development Approach Utilize COGCC and commercial well/ production databases through August, 2012 for aggregate analyses.

4 A bit of history... Well Data Sources: IHS, COGCC (1) (3) (4) (2) Thermogenic Gas Biogenic Gas Regional Niobrara Completions (August, 2012) Vertical 17,607 Directional 3,685 Horizontal 682 (1) Early 1900 s: First Niobrara explicit production in WY s Salt Creek field (2) 1970 s 2000 s: Comingled production in CO s Wattenberg field & biogenic gas in eastern CO (3) Early 1990 s: Silo, WY field in early 1990s (4) Late 2009: EOG s Jake well in Hereford, CO field Mapped Niobrara features after: Sonnenberg, 2011; Meissner et al., 1984; and Lockridge and Scholle, 1978.

5 Jake Well: IP 1,500 Bbls 50k in 3 mnths k cum Mid & Well Data Sources: IHS, COGCC

6 35 30 Colorado Niobrara Horizontal Well Starts Statewide Monthly Cumulative EOG s Jake Well Well Data Sources: IHS, COGCC

7 11 10 Colorado Niobrara Horizontals Cumulative Production Statewide Oil (Million Barrels) Annual Production (Bbls) 2008: 83, : 183, : 1,033, : 5,383, : 4,133,396 (as of ~May) 1,523,379 Bbls 6,970,670 Bbls 3 489,905 Bbls ,047 Bbls 306,381 Bbls Monthly Production Production Data Source: COGCC

8 Colorado Niobrara Horizontals Cumulative Production Statewide 60 Oil (Million Barrels) Cumulative Gas: > 60 Bcf Gas (Billion Cubic Feet) Oil Gas Monthly Production Production Data Source: COGCC 0

9 35 30 Colorado Niobrara Horizontals Average Daily Production Statewide (Monthly Mean) > 30,000 Bbls/Day 180, , ,000 Oil (Thousand Barrels per Day) Oil Gas > 160,000 Mcf/Day 120, ,000 80,000 60,000 40,000 20,000 Gas (Mcf per Day) Production Data Source: COGCC 0

10 Oil (Mean Barrels per Day for Life of Well) Colorado Niobrara Horizontals Mean Production By Well Denver Basin 125 Bopd # of Wells: 448 Days of Production (mean): 255 Total Production (million bbls): 10.4 Denver Piceance Basin Sand Wash Basin North Park Basin 4 Bopd # of Wells: 31 Days of Production (mean): 295 Total Production (million bbls): Bopd # of Wells: 11 Days of Production (mean): 665 Total Production (million bbls): Bopd # of Wells: 9 Days of Production (mean): 1875 Total Production (million bbls): 0.23 North Park Sand Wash 50 Piceance 0 Production Data Source: COGCC Niobrara Horizontal Wells (Ordered by Basin and Production)

11 Oil (Mean Barrels per Day) Gas (Mean Barrels Equivalent per Day) Niobrara Gas Denver Basin Piceance Basin 2,250 Mcf per Day / Well 372 Mcf per Day / Well Piceance Denver North Park Sand Wash 0 Production Data Source: COGCC Niobrara Horizontal Wells (ordered by basin and production)

12 Niobrara Horizontal Wells Mean Daily Production

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17 Oil (Million Barrels) & Gas (Million Barrels Equivalent) Wells Niobrara Horizontal Production by Operator >50,000 Bbls/well

18 Declining returns what we see so far... CARRIZO OIL & GAS INC CARRIZO OIL & GAS INC CHESAPEAKE OPERATING INC KERR-MCGEE OIL & GAS ONSHORE LP PDC ENERGY INC MAGPIE OPERATING INCORPORATED KERR-MCGEE OIL & GAS ONSHORE LP SWEPI LP G3 OPERATING LIMITED LIABILITY CORP SLAWSON EXPLORATION COMPANY INC KERR-MCGEE OIL & GAS ONSHORE LP CHESAPEAKE OPERATING INC SLAWSON EXPLORATION COMPANY INC RICHARDS/BELNAP INTERESTS CHESAPEAKE OPERATING INC EPHPHATHA LLC CABOT PETROLEUM CORPORATION PETRO-CANADA RESOURCES (USA) INC DIVERSIFIED OPERATING CORPORATION SLAWSON EXPLORATION COMPANY INC MAGPIE OPERATING, INC 55% 18% 27% % of Total Production First 6 Months Second 6 Months Third 6 Months Typical EUR for some of the better performers: 250, ,000 Bbls Produced Oil (Thousand Barrels)

