Professional Documents
Culture Documents
Hamm 2011
Hamm 2011
This paper was prepared for presentation at the Canadian Unconventional Resources Conference held in Calgary, Alberta, Canada, 15–17 November 2011.
This paper was selected for presentation by a CSUG/SPE program committee following review of information contained in an abstract submitted by the author(s). Contents of the paper have not
been reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material does not necessarily reflect any position of the Society of Petroleum Engineers,
its officers, or members. Electronic reproduction, distribution, or storage of any part of this paper without the written consent of the Society of Petroleum Engineers is prohibited. Permission to
reproduce in print is restricted to an abstract of not more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of SPE copyright.
Abstract
Recent advances in horizontal drilling and multistage completion technologies have unlocked vast quantities of previously
inaccessible oil reserves. Since 2006, thousands of horizontal multistage wells have been drilled into numerous low
permeability oil reservoirs in the Western Canadian Sedimentary Basin including the Bakken, Cardium, Viking and
Shaunavon formations. Early horizontal multistage wells had relatively short horizontal sections with two to four completion
stages per well and have evolved over time to include wells in certain areas that have up to two mile horizontal sections and
over 25 individual completion stages. Along with the technical advancements that have occurred recently, operators are
actively seeking new reservoirs in which to apply them.
This paper presents a brief historical look back at a few of the major areas that have been developed to date. Specifically, the
light oil developments of the Bakken formation in Saskatchewan, Manitoba and North Dakota, the Cardium formation in
Alberta, the Viking formation in Alberta and Saskatchewan and the Lower Shaunavon formation in Saskatchewan are studied
in detail and comparisons drawn. Type curves are presented by vintage for each play showing the progression of advancing
technology countered by operator desire to push the development into reservoir of diminishing quality. Specific technical
metrics regarding initial production rates and decline rates are compared and contrasted. Average expected ultimate
recoveries are estimated based on decline analysis and the authors experience completing detailed reserve evaluations for
operators in their respective development areas. Based on the statistical study of performance to date and the estimates of
ultimate recovery a type well based on current development is generated for each of the areas.
Economic modeling based on the generated type wells and a comparison of the various development areas is presented using
a number of financial and industry metrics. Despite vast differences in productivity and recovery per well between the plays,
the economic analysis reveals that bigger is not necessarily better.
Introduction
Since the arrival of multistage horizontal completions, exploration companies have pushed the envelope of what was
conventionally considered exploitable in both oil and gas reservoirs. The impact of this technology to the natural gas supply
outlook in North America has been significant enough to move from a position of undersupply to oversupply in the span of
10 years. Similarly, development of unconventional oil reservoirs using multistage horizontal technology has also
accelerated in recent years following early success in the Bakken formation in Saskatchewan and Montana.
Currently there are numerous oil reservoirs being targeted that were previously uneconomic to exploit using conventional
vertical wells due to low permeability and the resulting low deliverability. Figure 1 below presents a map of the various tight
oil developments that are studied in this paper. In many cases, the target is reservoir at the edges of known conventional
pools. These “halo” reservoirs have encouraged significant capital investment in numerous different areas and target
formations. This paper presents the results to date for these various developments and presents estimated future performance
for each play. Finally, given the vast differences in productivity, capital costs, royalty structures, etc. between each play, an
economic model has been run to compare and contrast the various tight oil developments in the Western Canadian
Sedimentary Basin.
2 CSUG/SPE 149000
Figure 1 –Target Formation and Location of the Various Tight Oil Developments Studied in this Paper.
Summaries of the various technical and economic findings along with corresponding conclusions are presented in the body of
this paper and additional detail is available for each study area in Appendices A to I.
Methodology
All technical and production data related to this studied was sourced publicly. Production data and well logs were sourced
from IHS AccuMap®. Production data used in this study was current to the months indicated below:
• Alberta – May 2011
• Saskatchewan – March 2011
• Manitoba – April 2011
• North Dakota – April 2011
Initially, historical type curves were created using the normalized raw performance data plotted on production rate versus
time and production rate versus cumulative production graphs by vintage for each development area. The producing day rate
is presented by accounting for the number of hours the well was on production each month. All production related graphs in
this paper are presented based on production of barrels of oil per day (BOPD). Associated natural gas and natural gas liquids
production is not plotted but has been incorporated into type well economics.
