2008 Colorado Energy Epicenter Conference Notes: Investment Forum Executive Panel: Emerging Plays - the Next Engines
From ESER oil and gas
Contents |
Pioneer Natural Resources USA, inc.
new shale play in colorado
- PXD pierre shale position
- being developed under existing raton cbm field
- mancos equivalent, cretaceous aged laminated shale
- 4k-6k feet deep
- gross overal thickness of 2.2k - 2.8k
- completitions to date have focused on lower intervals
- encompases 134M acres of the 318M acres leased in raton
- wells can be drilled from both new and existing pads and tied into extensive cbm infrastructure
- total resource potential exceeds 2TCF
- 1200 risk adjusted potential drilling locations at 80-acre spacing
- 21TCF resource potential
key advantages
- pipelines takeaway capacity in place
- pioneer is highly integrated in colorado
disadvantages
- well costs increased over 200% last 5 years
- Raton region costs up 5% for pioneer because of integrated pioneer model
- mostly due to steel costs
importance of execution
- built for purpose rigs (reduced footprint, low emissions, low noise)
- wildlife studies
- managing produced water and potential aquifer depletion
- compressed natural gas fleet converesion
- also economic
- landowner surveys
- support community though charitable contributions
- local community colllege partnerships
Noble Energy
trends
- technology and price unlocking huge resource inventories
- major land grab
- us gas supply growing
- US gas production up 10% in last 21 months
- gas supply in texas growing 1% per month
- global natural gas markets repriced with oil
- US may temporarily disconnect
- not dependent on LNG
- price in china (imports lng) is $18
- lng costs rising, but so is demand
- US may temporarily disconnect
US onshore position
- lower risk
- predictable
- large inventory
- thousands of opportunities
Deepwater gulf of mexico
- large prospect sizes
- proven technology
International
- more than 50% production from outside US
- large blocks of unexplored lan
Resources
- 5 BBoe (31.8Tcfe of gas) total resources on noble energy
discovered unbooked resources
- large portion focused in rocky mountains
- piceance basin
- know it's there, drilled it, but not booked as proven
emerging US resource plays
- large concentration in rocky mountains
- wattenberg
- niobara
- pure shale
- east texas -- cotton valley, haynesville
tri-state area
- colorado, nebraska, kansas
- low cost resource play
- acquired sites in kansas in 2008
- substantial development with expanded acreage position
- 582k net acres (200k in 2008)
- will double activity to 365 wells in 2008
- tech
- using 3d seismic to optimize well locations
- success rate up to 90%
- improved new well productivity
- potential
- could accelerate to 500-1000 wells per year
summary
- piceance is developing wells at 10-acre spacing
- rockies represenet 1/3 of proven resources
Delta Petroleum Corporation
overview
- market cap of $2.5B
development projcets
- 2500 net development well locations
- 95% in rockies
exploration projects
- large acreage in columbia river basin
- untested structures in central utah hingeline
- 4 seperate prospects in paradox basin
drilling
- $350M capex on drilling in 08
- access to 18 drilling rigs through ownership in DHS Drilling Co
growth
- growing 40%-50% quarter-to-quarter
- proven reserves have increased 50% in first quarter of 2008
- very high growth company'
most acive areas
- piceance basin in colorado
- 25k acres -- 2.5tcf
- alone will allow provide company with low-risk high-growth
- most active development area
- paradox basin in Utah
- DJ basin
- unita basin
drilling rigs
- 50% ownership in drilling rig company -- other 50% is chesapeake
- delta has 1st call rights on all of the rigs
- most of the rigs are working for delta
- increasing number of rigs in piceance basin
utah
- recent discovery in provence field
- potential for multi-billion barrel production
- will be drilling third test in august
columbia river basin
- washington state
- using 25-year-old wells drilled by shell
- 508k net acres
- has not been drilled in last 25 years because of drilling cost and gas price
- is currently drilling there
paradox basin
- largest emerging play
- lower risk than utah and columbia river basin
- drilling in large salt anticline -- perfect seal for hydrocarbons
- drilled two wells 20 months ago, spaced 7.5 miles apart
- consistent geographic area
- 10k ft wells
- cost: $5.5M per well
- high test rates on wells
- 1cfe gas
pipeline