19 Niobrara Horizontal Well All-Stars * Highest IP: 1122 Bopd EOG, Red Poll 10-16H * Peak BOPD: 730 Bopd Noble, Wells Ranch, 29-68HN * Highest Average BOPD (wells > 1 year): 433 Bopd Noble, Wells Ranch, 29-68HN * Longest Lateral: 8982 Feet Noble, Wells Ranch, 29-68HN * Largest Cumulative Oil Production: 233,064 Bbls EOG, Critter Creek 4-09H * Largest Cumulative Gas Production: 2.13 Bcf Encana, Orchard Unit, 16-16H2

20 Value

21 $500 $450 $400 Niobrara Oil from Horizontal Wells in Colorado Production Value Estimation $ In 2009 there was 50% annual increase in value. In 2011, the increase was >500%! $479.3 $389.3 Production Value (Million $) $350 $300 $250 $200 $150 Sand Wash Piceance North Park Denver $100 $50 $0 $78.6 $2.8 $1.6 $6.4 $

22 Niobrara Gas from Horizontal Wells in Colorado Production Value Estimation $ $ to 50% of the total Niobrara horizontal well gas comes from the Piceance Basin. $102.4 $80 Production Value (Million $) $60 $40 Sand Wash Piceance North Park Denver $27.5 $61.5 $20 $0 $2.4 $3.9 $0.9 $

23 Niobrara Oil from Horizontal Wells in Colorado Production Value Estimation By County Production Value (Million $) $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $ Oil Weld County: > $900 Million in Niobrara oil since 2008 All other counties - $35 Million since 2008 Mesa County went from $0 to $20 Million annually in Niobrara gas in 3 years. In Denver Basin >10% of the produced Niobrara gas is not sold. Production Value (Million $) $80 $70 $60 $50 $40 $30 $20 $10 $ Gas

24 Colorado State Land Board and Niobrara Oil 72 horizontal Niobrara well completions on SLB leases. 24 are slated to be drilled. Direct benefit to State of Colorado (i.e. schools and other public facilities) 3 to 12.5% Net Royalty Interest Oil Production (Bbls) Royalties FY ,351 $3.5 Million FY ,180,998 $11.3 Million Total 1,561,349 $14.8 Million

25 Patterns of Development Density Laterals That s some mighty fine looking Smoky Hills there...

26 Drilled Horizontal Wells Per Section Permitted Horizontal Wells Per Section

27 Laterals & Well Density Operating in Wattenberg requires significant resources be put towards field development and anti-collision planning.

28 10000 Niobrara Horizontals - Lateral Length vs Production Lateral Length (Feet) Oil Production (Mean Barrels per Day)

29 Fracture optimized orientation Orientation based on lease holds & Section boundaries Experimental

30 10000 Possible Tool for Assessing Play Development... Oil Production Rate (Barrels Equivalent per Day) May, 1992 Mar, 2010 Gemini Well Jake Well Jan, 2009 Feb, 2011 Apr, 2012 Peak Rate (Max) Peak Rate (Avg) Rate (Avg) 1 Exploration Growth # of Horizontal Niobrara Wells Drilled in North Denver Basin (Weld County) Concept after Bernstein Research

31 Is the Niobrara play a success? Widespread, high volumes of Niobrara oil being produced in Colorado: 5.4 million Bbls in 2011; on track for 8 to 10 million Bbls in Significant gas (>25.8 Bcf in 2011) Niobrara oil produced from horizontal wells in Colorado estimated to be worth $479 million (14% of the total oil value for the state); the gas is worth an estimated $100 million. Important themes to watch in going forward: 1) Development outside the known entities of Wattenberg and Hereford. 2) Well path management in areas of high well density. 3) Longer lateral lengths in situations where an operator s lease holds allow. 4) More experimentation with lateral orientation, especially in fields away from well characterized zones. 5) How gas price and demand will affect interest and management of the substantial Niobrara gas resource. 6) Play performance upon reaching later stages of growth and maturity.

32 Acknowledgements Thom Kerr, Colorado Oil & Gas Conservation Commission Vince Matthews, Colorado Geological Survey Dave Noe, Colorado Geological Survey Tim Kelly, Colorado State Land Board

33 Thanks! Chris Eisinger Colorado Geological Survey Jim Milne Colorado Oil & Gas Conservation Commission