Individual well forecasts were created for each producing well in each development area using Energy Navigator’s Value
Navigator® software package based primarily on decline analysis. The authors have prior experience conducting detailed
reserve evaluations of assets in each of the studied development areas through their positions as reserve evaluators for various
operating companies. This prior experience was relied upon when forecasting the future performance of the studied wells.
Statistical and trend-based analysis was completed using Microsoft Excel®. Log normal plots of initial productivity and
estimated ultimate recoveries are presented along with trend graphs of productivity versus estimated ultimate recovery.
Based on the outcome of the historical type curves and the statistical analysis, a single type well was created for each
development based on the expected outcome of the current state of development. Value Navigator® was used to model the
economics of each type well based on estimated inputs for capital costs, pricing differentials, royalty and severance rates and
operating costs. Economics in this paper are presented before corporate income tax and conducted on a half-cycle basis
(i.e. excluding upfront land, facility and other infrastructure costs.) The capital cost forecast includes the estimated costs
required to drill, complete, equip and tie-in the well for production.
CSUG/SPE 149000 3
This study was limited to the analysis of production data and therefore an in-depth geological study of each area was not
completed. It is known that geological differences have a large impact on productivity and can vary greatly even within a
given area. This study was also limited to the evaluation of primary performance only. There are a number of secondary
recovery projects being piloted in the various development areas, the discussion and analysis of which is beyond the scope of
this paper.
The goal of this study was to present all the production data that was available for a given development area and allow the
analysis to determine an average expected outcome for each play based on primary development, given the current state of
development. Estimated type wells presented in this paper may not apply to specific regions within a study area that do not
conform to the average.
The historical production was studied by creating type curves of production rates versus time and cumulative production.
The type curves were separated by vintage as many of the developments show a significant difference between initial
development and more recent wells. Decline and performance analysis was used to estimate the estimated ultimate recovery
(EUR) for every well and statistical relationships were developed for each play. The combination of the historical type
curves and the statistical evaluation was used to create a type well for each play which is intended to represent the average
expected outcome for one well at the current state of development. Notably in plays where there are significant differences in
performance by vintage the type well may not conform to the statistical study, which included all vintages.
The historical type curves for each development area are presented in the sections below and the estimated type well based on
current development for each area is overlain for comparison. Additional detail regarding the statistical analysis and the
creation of the type curves by vintage is available in Appendices A to I.
Figure 2 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Bakken Wells in the Sanish Area of North Dakota.
4 CSUG/SPE 149000
The Sanish Bakken development is an excellent example of how the evolution of technology and reservoir understanding
over time can lead to positive gains. From Figure 2 above, improvements in initial production rates and production profiles
are clearly evident over time. Of significant importance is that the increases in initial rates appear to be genuinely accessing
additional reservoir as evident by the fact that the type curves are generally parallel on the rate versus cumulative production
graph implying that the gains in initial rates will translate to gains incremental in EUR. Finally, based on the results of the
most recent wells, it appears that operators are now maximizing production using current techniques.
Figure 3 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Bakken Wells in the Parshall Area of North Dakota.
In direct contrast to the Sanish area, the Parshall area presents an interesting example of how results can also degrade over
time. From Figure 3 above, it is evident that performance results both in terms of initial productivity rates and early decline
trends have consistently worsened over time since the highs achieved by the pre-2008 to 2009 vintage wells. Figure B-3 of
Appendix B shows additional detail on the individual vintages and it is clearly evident that the newer vintages are not
performing in-line with the original development. A review of the geographical location of the various vintages of wells
reveals that it is not a case of infill wells underperforming, as the majority of the area is still at one well per section. Early
wells were drilled in a specific area and subsequent vintages effectively stepped out from that area. Based on the
performance results demonstrated above it appears that the original wells were in a geological “sweet spot” and the newer
vintages are now pushing the play into degrading quality reservoir. The estimated type well for the Parshall area has been
weighted towards the performance of the more recent wells to better represent expected future development.
Bakken – Saskatchewan
Bakken development in southeast Saskatchewan has been focused on the Viewfield area (See Figure C-1 of Appendix C.)
The Bakken play in southeast Saskatchewan represents the first major horizontal multistage development of tight oil in
Canada and one of the leading developments in North America. Early evaluation wells were drilled in 2005 and major
development began in 2006 and 2007. Development was originally based on bi-lateral and tri-lateral wells with one-quarter
mile to one-half mile horizontal sections. Over time, development transitioned to single laterals with one-mile sections.