- constructing 35 mile pipeline
- became operational on June 30
- began selling gas from single vertical well
drilling
- drilling horizontally
reserve potential
- 3-6bcf equivalent per well
- 50k acres owned over center of play
- expectation is for all to be developed
- 4-6tcf gas potential for entire play
comparison with barnett shale
- total organic content of 6.5% vs 4.5% for barnett shale
- porosity between 2-10%
- barnett is 4-6%
- pressure gradients higher at deeper layers
- average recovery of a paradox well is higher than a barnett shale well
schlumberger in the rockies
overview
- 9 business segmnets
- 8k employees in 80 countries
stimmap live with divertamax
- new real-time 3D seismic technology to improve return on stimulation invesment
- uses remote satellite communications to allow energy to compare actual production from a well with predicated production
- allows remove control of diversion (via satellite)
- allows detection of undesired expansion of frac
- prevents frac into bad zone
- has much improved stimulation
- example of how technology is evolving to improve return on investment of stimulation
completition optimization -- schlumerger divertamax example
- allows unfraced zone to be filled in
- plugs were placed/removed to make sure frac filled the entire volume in the desired zone
- very inexpensive compared to drilling another well
- example of how real-time seismic increases return on invesment
conclusion
- real-time 3D seismic is wave-of-the-future for improving return on investment of frac jobs
future piceance facility
- starting construction in De Beque, Colorado to take advantage of piceance basin
- all services division will be located here:
- wireline services
- etc...
Questions and Answers
emerging plays infrastructure
- takes a lot of education and working with midstream business to develop infrastructure
- sometimes, have to make the investment themselves to build the takeaway capacity
- important to make sure midstream players are aware of plans for development
- takes 1,2, even 5 years of lead-time to get infrasture into place
- core issue: how do you know new plays are going to be large enough to justify the construction of a new pipeline?
- additional pipelines cost almost as much as the construction of the original pipeline
delta petroleum on infrastructure in new plays
- example: piceance basin
- has been very active for past 6-7 years
- however, is drilling in coburn valley
- before 3 years ago there was no activity there because of limited pipeline capacity
- therefore, delta had to get involved in the midstream business
- this put delta into a position where they were no overtaken by larger companies and were able to develop virgin territory
- requires risk capital
- before 3 years ago there was no activity there because of limited pipeline capacity
positioning of equipment in new emerging plays
- often, emerging plays are very equipment intensive because they require:
- frac techniques
- re-frac'ing
- issues such as water use (and transport) must be handled before staging equipment
on building acreage ahead of exploration
- approach is to increase exposure in multiple emerging plays concurrently
- not a good idea to bet the farm into one single play
- in some cases, have moved on because real-estate positions did not fit
- other companies were stronger and had better positions
- building acreage positions is a good way to hedge bets on the long-term development prospects of emerging plays
- a form of asset diversification
- what they are looking for:
- low entrance costs
- ability to test the acreage
- if it doesn't work on, move on to the remaining acreage
- as soon as you pick up buy acreage at $20 an acre and build the first successfull well, value may jump to $20k per acre
- this is called an exploration play
- however, different types of completitions are necessary -- which means that the cost of getting that first successful well could be extremely high
- failure to prove acreage may cause exit from play
- idea is to get in early with lease-holds, keep costs low, and test before everything takes off
paradox basin and delta petroleum
- made discoveries made 50 years ago looking for deeper horizons than are currently producing
- today, substantial hydrocarbon shows found
- initial completions vary
- haas to fracture stimulate some zones
- are now going horizontal
- better overall reserve recoverage
conclusion
- USGS puts total unconventional recoverables at 245tcf
- proven recoverables at 200tcf