Wednesday, August 22, 2012

The Case For Short Laterals


August 24, 2012: here's another short lateral well you can add to the mix:
  • 20636, 5,310, BR, Brazos 24-34H, middle Bakken, Charlson, short lateral, t6/12; cum 5K 6/12; the horizontal leg was drilled in four days; 11 stages (?);  
Original Post
This post may not yet be ready for prime-time. I posted it earlier to get the time-stamp but said I would come back to it later to finish it. So here goes.

The background:
A reader sent me this note, August 17, 2012, as part of a longer note:
My buddy with 13 wells south of Stanley, worked rigs 6 years, heads a large company, very knowledgable, says the oil companies are seriously thinking of going back to one-mile horitzontal versus two-mile horizontals. Short laterals may be more profitable.
(By the way, in that same note, he said he "ran into" former governor Ed Schafer that day. Governor Schafer, as you may recall, is on CLR's board of directors. Mr Schafer said that CLR raised its CAPEX to $1 billion for 2012. CLR is not slowing down; if anything it is getting more aggressive in the Bakken.)

Right now, there is a lot of talk about the cost of completing a Bakken well, upwards of $10 million. This is huge, but it's in line with short laterals costing upwards of $5 million.

But it seems the IPs are getting better which suggests that experience is paying off. I can't say for sure that IPs are getting better but it's my impression. I do know that operators have been raising their EURs, and EURs are based partly on IPs.

Two data points that have changed in the past year:
  • If one can drill a short lateral and get an IP that is comparable to the IP of a long lateral, why not drill short laterals. 
  • The new larger spacing units are making it more effective for short laterals than small spacing units of the past (I have explained that in the past; will explain it again if anyone has questions). 
So, those are the two "things" that have changed in the past year, and will enter into any discussion regarding long vs short laterals.

With that in mind, look back on some earlier posts that are relevant to this discussion. If you take the time to go back to these posts, be sure to check the dates of publication.

From DrillingInfo, what is the benefit of drilling long lateral Bakken wells.

Then, this: EOG bucking the trend with short laterals, a nice analysis by Mike Filloon.

So, all of that as background to something that continues to smolder: long vs short laterals. 

So, keep an eye out for well design changes next year. 

Earlier this week, an interview with Lynn Helms has been getting a lot of attention. This was the interview in which he mentioned that at least 35,000 more wells would be drilled in the Bakken, and one should expect an additional eight to sixteen wells per spacing unit.

There was another component to that interview, or maybe there was another interview, but regardless, Lynn Helms also talked about the expense of the wells, particularly fracking costs. But what caught my eye (as an eternal optimist, inappropriately exuberant about the Bakken, I overlook the costs) was the effectiveness of drilling these days. Look at what Helms had to say:
Drillers are finishing wells at a rate of eight daily, up from less than one a day five years ago, ...

The time needed to drill a well has dropped by two-thirds since 2007 to 20 days, ...

... the "enormous efficiency increase" is due in part to the increased use of diamond-tipped bits and the growing number of so-called walking drill rigs. Those machines are capable of moving between well sites on hydraulic feet without having to be disassembled.
With eight wells on a well pad and zip fracks, one can imagine eight short laterals in record time replacing eight long laterals become the standard for some operators. 


  1. TAQA is drilling alot of short (one section) laterals in the Flat Lake area of Sheridan County, MT (up near the Canada/ND boarders). It will be interesting to see if this becomes a widespread trend.

    1. I think it will be "company-specific."

      If Whiting can still drill these long laterals for less than $7 million and can drill them in less than 20 days, they will stick with long laterals.

      I think the companies to watch: CLR and EOG. One is a long-lateral company; one is a short-lateral company. See if either changes design.