More recently, certain operators are transitioning to bi-laterals with one mile horizontal sections per leg. Total production
from horizontal Bakken wells in the area rose quickly to approximately 55,000 BOPD in 2009 and has since risen slightly to
approximately 60,000 BOPD currently. The analysis suggests that there is a measurable difference in performance between
the core of the Viewfield area and the surrounding areas as displayed in Figures C-2a, Figure C-2b and Figure C-3 of
CSUG/SPE 149000 5
Appendix C. Figure 4 below presents historical type curves for the core area of the Viewfield area and the estimated type
well for current development.
Figure 4 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Bakken Wells in the Core Area of Southwest Saskatchewan.
Similar to the Sanish area, Saskatchewan Bakken development is another example of how the evolution of technology and
reservoir understanding over time can lead to positive gains. From Figure 4 above, improvements in initial production rates
are clearly evident over time. Also notable is a jump in production in the 2005 vintage type curve, which coincides with a
number of original wells, which were re-stimulated. In this case it appears that the gains in initial productivity may not be
translating directly into incremental EUR’s as is evident on the rate versus cumulative production chart where the newer
vintages appear to be declining at higher rates than the older vintages. Given that the majority of the field is already drilled to
approximately four wells per section and newer vintages of drills are increasingly infill in nature, this is likely a case of
increased productivity due to advances in technology but relatively small increases in EUR per well due to interference
effects with older vintages.
Bakken – Manitoba
Bakken development in southwest Manitoba has been focused on the Sinclair area (See Figure D-1 of Appendix D.)
Following the lead set in Saskatchewan, early evaluation wells were drilled in Manitoba in 2006 and 2007 and major
development began in 2008. The majority of development has been focused on single laterals with one-mile horizontal
sections and relatively small completion stages relative to its Saskatchewan and North Dakota analogues. Total production
from horizontal Bakken wells in the area has steadily climbed to approximately 10,000 BOPD currently. Figure 5 below
presents historical type curves for the southwest Manitoba area and the estimated type well for current development.
6 CSUG/SPE 149000
Figure 5 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Bakken Wells in the Southwest Manitoba.
From Figure 5 above, average results have been very consistent throughout the years with more recent vintages performing
very similarly to the original wells. As seen in Saskatchewan, a number of the earliest wells have now been re-stimulated
resulting in the increase in late-time production on the pre-2008 type curve. The narrow distribution of results is encouraging
as development in Manitoba has taken significant geographical steps away from the original Sinclair area and suggests that
the reservoir is consistent across large areas.
Early evaluation wells were drilled into the halo lands in 2009 and major development began in 2010. The majority of
development has been focused on single laterals with one mile horizontal sections and relatively large completions. Because
of the early stage of the play at present, operators are experimenting with various completion techniques in an effort to
maximize productivity while minimizing costs. Total production from horizontal Cardium wells in the east and west halos
has risen quickly to approximately 15,000 BOPD currently. The analysis suggests that there is a small difference in
performance between the east and west halos. However, at this early stage, both regions have been represented with a single
estimated type well for current development as per Figure 6 below.
CSUG/SPE 149000 7
Figure 6 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Cardium Wells in the Pembina Halo Areas of Central Alberta.
Figure 6 above shows that average results from the various vintages of the east and west halos have both performed within a
relatively tight band. Further investigation of the detailed vintage graphs in Figure E-3 of Appendix E suggests there is in
fact a fairly large scatter in the individual wells’ performances. Additional production history combined with a detailed
geological study would be required to further understand the differences in performance seen to date and is beyond the scope
of this paper. The type well estimate is intended to represent a reasonable average for the development area as a whole based
on current technology. The estimated ultimate recovery is based primarily on late life performance of the original vertical
wells and the current decline performance of the oldest existing horizontal multistage wells in the play, which are exhibiting
low decline rates after stabilizing from the initial high decline period. Figure 7 below presents the known behavior of vertical
wells in the area based on a historical type curve as compared to the estimated type well for the current development of
horizontal wells.
Figure 7 – Historical Actual Type Curve of Vertical Pembina Wells compared to the Estimated Type Well of Current Development for
Horizontal Cardium Wells in the Pembina Halo Areas of Central Alberta.
From the above it is clear that the vertical wells have had very low and steady decline rates for a number of years and the
estimated type well for horizontal development is based on the same behavior. The impact of horizontal development in this
play is primarily related to the high initial rates and the ability to recover significant volumes in the early time of the well
enabling a much more profitable outcome than vertical wells despite similar overall recoveries.
