Saturday, December 6, 2014

Utica Shale Production Decline Example

In this post we look at the decline rates of the top five gas producers from Q1 2014 in Ohio and see how they did over Q2 and Q3.

IP and UR and decline curves
Much has been written about the steep production decline curves of shale wells over time, a common and expected occurrence. There is reference to high IP rates or high Initial Production compared to UR or Ultimate Recovery. We still don't have a lot of data on longer-term Utica Shale well decline rates in Ohio and what each well will ultimately produce, but as more data comes in we get a better idea. Bending the production curve and sustaining production is the goal. Once a particular well has "paid-out" or paid for itself based on investment and profit, the rest is gravy.

Many variables impact ultimate recovery
It is important to appreciate that many factors go into decline rate. As technology improves and production practices are optimized, decline rates should also improve. Each operator is looking to find the right mix of technology and practices to squeeze the most Ultimate Recovery from their assets. And as a well's production declines operators may look into some form of well intervention that might increase production and/or allow production to be sustained for a longer period of time.

Utica Shale decline rate example
As an example of decline rates, lets take a look at the top five gas producing wells from the Q1 2014 Ohio DNR report, and now, with 2 subsequent quarterly releases, how those wells fared over time.

2014 Utica Shale production decline example (Q1 top 5 gas producers)
(How they did over time)

Source: Q1, Q2, and Q3 Ohio DNR production data release

The chart shows just how quickly production declines, a star in one quarter can continue to produce at a relately high rate, but rates decline sharply, not a surprise to those in the industry and nothing to be too concerned about, this is very typical in shale plays. The MCCORT well is unique from the other four in that the well produced for just 32 days in Q2. [All data is averaged based on Gas Production/Day. See charts below for more].

Excluding the MCCORT well, the others, top 5 gas producers in Q1, ranked 12,13,16,and 20 in Q2, and then 45,47,49, and 67 in Q3.

So there you have it, a look at five highly-productive wells over 3 quarters and what production decline looks like. Stay tuned for more analysis and reporting of Ohio's Utica / Point Pleasant Shale play.

Additional data
Source: Q1, Q2, and Q3 Ohio DNR production data release