2012 Energy Navigator Inc.

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Creating Accurate Type Wells
Randy Freeborn and Boyd Russell, Energy Navigator
January 9, 2012
Executive Summary
The current method of using only historical data to
create type wells is flawed. This Paper will show that
when historical production data is merged with reliable
production forecasts to build a type well, the resulting
type well is the best available representation of the
underlying data. Unfortunately, type wells are rarely
created using production forecasts.
When creating a type well from historical data only,
forecasts are implicitly calculated for wells that do not
have enough production to reach the end of the type
well time interval. Because these implicit forecasts are
likely inaccurate, the resulting quality of the type well
forecast is compromised. A detailed review and
analysis of the type well equations will demonstrate
this point.
When operators optimize profit by drilling their best
wells first, it is found that type wells will have a greater
rate profile and expected ultimate recovery (EUR)
than the underlying data will support. This is because
the implicit forecasts for the newer, less productive
wells are created from the older, better wells.
Conversely, type wells will under-predict rate and
EUR in technical plays where performance improves
with experience. This will be shown using both
synthetic and real world examples.
Finally this paper will demonstrate that if a forecast is
implicit to the type well method, the very best choice
for the forecast will be one that includes the benefit of
knowledge and experience.

Conclusions
When a production forecast is not available, the
method used by the industry to calculate type wells is
flawed because it relies on wells being drilled in a
random sequence with respect to both initial
productivity and rate of decline. When best wells are
drilled first, the type well will predict overly optimistic
rates and EUR. When wells are drilled where
production performance improves over time (like a
resource play), the type well will under-predict rates
and EUR.
Type wells are normally calculated as the sum of the
production rate from wells that are currently producing
divided by the number of producing wells. A common
error is to exclude shut in or depleted wells in this
calculation. Depleted wells must be included in the
divisor as though they continue to produce at a rate of
zero. If they are not included, reserves will be
attributed to these shut in wells as though they
continued to produce at the type well rate.
When production rates are averaged, the resulting
type well may exhibit a hyperbolic curvature, even
when all of the underlying wells are exponential.
The best type wells are obtained when history and
prediction are merged. In fact, without a prediction,
type wells are unreliable. Accurate automatic
forecasting would improve productivity when the
application requires a human touch to confirm the
forecasts and would facilitate creation of type wells
from samples that are too large to warrant
confirmation of all forecasts.
Quality control measures should be applied prior to
using predictions. Vintage plots are an effective and
efficient tool for this purpose.
Introduction
This white paper begins with very basic concepts
about the creation and limitations of type wells.
The concepts will then be expanded to a large sample
of 200 wells. The wells are synthetic in that they were
created to represent a random sample of wells for
which there will be a known answer against which
concepts for the creation of type wells can be tested.
That testing is described and the results are shown.
Finally a real world example is studied.
Type Well Mechanics
A type well is a pseudo well that is usually created by
averaging the production rate from many wells. Its
intended use is to determine the production rate that
can be expected from a new well(s) based on the
performance of analogous wells. It may also be used
as a benchmark to provide confidence in individual
forecasts for a group of similar wells.
While the process of selecting the analogous wells is
important, this paper will restrict its discussion to the
mechanics of creating the type well once the
analogous wells have been chosen. The paper will be


2012 Energy Navigator Inc. Proprietary and Confidential Page 2 of 8


example driven, starting with the most basic well
configuration, adding complexity as needed to explain
concepts and implications.
The Industry Standard Practice is to create a type
well as the average production rate from contributing
wells. This is not a standardized practice, but rather
an informal process that has become a standard with
near universal acceptance. The standard rarely
includes the use of individual well forecasts, but relies
solely on production history.

Two Wells, Same Time Frame
The simplest example has two wells that start
production on the same day and are both depleted in
10 years. For each month, the type well rate is a
simple average of the contributing well rates. This is
the industry Standard Practice.