8 CSUG/SPE 149000
Figure 8 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Viking Wells in the Provost Area of Central Alberta.
Figure 9 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Viking Wells in the Redwater Area of Central Alberta.
CSUG/SPE 149000 9
Figure 10 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Viking Wells in the Dodsland Area of Western Saskatchewan.
Figures 8, 9 and 10 above reveal that there is very little data to work with at this point given the recent nature of the
development. Certainly, it is possible to differentiate the plays base on initial production rates where the Provost area has had
the highest IP rates but also appears to suffer from the highest initial decline rates. The type well forecasts for all three plays
are based on the data that is available to date and as such have more risk associated with them.
Figure 11 – Historical Actual Type Curves By Vintage Overlain by the Estimated Type Well of Current Development for Horizontal
Lower Shaunavon Wells in Southwest Saskatchewan.
From Figure 10 above, average results have been very consistent throughout the years with more recent vintages performing
similarly to the original wells.
10 CSUG/SPE 149000
Figure 12 below presents the estimated type wells for the various development areas on a single production rate versus time
graph, which highlights the fact that there are significant differences between the reservoirs studied.
Initial productivity rates in the North Dakota Bakken are in excess of 500 BOPD whereas Bakken wells to the north in
Manitoba average less than 100 BOPD. The reason for these larger differences is primarily related to the geology of each
play. Table 3 below presents a summary of relevant geological parameters for the various development areas. Differences in
permeability and reservoir pressure among other things have a dramatic effect on performance and recoverability. A detailed
analysis of the geology of each development area and the effects on wells performance is beyond the scope of the paper.
In order to present a technical comparison of the various plays on a common scale, Figure 13 below displays the estimated
production type well for each play that has been normalized as a percentage of the 30 day initial production rate. Figure 13
gives insight into the performance of each play and specifically highlights the differences in initial decline rates and
stabilized rates at given points in time. Notably, the North Dakota properties, which have significantly higher IP rates than
the other Bakken developments, also have the highest initial Bakken decline rates. Similarly, high initial decline rates are
observed in the Pembina Cardium and Provost Viking plays which also stabilize at the lowest percentages after 36 months.
CSUG/SPE 149000 11
Figure 13 – Type Well Production Estimates Normalized as a Percentage of the 30 Day Initial Production Rate.
It is evident from Figure 13 that while there are large differences between the various reservoirs studied, they all follow the
same basic production profile characterized by a high initial production rate followed by a high initial decline rate with a
large hyperbolic exponent leading to an eventual stabilized long-term decline.
For this study an un-inflated price deck was used to present the clearest possible comparison of the type well economics. All
product prices were based on the basic assumptions of US$90/bbl West Texas Intermediate (WTI), US$4.50/MMBTU Henry
Hub (HH) and US/CAN exchange rate of 1.0. Additional details on product stream prices modeled are outlined below in
Table 4.
Table 4 – Summary of Oil, Natural Gas and Natural Gas Liquids Pricing
West Texas Int. Edmonton Oil Bow River Med Henry Hub AECO NGL FX
US$/bbl C$/bbl C$/bbl US$/MMBTU C$/MMBTU C$/bbl C$/US$
90.00 87.00 73.50 4.50 4.05 64.70 1.00
In addition, a number of estimates were made regarding pricing differentials, royalties, capital costs and operating costs for
each type well. Table 5 below presents a summary of the economic inputs and assumptions used. Additional economic
modeling details are available in Appendices A to I
12 CSUG/SPE 149000
Pricing Differential WTI minus $7.00/bbl WTI minus $7.00/bbl EDM minus $3.00/bbl EDM plus $0.25/bbl EDM minus $2.00/bbl EDM minus $3.00/bbl EDM minus $3.00/bbl EDM minus $3.00/bbl BOW minus $3.00/bbl
(WTI minus $6.00/bbl) (WTI minus $2.75/bbl) (WTI minus $5.00/bbl) (WTI minus $6.00/bbl) (WTI minus $6.00/bbl) (WTI minus $6.00/bbl) (WTI minus $19.50/bbl)
Royalty Type Freehold (22%) plus Freehold (22%) plus 50/50 Crown and Freehold (15%) plus Crown 50/50 Crown and Crown 50/50 Crown and Crown
State Severance Tax State Severance Tax Freehold (15%) plus Provincial Mineral Tax Freehold (15%) plus Freehold (15%) plus
Provincial Mineral Tax Provincial Mineral Tax Provincial Mineral Tax
Royalty Incentive N/A N/A 37.7 Mbbl royalty approx. 60 Mbbl 5% royalty for first 24 5% royalty for first 18 5% royalty for first 18 37.7 Mbbl royalty 37.7 Mbbl royalty
holiday (max 2.5%) on royalty holiday on months or 60 MBOE months or 50MBOE on months or 50MBOE on holiday (max 2.5%) on holiday (max 2.5%)
Crown and Mineral Tax Mineral Tax Crown Crown Crown and Mineral Tax
Figure 14 below presents the same estimated type wells for each development area as presented in Figure 12 but now
production rates have been normalized to $1 million ($1MM) of capital spending. On this basis, the North Dakota Bakken
wells still deliver the most production on a per dollar basis but the spread is significantly reduced.
