• 1 day PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 2 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 2 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 2 days British Utility Companies Brace For Major Reforms
  • 3 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 3 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 3 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 4 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 6 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO
Alt Text

Canada’s Pipeline Industry Takes Another Hit

Canada’s struggling oil industry has…

Alt Text

Trump’s Iran Decision Haunts Big Oil

Donald Trump’s Iran decision has…

Arthur Berman

Arthur Berman

Arthur E. Berman is a petroleum geologist with 36 years of oil and gas industry experience. He is an expert on U.S. shale plays and…

More Info

Inefficiencies Abound In U.S. Shale

Inefficiencies Abound In U.S. Shale

Recent well performance in the Eagle Ford Shale play has declined among key operators. This is due in part to especially poor well performance by a few operators. Excluding those operators, well performance for 2013 and 2014 was still poorer than in 2012 but improved in 2014 compared with 2013.

When I wrote that Eagle Ford well performance was declining in a recent post, some readers were indignant as if a shale play somehow deserves a pass on the laws of physics and eternally gets better instead of eventually declining as all plays do.

“Never confuse production with reserves” is one of Halloran’s Immutable Principles of Energy. Wells may produce at relatively high rates but never reach commercial reserve levels because of cost or declining well performance over time despite high initial rates. Published analysis of shale plays too often stresses success based on production volumes but not reserves, production rates but not the cost, the benefits of technology but not its price, and claims of profit that exclude important expenses.

Below is an example of well interference and rate acceleration in the Eagle Ford Shale play where an operator has over-drilled an area with bottom-hole locations approximately 300 feet apart. EUR values are shown for each well. None will be commercial because the wells are cannibalizing production from each other. Approximately $150 million in capital cost was spent on the non-commercial wells shown on this map.


Example of well interference and rate acceleration in Eagle Ford Shale play in Dimmit County, Texas. Closely spaced wells are shown with EUR values. Source: Labyrinth Consulting Services, Inc. Data from Drilling Info.

The Eagle Ford Shale play is perhaps the most successful of the tight oil plays in the U.S. Below are maps showing the commercial core areas in green for $70 and $45 per barrel WTI oil prices.


Eagle Ford Shale EUR Commercial Area at $70 WTI Oil Price Source: Labyrinth Consulting Services, Inc. Data from Drilling Info.


Eagle Ford Shale Commercial Area at $45 WTI Oil Price. Source: Labyrinth Consulting Services, Inc. Data from Drilling Info.

Despite assurances by operators and fawning analysts that break-even price is whatever the new low price of oil is today, it is clear that there is almost nothing commercial in the play at $45 oil prices, and the $70 commercial area is fairly small. Related: Why Oil Won’t Go Below $40

This study, however, is not about break-even prices. My focus is on evaluating trends in reserves or EUR (estimated ultimate recovery). This involves decline-curve analysis that I won’t go into here except to say that it is the industry standard and I had the details reviewed by technical experts.

I evaluated well performance by the leading operators in the play–those companies with the largest number of wells shown in the table below.


Key operators and number of wells with single-well production reporting evaluated in this study. Source: Drilling Info.

I limited my study to wells with single-well production reporting. In Texas, oil wells may be reported by lease and this means that many wells are reported as one. Those wells are impossible to evaluate based on publicly available data.

I evaluated wells in vintaged groups by operator meaning that I separately forecasted EUR by year of first production by individual operator to account for changes in technology and differing completion practices among operators. The results are shown in the table below.


EUR by operator and vintaged year of first production. Source: Labyrinth Consulting Services, Inc. Data from Drilling Info.

Overall, 2012 was the best year for well performance for the group with an average well EUR of 310,175 BOE (gas was converted to barrels of oil equivalent–BOE–using a value basis of 16:1 based on $50 oil and $3 gas prices). Results for 2013 and 2014 were substantially lower than for 2012 with EUR of 223,311 and 233,748 BOE, respectively. The average EUR for all years and operators was 258,211 BOE which is commercial at $95 but not at $70 WTI oil price.

Looking at the individual operators, it is clear that Anadarko (APC) and BHP Billiton (BHP) significantly under-performed the rest of the group. Anadarko had the most wells used in this study (upper table) so their results significantly skewed the group weighted average well performance. The table below shows the results when APC and BHP were excluded from the group.


EUR by operator and vintaged year of first production excluding Anadarko and BHP. Source: Labyrinth Consulting Services, Inc. Data from Drilling Info.

In this case, well performance for the group was lower in 2013 (290,986 BOE) and 2014 (326,659 BOE) compared with 2012 (359,702 BOE) but not as low as in the previous table and with much stronger performance in 2014. Chesapeake and EOG had their strongest years for EUR in 2014. It is important to note that approximately 75% of EOG’s wells are reported on a multi-well lease basis and therefore could not evaluated in this study. It is probable that EOG’s performance is better than my results suggest. Similarly, Marathon and Chesapeake have significant multi-well lease reporting. Related: After Saudi Arabia Crushes US Shale Who Will It Go After Next?

There are 4 core areas for the Eagle Ford Shale play shown on the map below.


Eagle Ford Shale core areas outlined in red. Source: Labyrinth Consulting Services, Inc. Data from Drilling Info.

The following table shows the percent of wells by key operators in those core areas. Anadarko and BHP have the lowest percentage of their total wells in the core areas. It is clear that well performance is tied to location within core areas of the play. Other companies not evaluated in this study that are represented within core areas include Devon Energy, Encana Corporation, Rosetta Resources, Murphy Oil Corp., SM Energy, Carrizo Oil & Gas, Fasken, Lewis Petro, EP Energy, SN Operating, 1776 and Matador.


Table showing approximate percentage of wells in Eagle Ford core areas. Data from Drilling Info.

The key observations that come from this study include:

• EUR is the best way to evaluate well performance.
• Production rate and volume analysis may be deceptive because cost is not a factor.
• Performance varies by operator and is mostly a function of location in core areas.
• Even within core areas, well performance varies.
• Operators have not cracked the code on shale plays and still drill poor wells despite the best science, location and completion methods.
• All plays mature and decline and shale plays are no exception.
• Companies should be held accountable for poor well performance and not evaluated solely on production growth.

By Art Berman for Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment
  • Lee James on February 10 2015 said:
    As I see readers comment about the role of Saudi Arabia, environmentalists and Obama in doing-in the U.S. petroleum industry, I wonder when it will sink in that current difficulties are inherent in the way we've conducted ourselves as the oil resource winds down.

    I'd like to post an extract from the article here:

    "Published analysis of shale plays too often stresses success based on production volumes but not reserves, production rates but not the cost, the benefits of technology but not its price, and claims of profit that exclude important expenses."
  • Brad on February 17 2015 said:
    While I take no issue with the idea that operator-stated EURs are overly optimistic, certain of your data strikes me as far too pessimistic (e.g., APC EURs). You skipped over your decline curves and how you arrived at them, but I would be interested in hearing a lot more about how you did that part of the analysis as it is one of the most important parts. It is not easy to build real decline curves, and even small mistakes in model assumptions can have large EUR impact. I also would be interested in hearing how you tried to unpack a single well decline curve from multi-well leases. My own experience with that suggests that it is difficult at best, and perhaps nearly impossible. Thanks for the article; was thought-provoking.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News