Rotc =
wcll Rotc
No. wclls


Depleted or Shut In Wells
Assume now that Well 1 with the greater rate is
capable of depleting its reservoir in only three years
as shown on Chart 2. After three years, there are two
types of wells: those that are shut in (SI) and those
that continue to produce (Prod). The equation needs
to be re-written to account for the different well types:
Rotc =
ProJ Rotc +SI Rotc
# ProJ + # SI

Rotc =
ProJ Rotc
# ProJ wclls + # SI wclls

The shut in wells have no production. So the equation
is simplified, but the number of shut in wells needs to
remain in the divisor. This equation is shown by the
dashed red line on Chart 2. The slight decrease in
rate after three years is caused by Well 2s rate
dropping from the abandonment rate to nil.

A common error in constructing type curves is to
consider only wells that are producing by dropping the
SI well count from the denominator:
Rotc =
ProJ Rotc
# ProJ wclls

When this error is made, there will be a step change
in the rate each time production ceases at a depleted
well. This is observed with the solid red line of
Chart 2.
Why is it important to include the shut in well count?
When the SI well count is excluded from the equation
denominator, there is an implicit assumption that
beyond year three, Well 1 continues to produce at the
same rate as Well 2. This implicit assumption is
shown in the first equation below. This equation is
only valid when Rate1 equals Rate2. That is why the
type well rate shifts to the Well 2 forecast.
Excluded
Type Well Rate = (Rate 1 + Rate 2) / 2 = Rate 2
Included
Type Well Rate = (0 + Rate 2) / 2 Rate 2

Chart 3 examines the recovery impact of excluding
the SI well count in the type well calculation. It is
observed that when the SI well count is included, the
recovery from the type well is the average of Wells 1
and 2. This is the expected and desired result. When
the SI well count is excluded, implicit production from
Well 1 continues, creating additional recovery. In this
Chart 1
1
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0 1 2 3 4 5 6 7 8 9 10
R
a
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b
b
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Time, years
Well 1
Well 2
Standard Practice
Chart 2
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0 1 2 3 4 5 6 7 8 9 10
R
a
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,

b
b
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Time, years
Well 1
Well 2
Exclude # SI Wells
Include # SI Wells
Chart 3
0
25
50
75
100
0 5 10 15 20 25 30 35
R
a
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,

b
b
l
d
Cumulative Recovery, mbbl
Well 2
Well 1
Exclude # SI Wells
Include # SI Wells


2012 Energy Navigator Inc. Proprietary and Confidential Page 3 of 8


example, the type well recovery is greater than either
Well 1 or Well 2, which means reserves have been
manufactured.
Clearly, the type well calculation must include the SI
well count as though those SI wells continue to
produce at a rate of zero.
Most engineers now understand this shut in well
concept and the Industry Standard Practice is to
include shut in wells when calculating type wells.
Nevertheless, this knowledge is not universal.
The wells on Chart 2 also provide a good example to
observe the apparent hyperbolic curvature created
when exponential production trends are averaged. In
early time, high rate, steep decline wells dominate the
performance. In later time, the lower rate, flatter
decline well is dominant.
Modeling the type well as hyperbolic would be
appropriate when that type well is used to forecast a
multi-well program that would have the same pseudo
hyperbolic characteristics. If only a few wells are
contemplated, it would be better to create an
exponential type well that fits the desired IP and EUR
from the statistical analysis.

Date of First Production
Wells are never all drilled on the same date. Usual
practice is to shift data from the production wells so
they all start at the same time. Sometimes this date is
a real date, but most often it is a notional date termed
time zero or month zero. It is common to refer to the
shifted data as having been normalized. The term
normalization should be avoided because it also
includes scaling or stretching to fit within a specific
value range. In this case the shift is simply a data
translation.
When shifting dates, production rates are calculated
using the number of producing or calendar days in the
source month. The choice of calendar day or
producing day rate is one of personal preference, but
it should be remembered that the use of producing
day rates removes most down time from the well, so
downtime will need to be assigned on application of
the type well. The use of calendar day rates provides
a production risked type curve, but the amount of
imbedded down time is unknown.
It is preferable to retain the data in common time
increments, usually one month; otherwise there would
not be a common period over which to average the
production. When time shifting, it is normal to exclude
full months with no production and this practice is
recommended.
In addition to removing full months with no production,
there is normally down time within production months
that is not excluded. This down time will stretch the
time scale, causing an increase in the reserve
represented by the type curve. This bias can be
eliminated by using producing days on the time scale,
but would also require interpolation to obtain a
common time interval for averaging.
The first example is revisited. Some of the timing
assumptions are changed and shown in the
schematic of Chart 4.
Current time is year five. Well 1 has five years of
production history.

