Appraising & Developing Your Unconventionals: How to Avoid Squandering Billions of Dollars Next Time
Presented by: Creties Jenkins, Rose and Associates
Over the past three years, more than 100 oil and gas companies in North America with almost $80B in debt have filed for bankruptcy. Many of these failed because of the way they approached appraising and developing opportunities. Two of the most common mistakes have been focusing on production attainment instead of value creation, and incorrectly thinking that enough was understood about a given reservoir before committing to development.
To mitigate these errors, unconventional reservoirs must be evaluated in a series of stages. In each stage, we need to (1) identify the key uncertainties and risks, (2) collect the data needed to quantify these, and (3) generate a probabilistic assessment of potential outcomes and their associated values. A key aspect of this work is applying the principles of aggregation to generate trumpet plots and confidence curves to determine how many pre-development wells are needed to be confident that the average development well will exceed our commercial threshold. This is primarily a function of the variance (P10/P90 ratio) in well performance and the level of confidence (generally 80%) needed.
This process requires discipline, including rigor in evaluating production data and analogs, and maintaining consistent drilling and completion practices so variations in reservoir quality can be quantified. It also requires that we keep track of our predictions, use appropriate economic metrics to make comparisons, and conduct look-backs for calibration. The time to change the process is NOW, before prices rebound and we lapse into our old destructive habits.
Creties Jenkins (P.E., P.G.) is a Partner with Rose and Associates where he specializes in the characterization of unconventional reservoirs. Creties has carried out integrated studies, peer reviews, training, and resource assessment work for more than 50 companies around the world. He has also conducted more than 100 industry courses and workshops over the past decade focused on tight oil and gas reservoirs. Creties has served as a technical editor, distinguished lecturer, and distinguished author for SPE and is a past president of the Energy Minerals Division of AAPG. He is also a co-author of SPEE Monograph 4: Estimating Ultimate Recovery of Developed Wells in Low-Permeability Reservoirs. Creties has previously worked for Tenneco, ARCO, and DeGolyer & MacNaughton in his 30+ year career. He holds a BSc in Geological Engineering and a MSc in Geology from the South Dakota School of Mines.
Members Register here:
Non Members Register here:
Students please contact Alex Lubchansky for registration.