Three Executive Strategies for Pushing Back the Inventory Wall

Three Executive Strategies for Pushing Back the Inventory Wall

Troy Ruths  •  
The shale inventory wall is a real challenge for our industry and has made the news circuit in the Wall Street Journal this past week (subscription required):
  1. Oil Frackers Brace for End of the U.S. Shale Boom - WSJ
  2. Oil Prices Top $100, Yet Some Big U.S. Frackers Let Their Production Fall - WSJ
  3. Frackers Say Oil Production Slowing in the Shale Patch - WSJ

Over the last 12 months, our customers have used DSU Design to develop what I would call “the hardest pads of North American shale” - over 250 wells across the major basins.

These DSUs had parent/child issues, fringe acreage, new development zones, sequencing challenges, overlapping wells, a lack of diagnostic data, varying frac sizes, complex geologies and varying geomechanical regimes.

You might have seen some of these pads in a few of our technical papers this year.

Our customers climb their respective shale inventory walls DSU by DSU – generating sensitivities, what-if scenario analysis and checking assumptions with Teams use our technology to model drainage and ask a critical question:

How does our “DSU understanding” of the subsurface change the economic outcomes available for a particular section of the reservoir?

Here, “DSU understanding” means the characterization, uncertainty, and mental models that live within the asset team driving development and investment decisions. What our customers are doing push back the effects of the shale inventory wall on business economics, buying time to find the next opportunity to bolt on or build from.

Here are three strategies we’ve seen that can be useful as you navigate the challenges imposed by the shale inventory wall.

  1. Transition from well economics to section economics – how do I drill around this parent? Wells communicate and affect each other's production signature, so the whole DSU should be thought of as an economic unit.Opportunities lie in alternative DSU designs that optimize with infill well placement and completion design – maximizing recovery without risking existing inventory.
  2. Control development pace - should I add another rig or drop one? Wells communicate but you can also sequence them in an appropriate way once you are confident with local degradation models. Operators with sufficient inventories can dynamically adjust development strategies based on factors like service pricing and availability, commodity prices for oil, gas, and condensate, and even an enterprise’s cost of capital.
  3. Level up at non-core acreage – should you go after fringe? While there is still core-acreage available, most will only be able to afford “tier 2,” “fringe,” or the “stuff with hair”.Improving your team’s ability to handle harder subsurface issues enables Tier 1 returns on Tier 2 acreage.

All these decisions require a dialed-in reservoir model of not only your position, but neighboring acreage and A&D hot zones.

Our customers use to pull out clear sensitivity tradeoff curves for exploitation strategies, connected to returns-on-capital economics, on any location where they can access public or private data. This allows asset teams to move quickly and confidently.

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