Figure 14 – Type Well Production Estimates Normalized per $1 Million of Capital Spending.
With the productivity of the various plays compared on even financial ground, it is important to highlight the differences in
revenue, operating costs and royalty structures in the various provinces and states along with the effect on the economics for
these plays.
Aside from the Lower Shaunavon play, which is producing a medium quality crude oil, the remaining plays are all producing
light sweet crude oil. As such, the pricing differentials are relatively similar and are based primarily on transportation costs
and distance to market. Operating costs are also relatively consistent across the various plays given the similarity of
equipment being used. Pricing differentials and operating costs were estimated based on the author’s experience evaluating
various operators in each area. Given the similarity in the pricing differentials and operating costs they do not have a
significant impact on the comparative economics of each play.
Unlike pricing differentials and operating costs however, royalties and production taxes vary greatly from area to area and
have a large impact on the comparative economics between each play. The majority of oil and gas rights in Alberta are
owned by the Crown. In Saskatchewan and Manitoba there is a mix of Crown and freehold land and in North Dakota
essentially all land is under freehold tenure. In all freehold cases, the province or state collects an additional mineral tax or
severance tax respectively and in Saskatchewan there is an additional capital surcharge. By comparison, severance taxes
collected in North Dakota are much more significant compared to mineral taxes in Canada; especially considering that there
are many provincial royalty incentive programs in place for horizontal wells which can nearly offset the tax altogether.
Mineral rights in the Bakken development in Saskatchewan and the Viking developments in Provost, Alberta and Dodsland,
Saskatchewan are held in a mix of Crown sections and freehold sections. For the purpose of comparison, the economics were
run on these type wells based on a 50-50 split between Crown and freehold. In reality, it is likely that a number of wells
CSUG/SPE 149000 13
would be drilled into Crown sections and a roughly equal number drilled into freehold sections, each with their own
respective economic cases. Estimates of average freehold royalty rates were made based on available data as detailed in
Table 5.
The difference between the various royalty and production tax schemes in place results in significantly different royalty/tax
rates and profiles over time for the different development areas. Figure 15 below presents the total government and freehold
take for each play expressed as a percentage of gross revenue. All economics presented in this paper are run on a before
corporate income tax basis.
From Figure 15 above, it is clear that the combination of the freehold royalty and the state severance tax significantly impacts
the operating income from the North Dakota Bakken. Conversely, certain projects in Saskatchewan and Alberta that are
primarily on Crown land such as the Shaunavon, Redwater Viking and Pembina Cardium benefit significantly from royalty
incentive programs that ensure a low royalty rate for the all-important early months of production (Alberta, 2010)
(Saskatchewan Ministry of Energy and Resources, 2010.) The various Crown royalty incentive programs are clearly visible
as large increases in royalty rate when the program has expired. Additionally the government mandated royalty programs in
place for Crown lands in Alberta and Saskatchewan are variable to the well production rates, which is evident by the
decreasing royalty rate over time. North Dakota also has an incentive program which lowers the total severance tax from
11.5% to 7% for horizontal wells for the first of either 75,000 barrels, $500,000 gross revenue or 18 months but the program
becomes ineffective at average oil prices greater than $70/bbl (State of North Dakota, 2009).
The effect of the differing royalty rates is seen in Figure 16 below which presents the normalized operating income on an
undiscounted basis for each play based on a reference point of $1 million of capital spending. As a result of the high royalty
rates the North Dakota type wells are no longer top ranked with both the Redwater Viking and the Saskatchewan Bakken
delivering more operating income in early months. Notably however, the North Dakota Bakken wells regain the top spots
after 12 to 18 months when both the royalty incentive programs have expired for the Saskatchewan Bakken and Redwater
Viking.
