Drillinginfo DPR...The purpose of the Drilling Productivity Report (DPR) is to give a short-term...

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Drillinginfo DPR

Drilling Productivity Report | September 2018


Contents

What Is the Drillinginfo Drilling Productivity Report? 3

Drillinginfo DPR – Key Takeaways 4

Anadarko 5

Appalachia 8

Bakken 11

Eagle Ford 14

Haynesville 17

Niobrara 20

Permian 23

Methodology Notes 26


What is the Drillinging Productivity Report?

▪ The purpose of the Drilling Productivity Report (DPR) is to give a short-term (three-month) outlook for

oil and gas production from the major shale basins in the country.

▪ The major shale basins are defined as Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville,

Niobrara, and Permian. The counties included in the different basin definitions correspond to the same

geographic extents as the EIA.

▪ The EIA's DPR was developed to provide guidance on short-term production given the lack of up-to-

date production information from the state reporting agencies, using several different data sources

including Drillinginfo (DI). The Drillinginfo Drilling Productivity Report (Drillinginfo DPR) uses DI's

datasets and some key changes to methodology to provide an alternative short-term forecast for the

market's consumption.

▪ Key differences between EIA and DI’s DPR:✓ Historical production: Both source DI’s historical production. However, the determination of the completeness of

the state data vs. when projections start varies between the two (e.g. the date that Drillinginfo uses to cut off historical observed data vs. the forecast is generally more recent than the EIA DPR forecast starting date). Additionally, DI does not employ a natural gas flow data-driven adjustment to historical volumes, instead taking the state-reported volumes as the de facto production level. We do this because the state-reported volumes are used for the purpose of calculating royalty and tax liabilities, and therefore should be the most accurate data available.

✓ Rig counts, wells drilled, and wells completed: EIA uses Baker Hughes while DI incorporates proprietary data from GPS tracking units and publicly reported information to more accurately monitor oil and gas drilling rig movements.

✓ Incremental production: DI’s calculation uses a vintage-type curve (from wells drilled in the past 12 months) from reported actual well results. EIA calculates incremental volumes per rig by dividing production from new wells by the rig count from the most recent month. The use of a vintage-type curve allows for the use of a completion count instead of a rig count.


Key Takeaways

▪ Anadarko production has been growing with increased rig activity in the STACK and SCOOP. Top-tier economics are supporting this growth. However, the pace of the growth is somewhat muted in the DI forecast due to a combination of different factors:

✓ DI uses a later start date for its forecast, given that the reporting well counts in the area support a complete production dataset through June.

✓ Oil production is increasing in the area, given the emphasis placed on the STACK. The STACK is an oil-directed play while the SCOOP is more gas heavy. In the DI forecast, the shift away from the gas-producing areas is highlighted by the flatter gas production profile of recent wells.

▪ The greater Niobrara area is expected to continue its growth trajectory but at a slower rate than the EIA DPR trend. DI believes crude oil production will trend below EIA estimates due to observed well results. Gas production will rebound following a temporary decline at the start of 2018.

▪ The Permian is the most active basin in the country. DI and EIA both foresee a steep upward trend in production, but DI’s higher gas production forecast seems to support the higher basis differential at Waha. The DUC count in the Permian has continued to grow over the past several months, and this is due to the inability of completions crews to keep up with the pace of drilling. This is causing EIA’s per-well productivity metric to flatten out in relation to actual well results which is why EIA’s production trajectory is less steeper than DI’s. It is important to note that infrastructural constraints in Permian are not considered.

▪ Although the DI forecast for Eagle Ford is lower than that of the EIA, should historical production recover further once state data comes in for near months, the expected production levels will follow a similar trajectory for crude oil. The natural gas production expectations are lower in the longer term in DI’s forecast, since active operators with a focus on the Eagle Ford are moving their activity to oilier parts of the basin.

