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How Have Well Economics and EURs Reacted to Low Commodity Prices and Falling Service Costs Within the United States Oil Plays?


With the global over supply of crude oil brought on by OPEC reluctance to impose an output freeze, strong production growth from the US and depressed global demand, oil prices dropped from $100/bbl in July 2014 to current levels of ~$45/bbl. This study reviews more than 100,000 wells from 30 major oil and gas play regions within the US to understand how performance has changed leading up to and through the downturn. Over 5000 unique type curves across 650 play sub-regions are generated to isolate geological differences and forecast production trends. The result is a detailed understanding of drivers of performance change within each geologically consistent area. The effects of depressed commodity prices and service costs on single well breakeven commodity prices and play-wide recoverable resources are analyzed. Finally, a rig-driven production forecast model is built to estimate future US production. In 2012, single well breakevens across the 30 plays studied averaged $80/bbl with the average well expected to recover 399 Mboe (31% oil). Since 2012 breakevens dropped in each of the following years, with Q1'16 estimated at $59/bbl with a 487 Mboe EUR (Estimated Ultimate Recovery) (51% oil). Of the four major oil plays, Gulf Coast Basin (Eagle Ford Formation) breakevens went from $65/bbl in 2012 to $47/bbl in Q1'16, Delaware Basin (Wolfcamp Formation) went from $70/bbl to $47/bbl, Midland (Wolfcamp and Sprayberry formations) plunged from $89/bbl to $49/bbl and the Williston Basin (Bakken Formation) fell to $57/bbl. Driving the improvements observed from 2012 to Q1'16 are factors such as falling operating and well costs (down 15-30%), improving completion designs, longer lateral lengths and inventory high-grading of well locations. Proppant intensity (completion design measure) has grown anywhere from 23% to 56% since 2012, resulting in EUR improvements ranging from 6-19%. Furthermore, wells in all four plays examined have experienced longer lateral lengths through time, corresponding to up to 20% increase in EURs. Our latest results suggest performance has continued to improve through 2016, which will significantly impact areas of future exploration.