Oil companies drilling so-called child wells in the Permian risk losing 15 to 20 percent of the crude oil that could be recovered otherwise, investment bank Tudor, Pickering, Holt & Co. has said in a presentation seen by Bloomberg.
Child wells are secondary wells drilled close to the first, or parent, well. According to Tudor, Pickering, Holt & Co., the proximity makes the child well a lot less prolific than one further away from the parent. On the other hand, however, if the secondary well is drilled too far from the parent, the driller risks a dry well.
“Child wells get progressively worse relative to their parent well with tighter spacing,” the Houston-based, energy-focused, investment bank wrote. This means wells are at their most prolific in some Goldilocks zone that is neither too close to the parent nor too far from it.
One way to get around this problem is to drill two wells at once. This approach, according to Tudor, Pickering, Holt & Co., ensures better recovery rates closer to the driller’s projections.
The ban knotes that 60 percent of the wells drilled in the Delaware Basin in the Permian last year were child or simultaneously drilled wells, as opposed to the period until 2017, during which most of the wells in the Delaware Basin were parent wells. Related: War In The Middle East Is China’s Worst Nightmare
Some producers are already suffering the consequences of too tight well spacing, Bloomberg reports. Concho Resources most recently had to endure a 22-percent drop in shares when it emerged the company had drilled too many wells on a single pad, with recovery expected to miss company targets.
Spacing is crucial with shale wells: they dry up quickly—with output falling by 70 percent over their first year—and new ones need to be drilled on an ongoing basis to maintain production. As a result, the best, lowest cost, acreage in the Permian is running out and recovery rates are getting worse.
By Irina Slav for Oilprice.com
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