Wells 2 and 3 are drilled at the beginning of years
two and three.

Economic value has been optimized by drilling
the best wells first.

In following Charts 4 to 6, some curves have the label
Known. This means that the synthetic exponential
forecast for these wells was used to create the type
well.

Presuming we want a type well to represent at least
the five years for which there is production data, we
have a problem. There is a data gap between years
three and five for Well 2 because the well has not
produced long enough. A similar gap exists for Well 3.
To build a type well, it is necessary to fill the Data
Gap. These shorter life wells are termed Gap Wells.
The ideal choice would be to fill the data gap with the
best estimate of the wells future performance: a
production forecast. With this method and good
forecasts, we would have a near perfect solution. But
caution is necessary: if the forecast is wrong, the type
well will also be wrong.
With any forecast, it is prudent to do a quality check.
The most effective and efficient check is to group the
wells by year of first production and view the decline
trend of the average or aggregated production. This
vintage method removes the effect of ongoing drilling,
Chart 4
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100
0 1 2 3 4 5 6 7
R
a
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,

b
b
l
d
Time, years
Well 1 Future 1
Well 2 Future 2
Well 3 Future 3
Known Current Time


2012 Energy Navigator Inc. Proprietary and Confidential Page 4 of 8


allowing one to ensure the forecasts make sense. If
you dont trust your forecasts, only use them for a
limited period of time or dont use them at all (remove
those wells from the type well sample).
Wells with very little production need to be included to
get the right balance of Initial Productivity (IP). The
forecast for these wells may often be improved by
using other wells in the sample to help determine the
decline shape.
When predicted rates are used in the type well
creation, there will be no gap wells and the divisor will
always be the total number of wells in the type well
sample.
There are times when it is appropriate to disregard the
recommendation to use predictions when building
type wells. A forecast may not be available, may be
unreliable or may contain personal bias. In this case
the original equation is still used, but the Gap Wells
are ignored when there is a Data Gap. The divisor will
not always be the sum of the wells in the type well
sample.
Rotc =
ProJ Rotc
# ProJ wclls + # SI wclls


The intent of the type well is that the rates represent
all wells. Referencing Chart 5 for the middle of year
two, the math for three wells is shown below. It shows
that ignoring the gap wells has the result of filling the
Data Gap with the type well rate. This rate is the
average of the producing and shut in wells.
Type Well Intent
Type Well Rate = (Rate 1 + Rate 2 + Rate S) S
Type Well Equation
Type Well Rate = (Rate 1 + Rate 2) 2
The Math
Type Well Intent = Type Well Equation
Rate 1 + Rate 2 + Rate S = 1.S (Rate 1 + Rate 2)
Rate S = u.S (Rate 1 + Rate 2)
This is an excellent case to show the Sequence Bias.
When practical, operators maximize profit by drilling
their best wells first. In the context of type wells, the
new poor wells will be the first to have a Data Gap,
and the Data Gap will be filled with the average
production rate from older, more prolific wells. This
Sequence Bias will result in a false flattening of the
apparent decline and an over estimation of recovery.
In many cases the type curve is not just flattened, but
it develops into an incline.
The converse to drilling best wells first is also true.
Some projects, like resource plays involve an
extended learning period where production and
recovery performance increases with experience. In
this circumstance, the type well rate and recovery will
be understated.
To partially counter the Sequence Bias, it is
recommended to truncate the type well when too
many wells have a Data Gap to fill. This shortens the
time frame available from which to launch a best fit
forecast of the available data.
The method described above provides further detailed
information about the previously defined Industry
Standard Practice. The use of Industry Standard
Practice without the use of prediction data can lead to
erroneous type wells and should be avoided.
Multi Well Testing
Synthetic Wells
To test the concepts discussed in a more complex
setting, synthetic data for a large number of wells was
created using random numbers, log normal
distributions and the Arps equations.
The process of creating 199 realistic synthetic
production forecasts used the following logic:
Define a log normal distribution for both IP and
EUR. These are shown as the straight lines on
Chart 7 and as a straight line on Chart 8.