14 CSUG/SPE 149000
Following from the normalized operating income presented in Figure 16, the normalized cumulative cash flow on an
undiscounted basis is presented in Figure 17. As expected, both the Redwater Viking and the Saskatchewan Bakken are the
earliest to payout because of the favorable royalty incentives and are followed closely by the North Dakota Bakken wells.
Not surprisingly, given the medium quality of the crude oil produced and the resulting significant differential to light oil
prices, the Shaunavon is the slowest to payout but still manages do to so in less than two years.
Figures 16 and 17 display only the first 36 months of production which provides insight into the important early-time
performance but they do not accurately portray the total return for each play. Figure 18 below presents a summary of various
financial metrics for the full life economic runs.
CSUG/SPE 149000 15
Figure 18 – Comparison of Internal Rate of Return, Profit Ratio, Finding and Development Costs and Recycle Ratio
Internal rate of return (IRR) is calculated as the effective discount rate at which net present value is zero. Profit ratio is
calculated as the 10% discounted net present value divided into the initial capital investment. A profit ratio of 0.0 represents
a 10% rate of return. Finding and development costs are calculated as the capital investment divided by the total expected
ultimate recovery in barrels of oil equivalent. The recycle ratio is calculated as the average operating netback for the life of
the type well divided by the finding and development cost.
Figure 18 further shows the positive impact on near term cashflows of the royalty incentives for the Redwater Viking and
Saskatchewan Bakken. They are able to generate the highest internal rates of return despite having higher finding and
development costs than the North Dakota Bakken wells. However, the sheer magnitude of the productivity and total recovery
of oil in the North Dakota Bakken shines through with the highest 10% net present value per dollar of spending and the
lowest capital costs per barrel of oil equivalent recovered. Notably, even the lowest ranked plays are generating very
profitable rates of return and corresponding excellent finding and development costs and recycle ratios.
Conclusions
Significant strides have been made in recent years in horizontal drilling technology and more importantly in multistage
completion technology. The combination of these technologies has resulted in opening a whole new category of technically
and economically exploitable oil and gas reservoirs.
This paper studied some of the highest profile tight oil plays in the Western Canadian Sedimentary Basin and found that
while there are significant technical differences between the reservoirs being exploited, the same general theory behind
multistage completions is being put to use successfully.
Type curves were generated by vintage for each play and a statistical analysis of various technical parameters was completed.
Based on the type curves and the results of the statistical study, a representative type well was estimated for each
development area weighted toward the results of the current development occurring.
Despite the differences in geology between the various plays, there is a common production profile consisting of high initial
productivity followed by high initial decline rates. The initial decline rates rapidly stabilize to a steady low decline due to the
highly hyperbolic nature of the performance of these reservoirs. The type well for each play was normalized to the initial
production rate and it was observed that the Bakken developments in Manitoba and Saskatchewan and the Lower Shaunavon
development in Saskatchewan had the lowest initial decline rates and the highest stabilized production profiles while the
Pembina Cardium and the Provost Viking developments had the highest initial decline rates and the lowest stabilized
production profiles relative to their initial production rates.
In addition to the technical study, an economic analysis of the various plays was undertaken to present a profitability
comparison between the various developments. Numerous metrics were normalized to an illustrative $1 million dollars of
capital spending and compared between the plays. It was found that the North Dakota Bakken plays deliver the highest
productivity per dollar of capital spending. However, due to significant differences in royalty structure between the various
16 CSUG/SPE 149000
development areas, both the Redwater Viking play and the Saskatchewan Bakken play were able to generate more operating
income per dollar of capital spending in the first 18 months despite their lower relative productivity.
All developments studied in this paper are exceptional performers and each delivers excellent rates of return. Based on the
US$90/bbl price deck used, all type wells demonstrated payouts in less than two years, achieved finding and development
costs in the 11 to 21 $/BOE range and generate recycle ratios of 2.5 to 4.6.