▪ The growth trajectory of the two natural gas-directed basins, Appalachia and Haynesville, both show similar upward trends in gross gas production. Crude oil is also showing a similar trend in both areas. In Appalachia, higher prices recently may lead the operators to move to the condensate windows in the future, and the DI DPR will keep a close eye on this trend.

▪ Bakken will continue to grow production in line with operator expectations. There was a period of lower production at the start of the year due to winter conditions, but the volumes are recovering.

© 2018 Drillinginfo, Inc. All rights reserved. All brand names and trademarks are the properties of their respective companies. 5 Drillinginfo DPR - September 2018

ANADARKO – Active Rigs and Well Starts

Source: DI Rig Analytics

0

50

100

150

200

250

Active R

igs &

Well

Sta

rts

Active Rigs (H) Well Starts (H)

CHART 1

Active Rigs and Well Starts


ANADARKO – Vintage Type Curves

0

50

100

150

200

250

300

350

Oil

(Bb

l/d

)

Months on Production

2012 2013 2014 2015

2016 2017 2018

0

500

1,000

1,500

2,000

2,500

Gas (

Mcf/

d)


2012 2013 2014 2015

2016 2017 2018

Gross Gas Vintage CurveCrude Oil Vintage Curve

CHART 2 CHART 3

Source: DI Web App


ANADARKO – Production Forecast September

Source: DI ProdCast

0.30

0.35

0.40

0.45

0.50

0.55

0.60

Cru

de O

il P

roduction (

MM

Bbl/d)

EIA Drillinginfo

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

Gro

ss G

as P

roduction (

Bcf/

d)

EIA Drillinginfo

Gross Natural Gas ProductionCrude Production

CHART 4 CHART 5


APPALACHIA – Active Rigs and Well Starts


0

50

100

150

200

250

Active R

igs &

Well

Sta

rts


CHART 6



APPALACHIA – Vintage Type Curves


CHART 7 CHART 8

0

10

20

30

40

50

60

70

80

90

Oil

(Bbl/d)


2012 2013 2014 2015

2016 2017 2018

0

2,000

4,000

6,000

8,000

10,000

12,000

Gas (

Mcf/

d)


2012 2013 2014 2015

2016 2017 2018

Source: DI Web App


APPALACHIA – Production Forecast September

Source: DI ProdCast

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

Cru

de O

il P

roduction (

MM

Bbl/d)

EIA Drillinginfo

9

14

19

24

29

34

39

Gro

ss G

as P

roduction (

Bcf/

d)

EIA Drillinginfo


CHART 9 CHART 10


BAKKEN – Active Rigs and Well Starts


0

50

100

150

200

250

300

Active R

igs &

Well

Sta

rts


CHART 11



BAKKEN – Vintage Type Curves

Source: DI Web App


CHART 12 CHART 13

0

100

200

300

400

500

600

700

800

900

1,000

Oil

(Bb

l/d

)


2012 2013 2014 2015

2016 2017 2018

0

200

400

600

800

1,000

1,200

1,400

Gas (

Mcf/

d)


2012 2013 2014 2015

2016 2017 2018


BAKKEN – Production Forecast September

Source: DI ProdCast


CHART 14 CHART 15

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

Cru

de O

il P

roduction (

MM

Bbl/d)

EIA Drillinginfo

0.50

1.00

1.50

2.00

2.50

3.00

Gro

ss G

as P

roduction (

Bcf/

d)

EIA Drillinginfo


EAGLE FORD – Active Rigs and Well Starts


CHART 16


0

50

100

150

200

250

300

350

Active R

igs &

Well

Sta

rts



EAGLE FORD – Vintage Type Curves

Source: DI Web App


CHART 17 CHART 18

0

100

200

300

400

500

600

700

800

Oil

(Bbl/d)


2012 2013 2014 2015

2016 2017 2018

0

500

1,000

1,500

2,000

2,500

Gas (

Mcf/

d)


