The performance of an unconventional well has less of an effect on reserves than a conventional well because of the nature of the unconventional resource.
Unconventional oil and gas production is closer to mining an ore body that is fairly uniform in grade. With the way the unconventional well curve behaves, in most instances, the higher the flow rate, the steeper the decline curve and the longer the tail production of the well. You essentially get the reserves out faster but don't necessarily get more reserves out . A bit like mining the ore body at a faster rate. This will have an effect more on the NPV of the well but not change the reserve volume materially as such.
There are almost no dusters in unconventional development drilling. Since it's rebirth in late 2015, BRK have participated in over 50 fracked horizontal wells, 4 as operators , and not one has been a duster. The least productive well from memory was the Mote well, in Garvin County, which is very close to the Bullard , a Woodford well drilled by Rimrock in 2018. The Bullard was outstanding well as per the BRK announcement below.
In unconventional production the trick is to get the most efficient drainage of the reserve, not the greatest production in total . For example, an operator may calculate a certain single zone DSU has 10 million BOE in place resource, and 3 wells at even spacing will drain an average of 1.5 million BOE each for a total of 4.5 million BOE. They also calculate that 5 wells will drain an average of 1.1 million BOE or 5.5 million BOE in total . Each well in the second case will drain less oil because the frack drainage envelope has to be smaller for the wells not to interfere with each other. If all the wells cost approximately the same because they go to the same depth and have the same lateral lengths and the same number of frack stages then the operators will chose to drill only three wells and recover less oil as that option provides a better return on capital, even though it recovers less oil.
Rangers ' underperformed' not because of geology,or bad design, or lack of natural fracturing, but because of well interference from Sundance Kid.. If there was no well interference the reserves Rangers would recover would not change materially due to a lower flow rate, but it's payback period would be longer longer and NPV will be somewhat lower because it will return cash at a slower rate , but longer tail. The effect of the Sundance Kid well however on the Rangers DSU would have been to create a drainage sump towards SDK which left alone could have decreased the recoverability and hence reserves of the Rangers well when it was drilled... the longer the delay the greater the effect. Hence the rapid CR for Rangers in Aug 2021.
Wolf Pack was drilled almost certainly for 2 reasons.
1) To take advantage of the elevated commodity prices
2) Because Scissor Tail were drilling their Jake 1 and 2 wells in the DSU immediately to the east of the Rangers DSU . The spacings are correct in terms of being 1320 feet away from WP. The fact the BRK also shut in the Rangers well for a few weeks during the WP frack operation ( Rangers is more than 1320 feet away from WP) to " protect " that well from a WP frack hit means BRK thought it was best/ necessary to drill WP now and in that location to counter any potential effect of the Jake wells on the Rangers DSU... effectively kill 2 birds with 1 stone.
Just because a HBP well holds all the reserves within a DSU, the laws of fluid dynamics don't necessarily take that into account when wells are drilled in an adjacent DSU. BRK would not be securing it's asset base if it ignored 3rd party activity in DSU's abutting it's own..simple physics which comes with the benefit of cash flow and nothing unusual, controversial or underhanded.
The questions should be
1) Would BRK's pace of SWISH non HBP drilling be slower at lower commodity prices?
2) At current prices, would the pace of SWISH non HBP drilling be slower if there was no third party drilling in adjacent DSU's?
I am pretty sure the answer would be yes for both.
Cheers
Dan
BRK Price at posting:
1.3¢ Sentiment: Buy Disclosure: Held
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