Chart 5
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0 1 2 3 4 5 6 7
R
a
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b
b
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Time, years
Well 1 Future 1
Well 2 Future 2
Well 3 Future 3
Known Standard Practice
Current Time
Chart 7
P 98
P 95
P 90
P 80
P 70
P 60
P 50
P 40
P 30
P 20
P 10
P 5
P 2
P 98
P 95
P 90
P 80
P 70
P 60
P 50
P 40
P 30
P 20
P 10
P 5
P 2
100 1,000 10,000
IP mcf/d (red) | EUR mmcf (blue)


2012 Energy Navigator Inc. Proprietary and Confidential Page 5 of 8



For each well, randomly select a probability
between 0.1% and 99.9%. Using that probability,
determine that wells IP and EUR from the
defined distribution of Chart 7.

Calculate the synthetic IP and EUR by adjusting
the log normal IP and EUR by +/- 30% using a
random number to determine the magnitude of
the adjustment.

Charts 7 and 8 show the log normal and synthetic
distributions of IP and EUR. The synthetic EUR
versus IP has a band width that is similar to most
real field examples.

On Chart 7, the cumulative frequency distribution
is plotted on the y-axis using a probit scale. This
scale is manufactured to ensure that a normal
cumulative distribution will plot as a straight line.
On the x-axis, the IP and EUR are plotted on a
log scale to turn the normal distribution into a log
normal distribution. If you are unfamiliar with the
concept of a manufactured scale, it should be
noted that a log scale is also manufactured.

The chosen sample size of 199 is large enough to
have statistical significance. For this reason, the
distribution of the created wells closely matches
the defined distribution from which these wells
were based. When the sample size is reduced,
for example below 60, the distribution of the
created wells may not match the defined
distribution.

This attention to sample size is important when
you are working with a small number of wells. The
distribution you determine from that statistical
analysis may not be correct, because the sample
size is too small. Nevertheless, if all you have is
a small sample, continue to use type wells, but
use them with caution.

For those who have never calculated probability
distribution, it is worth noting that the data must
be sorted. When selecting a P25 probability for IP
and EUR, it is likely that the IP and EUR will
come from different wells. The terminology P25
means 25% of the data (IP or EUR) will be at or
above the specified value.

The curvature in the Arps equation (hyperbolic
exponent n or b) needs to be specified. For this
testing, an exponential equation with n = 0 was
specified. For future work it is possible to
randomly vary n between an upper and lower
range.

Having specified IP, EUR, n and a final producing
rate of (q
f
= 25 mcf/d), use the Arps equation to
determine the decline factor and hence the rate
time relationship for the well.

Wells are scheduled so that the first production
month for all wells occurs within a five year time
frame. A random number was used to select the
first production month for each well.

This method of determining the production
character and timing for first production ensures a
uniform distribution of good and bad wells. To
mimic a Sequence Bias, a second production
schedule was created with the first production
month ordered by descending IP.

For clarity, wells were all drilled and on production
in the first five years. The type well examples are
being created 10 years after the first well was
placed on production. Thus each well will have
five to 10 years of time shifted production history
except for wells that have been depleted before
that time.

Each discussion will look at two alternatives. For
the Random Case, wells will start production in
random order of IP as indicated by the red dots of
Chart 9. The Best First Case has the wells first
production month sequenced in descending order
of IP. This Best First Case mimics the more
common situation where economics are
optimized by drilling better wells first and is
indicated by blue diamonds on Chart 9

The production curves for all 199 wells are shown in
the following chart. This is presented to show that all
wells are exponential (straight line on log rate versus
time) and that there is a wide range in rate time
Chart 8
100
1000
10000
100 1000 10000
E
U
R
,

m
m
c
f
IP, mcf/d
Synthetic Data
Equal Probability
Log Normal Target
Chart 9
100
1000
10000
0 1 2 3 4 5
I
P
,

m
c
f
/
d
1st Production Year
Random Best 1st


2012 Energy Navigator Inc. Proprietary and Confidential Page 6 of 8


performance with some wells depleted in the first 10
years. This variance is typical of data used to create
type wells. Because the wells are synthetic, the
correct answer for any analysis is known.

