Effective Economic Modeling and Portfolio Selection of Unconventional Resource Plays via Statistical Type Wells

Gouveia, Jim¹, Mark McLane², Gary Citron³ (1) Rose & Associates, Calgary, AB (2) Rose & Associates, Midland, TX (3) Rose & Associates, LLP, Houston, TX

Many firms are pursuing Unconventional Resource plays worldwide as a low risk vehicle for growth. Unfortunately, not all active resource plays have met the expectations of this low risk model. Pick the wrong play and no matter how flawlessly you execute, you will provide limited returns. Select the right Unconventional Resource play and you will have happy shareholders.

Some plays are very price dependent while others are both price and technology dependent. We provide a brief overview of the North American industry's use of statistically-based production curve types to assess potential ventures. We then focus on an alternative methodology for the selection of future Unconventional Resource plays critical to the long-term success of many companies. The methodology is similar to, yet unique from traditional basin analysis and features:

(1) Definition of materiality relative your company; (2) Type wells to generate EURs, production profiles, costs and land requirements to meet materiality; and (3) Use of pilot programs to represent segments of the play and sequence investments.

Consistent and systematic adoption of this methodology should greatly enhance the selection of future profitable Unconventional Resource plays.