Nomenclature
$1MM = 1 million dollars
BOE = barrels of oil equivalent
BOPD = barrels of oil per day
C$ = Canadian dollars
EUR = estimated ultimate recovery
F&D = finding and development
ft = feet
GOR = gas-oil ratio
IRR = internal rate of return
mD = millidarcies
Mbbl = thousand barrels
MMbbl = million barrels
NPV10 = 10% discounted net present value
psia = pound per square inch absolute
RR = recycle ratio
scf = standard cubic foot
WM = well-month
Acknowledgements
The authors would like to thank the management and staff at McDaniel & Associates Consultants Ltd. for their support in
preparation of this paper.
References
Saskatchewan Ministry of Energy and Resources. (2010). PR-IC05 Royalty/Tax Incentive Volumes for Horizontal Oil Wells drilled on or
after October 1, 2002.
Retrieved from http://er.gov.sk.ca/adx/aspx/adxGetMedia.aspx?DocID=5756,5755,3430,3384,5460,2936,
Documents&MediaID=29750&Filename=pr-ic05.pdf
State of North Dakota. (2009). Oil Extraction Tax Incentive Becomes Ineffective November 1, 2009.
Retrieved from http://www.nd.gov/tax/oilgas/pubs/horizontalnewwellmemo.pdf
CSUG/SPE 149000 17
Figure A-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Sanish Area of
North Dakota.
18 CSUG/SPE 149000
Figure A-2 - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Bakken Wells in the Sanish
Area of North Dakota.
CSUG/SPE 149000 19
Figure A-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Bakken Wells in the Sanish Area of North
Dakota.
20 CSUG/SPE 149000
Figure B-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Parshall Area of
North Dakota.
CSUG/SPE 149000 21
Figure B-2 - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Bakken Wells in the Parshall
Area of North Dakota.
22 CSUG/SPE 149000
Figure B-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Bakken Wells in the Parshal Area of North
Dakota.
CSUG/SPE 149000 23
Figure C-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Core Bakken
Area of Saskatchewan.
24 CSUG/SPE 149000
Figure C-2a - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Bakken Wells in the Core Area
of Saskatchewan.
CSUG/SPE 149000 25
Figure C-2b - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Bakken Wells in the Non-Core
Area of Saskatchewan.
26 CSUG/SPE 149000
Figure C-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Bakken Wells in Southeastern
Saskatchewan
CSUG/SPE 149000 27
Figure D-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Bakken
Development in Southwestern Manitoba.
28 CSUG/SPE 149000
Figure D-2 - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Bakken Wells in Southwest
Manitoba.
CSUG/SPE 149000 29
Figure D-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Bakken Wells in Southwest Manitoba.
30 CSUG/SPE 149000
Figure E-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Cardium
Development in the Pembina Area of Alberta.
CSUG/SPE 149000 31
Figure E-2a - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Cardium Wells in in the West
Pembina Area of Alberta.
32 CSUG/SPE 149000
Figure E-2b - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Cardium Wells in in the East
Pembina Area of Alberta.
CSUG/SPE 149000 33
Figure E-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Cardium Wells in the Pembina Area of
Alberta.
34 CSUG/SPE 149000
Figure F-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Viking
Development in the Provost Area of Alberta.
CSUG/SPE 149000 35
Figure F-2 - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Viking Wells in the Provost
Area of Alberta.
36 CSUG/SPE 149000
Figure F-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Viking Wells in the Provost Area of
Alberta.
CSUG/SPE 149000 37
Figure G-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Viking
Development in the Redwater Area of Alberta.
38 CSUG/SPE 149000
Figure G-2 - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Viking Wells in the Redwater
Area of Alberta.
CSUG/SPE 149000 39
Figure G-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Viking Wells in the Redwater Area of
Alberta.
40 CSUG/SPE 149000
Figure H-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Viking
Development in the Dodsland Area of Saskatchewan.
CSUG/SPE 149000 41
Figure H-2 - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Viking Wells in the Dodsland
Area of Saskatchewan.
42 CSUG/SPE 149000
Figure H-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Viking Wells in the Dodsland Area of
Saskatchewan.
CSUG/SPE 149000 43
Figure I-1 – Location Map, Actual Results versus Type Well Charts and a Summary of Type Well Economics for the Lower
Shaunavon Development in Southwest Saskatchewan.
44 CSUG/SPE 149000
Figure I-2 - Statistical Analysis of Initial Production Rates and Estimated Ultimate Recoveries for Hz Lower Shaunavon Wells in
Southwest Saskatchewan.
CSUG/SPE 149000 45
Figure I-3 – Normalized Production Rate versus Cumulative Production by Vintage for Hz Shaunavon Wells in Southwest
Saskatchewan.