Shown on the chart, as a red line, is the average
production rate. This is the known answer for any type
curve targeted to find the mean solution.
The rate for the average will fall below the 25 mcf/d
final rate specified for the wells. This happens as the
number of depleted wells increases because the sum
of rates is always divided by the total number of wells.
When the last well is producing on its last month, the
type well rate is 0.125 mcf/d (25199). It is best to
terminate the type well at the same final rate used for
the producing wells. The decrease in recovery and
value from this truncation will be small.

Type Wells Using Historical Data
The following discussion will focus on creating type
wells using only historical data. In this discussion the
Known Answer is the one created using synthetic
data to the end of the 10 year time interval for which
production data is available.
Without prediction information, a portion of the type
well will be created. Decline analysis is then used to
complete the type well to its full life. In this respect,
the created type well must have accurate rates and a
representative trend to get the correct decline.
Earlier in the paper it was noted that Industry
Standard Practice implicitly fills Data Gaps with the
average production rate from wells that have
production data. When the sequence of drilling is
random and the sample size is large, this is
reasonable. Deviation from the known answer would
occur in early time when the number of gap wells is
too small to be represented by the average. This
deviation will be insignificant because the deviation
only applies to a small sample. In late time, the
producing well sample becomes too small to
represent the sample, and this will also create the
potential for error in the type curve calculation.
Chart 11 shows the type well calculated for the
Random Case. For Industry Standard Practice, the
type well follows the expectation that it should match
the known type well closely until the late time when it
will deviate due the small sample size of producing
wells. In this example, that small sample size is 15%
of the sample.

Chart 12 shows the type wells that would result from
the Best First Case. Earlier, it was speculated that
when the wells are sequenced in descending order of
IP, Industry Standard Practice would create a type
well with significant flattening that may even transform
into an incline.

A consequence of the flattening is that some of the
data must be forfeited because it is not reliable. Also it
is not known at what point in time the data forfeiture
should occur. This sample clearly shows the
transformation to an incline, but imagine having six
years of data without the Known Answer to provide
guidance. It would be easy to interpret a hyperbolic
decline.
From the examples, it is clear that it is easy to fall
prey to false type well forecasts. But the tests are for
wells with an exponential trend. The question remains
whether the use of stepwise exponential declines will
work when the individual wells and the type well are
hyperbolic or harmonic.
To test this variation, the large exponential sample
was altered by setting the decline type to harmonic
199 Wells with 1
st
Production in Random Order Chart 10
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1000
10000
0 1 2 3 4 5 6 7 8 9 10
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m
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Time, years
Wel ls
Average
Chart 11
0
100
200
300
400
500
600
10
100
1000
10000
0 1 2 3 4 5 6 7 8 9 10
#

W
e
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o
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P
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u
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m
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Time, years
Standard Practice
Known Answer
# of Prod Wells
Wells On Production in
Random Order of IP
Chart 12
0
100
200
300
400
500
600
10
100
1000
10000
0 1 2 3 4 5 6 7 8 9 10
#

W
e
l
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s

o
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P
r
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d
u
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t
i
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n
R
a
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e
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m
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/
d
Time, years
Standard Practice
Known Answer
# of Prod Wells
Wells On Production in
Descending Order of IP


2012 Energy Navigator Inc. Proprietary and Confidential Page 7 of 8


and increasing the IP and EUR to reflect the higher
initial rates usually encountered with harmonic wells.

The harmonic results are shown in Charts 13 and 14.
The results observed for the Industry Standard
Practice applied to exponential wells for both Random
Order and Descending Order are repeated when the
sample is harmonic.