2012 2013 2014 2015

2016 2017 2018


EAGLE FORD – Production Forecast September

Source: DI ProdCast


CHART 19 CHART 20

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Cru

de O

il P

roduction (

MM

Bbl/d)

EIA Drillinginfo

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Gro

ss G

as P

roduction (

Bcf/

d)

EIA Drillinginfo


HAYNESVILLE – Active Rigs and Well Starts


CHART 21


0

10

20

30

40

50

60

70

Active R

igs &

Well

Sta

rts



HAYNESVILLE – Vintage Type Curves

Source: DI Web App


CHART 22 CHART 23

0

5

10

15

20

25

Oil

(Bbl/d)


2012 2013 2014 2015

2016 2017 2018

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Gas (

Mcf/

d)


2012 2013 2014 2015

2016 2017 2018


HAYNESVILLE – Production Forecast September

Source: DI ProdCast


CHART 24 CHART 25

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

Cru

de O

il P

roduction (

MM

Bbl/d)

EIA Drillinginfo

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Gro

ss G

as P

roduction (

Bcf/

d)

EIA Drillinginfo


NIOBRARA – Active Rigs and Well Starts


CHART 26


0

20

40

60

80

100

120

140

160

180

Active R

igs &

Well

Sta

rts



NIOBRARA – Vintage Type Curves

Source: DI Web App


CHART 27 CHART 28

0

50

100

150

200

250

300

Oil

(Bbl/d)


2012 2013 2014 2015

2016 2017 2018

0

100

200

300

400

500

600

700

800

900

Gas (

Mcf/

d)


2012 2013 2014 2015

2016 2017 2018


NIOBRARA – Production Forecast September

Source: DI ProdCast


CHART 29 CHART 30

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

0.65

0.70

Cru

de O

il P

roduction (

MM

Bbl/d)

EIA Drillinginfo

3.8

4.0

4.2

4.4

4.6

4.8

5.0

5.2

Gro

ss G

as P

roduction (

Bcf/

d)

EIA Drillinginfo


PERMIAN – Active Rigs and Well Starts


CHART 31


0

100

200

300

400

500

600

Active R

igs &

Well

Sta

rts



PERMIAN – Vintage Type Curves

Source: DI Web App


CHART 32 CHART 33

0

100

200

300

400

500

600

700

Oil

(Bbl/d)


2012 2013 2014 2015

2016 2017 2018

0

200

400

600

800

1,000

1,200

1,400

Gas (

Mcf/

d)


2012 2013 2014 2015

2016 2017 2018


PERMIAN – Production Forecast September

Source: DI ProdCast

Gross Natural Gas Production*Crude Production*

CHART 34 CHART 35

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Cru

de O

il P

roduction (

MM

Bbl/d)

EIA Drillinginfo

4

5

6

7

8

9

10

11

12

13

Gro

ss G

as P

roduction (

Bcf/

d)

EIA Drillinginfo

* No constrains


DRILLINGINFO, INC. (DI) DRILLING PRODUCTIVITY REPORT (DPR)

The purpose of the Drilling Productivity Report (DPR) is to give a short-term (three-month) outlook for oil and gas production from the major shale basins in the country. The major shale basins are defined as Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara, and Permian. The counties included in the different basin definitions correspond to the same geographic extents as the EIA. The EIA's DPR was developed to provide guidance on short-term production given the lack of up-to-date production information from the state reporting agencies, using several different data sources including Drillinginfo (DI). The Drillinginfo Drilling Productivity Report (Drillinginfo DPR) uses DI's datasets and some key changes to methodology to provide an alternative short-term forecast for the market's consumption.