Field Examples
Hugoton Field, Kansas
A field example was evaluated to test the theory that
the reliability of type wells will improve by using both
forecast with history. Eighty eight gas wells in the
Hugoton Field in Kansas were evaluated. All the
wells came on production between January 1987 and
January 1991. Eighty two wells are currently still
producing.
Five separate cases were evaluation.
Case Number 1, the Known Case, includes
historical production data to August 2011 and
individual forecasts for the remainder. The final
EUR can be determined with a high degree of
certainty since all of the wells are nearing their
economic limit.
Case Number 2 through 5 include only historical
data to December 1996. Therefore these wells
have between five and nine years of data from
which type wells will be created.
Case Number 2 creates the type well using
Industry Standard Practice without the benefit
of production forecasts. When the producing well
count falls below seventy five (75) percent of the
total wells, the balance of the type well is created
using convention decline analysis.
Case Number 3 and 4 are identical to Case
Number 2 except that they have cutoffs of fifty
(50) and twenty five (25) percent respectively.
Case Number 5 includes history and forecasts
when building the type well.
As shown in Chart 15 and Table 1, using only
historical data in type wells results in large errors in
estimating EURs. Of note, all History Only Cases
generated large errors. The history and forecast case
provided an excellent answer with an error of only 1.8
percent.


The results of this evaluation support the premise that
forecast information should be used to create
accurate type wells.
Wild River Field, Alberta
Typically, an evaluator does not have the benefit of
two decades of history to verify the accuracy of type
wells as is the case for the Hugoton Field. The
following example is designed to present a situation
where the correct answer is unknown. Eighty four gas
wells in the Wild River Field in Central Alberta were
forecasted.
All wells were in the Cardium/2
nd
White Specks
formation. All wells were drilled between the years
Chart 13
0
100
200
300
400
500
600
10
100
1000
10000
0 1 2 3 4 5 6 7 8 9 10
#

W
e
l
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s

o
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P
r
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d
u
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t
i
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n
R
a
t
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m
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/
d
Time, years
Standard Practice
Known Answer
# of Prod Wells
Wells On Production in
Random Order of IP
Chart 14
0
100
200
300
400
500
600
10
100
1000
10000
0 1 2 3 4 5 6 7 8 9 10
#

W
e
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s

o
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P
r
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u
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t
i
o
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R
a
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,

m
c
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/
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Time, years
Standard Practice
Known Answer
# of Prod Wells
Wells On Production in
Descending Order of IP
Chart 15
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0 5 10 15 20 25 30
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m
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Calendar Time, years
Known Case
1996 Historical 75% Cutoff
1996 Historical 50% Cutoff
1996 Historical 25% Cutoff
1996 Historical and Forecast
Table 1
EUR MMcf Error %
Production Current to 2011 1,466
Production to 1996
History and Forecast 1,439 -1.8%
History Only Cutoff 75% 1,948 32.9%
History Only Cutoff 50% 2,049 39.8%
History Only Cutoff 25% 2,562 74.8%


2012 Energy Navigator Inc. Proprietary and Confidential Page 8 of 8


2000 and 2010. Each well was individually forecasted
and type curves were created using only history with a
twenty five (25) percent cutoff and history plus
forecast. The results are presented below in Chart
16.

This field example appears to show a Sequence Bias
that one would expect when better wells are drilled
first. The type well created with only history has a
smooth curvature from start to finish. There is no
information to suggest that the data is not reliable and
no information to provide guidance with respect to
using data from a shorter time interval. The EUR from
the History Only case is almost double the EUR when
forecasts are used to create the type well. Although
the correct answer is unknown, the type curve created
with history and forecast is more reasonable since it
does not continue to curve throughout its life.
The results of this evaluation also support the premise
of this paper. Forecast information should be used to
create accurate type wells.
Conclusions
The History/Forecast Method for creating a type wells
works well under the tested circumstances and has a
high degree of flexibility.
The type well may be created from data for the
entire life of all wells.

When the long term forecast is less certain, type
well creation may use data for a shorter period of
time, using conventional declines to complete the
full life prediction.

Usually the addition of forecasts will extend the
useful time period from which the type well
forecast may be created
When creating a type well from historical data only,
forecasts are implicitly calculated to the Gap Wells.
These implicit forecasts can compromise the reliability
of resulting type well forecast.
Industry Standard Practice of only using production
cannot be used reliably to create type wells unless the
sequence of bringing wells on production is
completely random with respect to IP and EUR.
When Sequence Bias exists, which is common,
creating type wells from production will result in over
or under estimation of reserves.
If a forecast is always implicit to the type well method,
the very best choice for the forecast will be one that
includes the benefit of knowledge and experience.
Chart 16
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d
Calendar Time, years
History/Forecast
HistoryOnly