The DI DPR uses DI Rig Analytics to obtain key inputs regarding rig counts and wells drilled. Using monthly active rig counts and well starts, a well starts/active rigs/month is calculated for the shale basin for both horizontal wells and vertical/directional wells. The latest six-month average for active rigs is used as the count going forward for the purposes of the forecast. The latest six-month average for well starts/active rig/month is used as the rate going forward for the purposes of the forecast. Permit types Deepen Below, Deepen Within, Field Transfer, Plug Back, Reclass, Recompletion, and Reenter are not considered. Product descriptions Carbon Dioxide, Disposal, Enhanced Recovery, Gas Storage, Injector, Monitoring Well, Permitted Carbon Dioxide, Permitted Disposal, Permitted Injection, Permitted Water Supply, Salt, Salt Water Disposal, Stratigraphic/Core Test, and Water are not considered. If the Drilling trajectory is listed as Unknown, the drilling trajectory is assumed to be Horizontal. A three-month lag is assumed for the well start to completion lag for horizontal wells. A two-month lag is assumed for the well start to completion lag for vertical wells. Active rigs data starts from June 2014, and well starts data starts from March 2014. Only data from months that have been completed are used in the analysis. The key differences between the EIA and DI DPRs regarding the rig counts, wells drilled, and wells completed are the use of DI's rig count vs. Baker Hughes', a count of well starts from DI's more detailed rig activity dataset vs. an approximation through modeling, and a three-month lag in DI's DPR for horizontal wells between well start and completion vs. two months in EIA’s.

DI's state well-level data is used as the source for historical production for the shale basin from both horizontal and vertical/directional wells. The historical data starts in January 2007. If Drill type is listed as Unknown, the drill type is assumed to be Horizontal. DI makes a determination as to the completeness of state data using both the volumes and the count of wells reporting for the shale basin. The EIA also uses DI as the source for historical production data. The key difference between the EIA and DI DPRs regarding historical production will be the determination of the completeness of the state data vs. when projections start. Additionally, DI does not employ a natural gas flow data-driven adjustment to historical volumes, instead taking the state-reported volumes as the de facto production level.

Historical production from active wells is assumed to decline at a certain rate in the shale basin for both horizontal and vertical/directional wells, constituting the PDP volumes starting from the last month of complete state data. The declines are calculated by fitting a decline curve to every well within every vintage year by drilling trajectory. The calculated decline rates for both horizontal and vertical/directional wells is applied to the last month of complete historical production data to calculate PDP volumes for the shale basin. The decline rates are calculated using DI ProdCast. The key difference between the EIA and DI DPRs regarding the PDP volumes is that declines are calculated from a well-level up calculation of PDP volumes and the resulting decline rate over the duration of the forecast vs. a model that estimates the monthly decline rate from the historical decline rate. Historical production data from Appalachia is lagged further than most other areas. Thus, natural gas flow data from Genscape is used to approximate gross gas production volumes using a ratio from the last year of complete historical production data from the state vs. the flow data from the same area. This allows for a more up-to-date starting point for natural gas production forecasts in Appalachia, ensuring a more accurate short-term outlook. This methodology, however, limits the availability of the data granularity for Appalachia.

Incremental volumes from wells completed after the state data ends are calculated using a vintage type curve for both horizontal and vertical/directional wells that have started production in the basin in the past 12 months. Should there be a sample size issue or a lack of state data, DI exercises discretion in terms of extending the time period or set of wells that are considered. The key differences between the EIA and DI DPRs from an incremental production calculation perspective is the use of a vintage type curve from wells' actual well results vs. the use of an estimation of incremental volumes per rig given the most recent month of production. The use of a vintage type curve allows for the use of a completion count vs. a rig count, and the aggregation of volumes given the combination of well completions through time and vintage type curve declines.

The DI DPR data deliverable provides the active rig count, well starts, well starts/active rig, historical production, PDP, and incremental production by month and trajectory where data is available for both commodities.


Contact

Drillinginfo, Inc.1221 W Mineral Ave Suite 101

Littleton, CO 80120

Market Intelligence Team Direct [email protected]

1-888-290-7697 ext 3

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