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Sustainable Strategies for Shale Plays. What Makes Economic Sense for Your Reservoir?

Bill Grieser Halliburton Energy Services

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Sustainable Strategies for Shale Plays. What Makes Economic Sense for Your Reservoir? Bill Grieser Sr. Engineer Halliburton Energy Services OKC After 10 years of intense shale development in N. TX. Barnett, SE OK Woodford and central AR Fayetteville, we have evolved methods to drill and complete shale reservoirs so that they are producing at ever increasing rates of initial production. However as the dynamic mix of costs and product price change, so to does our strategy in development of these assets. Operators are rethinking basic drilling and completion methods including; Vertical/Horizontal, Single or Multi Branch wellbores. Cemented, un-cemented, or open hole completions. Multi stage Single day or Multi stage Multi day completions. Single well or Pad multi well development Single or Simul-Frac stimulation. Sustainable resource development involves the ability to change drilling and completion methods as costs and product price change. This presentation covers some of the paradigm shifts occurring in shale plays of the Mid Continent.

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OUTLINE

· · · · · · Drilling and completion type Horizontal Multi Stage Multi Day Horizontal Multi Stage Single Day ON THE FLY Frac Diversion PAD Drilling Frac Factory What Makes Economic Sense

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Vertical/Horizontal, Single or Multi Branch wellbores. Shale Production From Shale Mining.

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Presently the drilling options used on all Mid-continent shale wells are vertical or single horizontal wellbores. Vertical wells are usually drilled during the early exploration stage. It give the operator the opportunity to collect valuable reservoir data through cores, cuttings and advanced logging methods to determine pay markers, thickness, drilling induced fracture direction and natural fracture density and direction. It also provides the early production profile or producing capacity of a vertical completion. After the vertical exploration stage is completed most completions turn horizontal. This is done because in most cases the extended surface area exposed in the lateral usually leads to increased production over that of a vertical completion. We are in fact "mining" the shale by drilling the wellbore through it and hydraulically breaking the rock with frac water and horsepower.

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VERTICAL WELL

Early Discovery Stage

Will The Well Produce?

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During the "discovery" or exploration stage of a shale project the first few wells are usually drilled and completed vertically. This drilling and completion method allows the operator to investigate the pay and the surrounding strata above and below the shale section. It also allows the operator to establish best practices in drilling and completion. Sustained production results give a better understanding of the producing potential. In addition project costs for drilling and completion are established and an economic return on investment can be made. This discovery stage also allows the operator to identify natural and induced fracture direction using image logs and tilt or microseism mapping. This is important because horizontal completions is usually the next step in reservoir development.

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HORIZONTAL SINGLE BRANCH

Expose more surface area.

Contact more Rock.

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The next step is usually an attempt to drill and complete the well in a horizontal manner. The reason for this approach is simple. The more rock exposed the more expected production. As we will see, the incremental increase in production by drilling and completing a horizontal shale well can range from 2-8 time that of the vertical well. If you can drill and complete a horizontal well for less than 2 times the cost of a vertical well, you should make more on your investment. This of course assumes that your ultimate recovery will also be at least 2 times that of the vertical completion. Knowing the drainage area of a shale completion is another hotly debated topic. No one knows for sure how to measure drainage area or estimate percent hydrocarbon recovery in a shale play. That is because the flow behavior through the matrix and fracture system of a shale is not the same as a conventional reservoir.

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MULTI BRANCH HORIZONTAL

Harvest the Resource.

Increase EUR

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Dual laterals or branch laterals are the next logical step in shale development. However there are a few major drawbacks in this type of completion. 1) Junction integrity and costs. 2) Second lateral is usually smaller ID and requires higher treating pressure to stimulate. Because major stimulation using large volumes of fluid and prop injected at high rate and pressure are common completion practices; the isolation and pressure seal of each lateral branch, must be able to withstand multiple fracture treatments. This would require a TAML level 4,5 or 6. TAML classifications were established by the group Technology Advancement for Multilaterals. They are rated on the degree of isolation required between the parent wellbore and the lateral.

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HORIZONTAL Cemented, un-cemented, MULTI DAY COMPLETIONS

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Cemented, un-cemented completions methods can apply to both vertical and horizontal wellbores. We will look at horizontal completions only in the next few slides. However these methods of completion can and are being used in some fields that are predominately vertically drilled.

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Injection at high rate

Cemented TCP Perforated first stage Staged with Composite Frac Plug and select fire gun

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Cemented casing liner or full string, is the most common completion type in all Midcontinent shale plays. The first stage is perforated using tubing conveyed guns (TCP). The first frac stage is pumped at the toe. The second stage is then isolated by pumping down a composite plug with a select fire gun. The plug is set and the casing is pressure tested. The gun is slowly pulled and selectively fired at specific sites along the lateral. This is called the "pump down packer perf gun" system.

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UnCemented Open Hole BHA with swellable packers and Composite Plugs

Injection at high rate

ECP OR Liner hanger & packoff

7-5/8" -9 5/8"CSG

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Un-cemented open hole completions are becoming more popular. Swell packers attached to the outside of the casing slowly swell (5-14 days) in a hydrocarbon environment (>5% oil).

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One Stage One Day OR Multi stage Single day

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Operators are constantly looking for ways to reduce cycle time between stages. Isolating and perforating each stage can involve 3-8 hours of down time. Methods of eliminating or reducing down time is what helps drive the final economic outcome to a higher plus value. Conventional 4 to 8 stage large volume frac jobs still take 24 days on location time. Operators and service companies are looking for ways to achieve a multi stage single day completion. One day completions are highly desirable. However full lateral coverage is also important. Many diverting methods inside the pipe and outside the pipe in the formation have been investigated.

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Injection at high rate

Open Hole Frac

Diverter Stages

Rock Salt Acid Flakes Prop Gel

7-5/8" CSG

6-1/4" Open Hole

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Open hole single stage single day treatments are not commonly used, but where the hole integrity is good, they do provide the least expensive completion type. Diversion of frac energy and hopefully initiation sites can be achieved with the use of diverting materials pumped during the fracture treatment. Care must be taken not to pump too much diverter so that the material does not bridge off the entire hole. However too little diverter may not provide diversion. Diversion stages that result in a 500-1000 psi pressure increase is considered to be a sign of successful diversion. To this date there are no known open hole completions in any mid continent shale. However operators are investigating the method in "non core" areas where it is imperative to keep cost low. Recent open hole horizontal completions in Oklahoma carbonate plays have been successfully completed with high rate acid and water fracs.

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Injection at high rate

5.5" or 7" back to surface

UnCemented Limited Entry With ECP in bend

Pp = 0.2369 ()Q2 d4 C2 N2

7-5/8" -9 5/8"CSG

ECP OR Liner hanger & packoff

Q1

Q2

Q3

Q4

Del-P1

Del-P2

Del-P3

Del-P4

Del-P5

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About 20 N. Tx. Barnett wells have been completed un-cemented single. The challenge is to attain a high enough rate to effectively divert the treatment along the entire wellbore. Diversion of the frac fluid is accomplished by frictional diversion through the perfs and in the open hole annulus. The cost savings of this method include the cement, perforating cost and the single day completion.

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Fracture Diversion Using Granular Material

And Or Ball Sealers

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Of course in cased cemented or un-cemented completions diversion can be achieved using granular material and ball sealers. The risk in this process is not knowing where the diversion is taking place, or how much diverter to use. Diversion in the formation with the use of 100 mesh slugs has been demonstrated with micro seismic mapping.

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On The Fly Multi Stage Diversion Inside The Casing

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Mechanical or on the fly single stage diversion is accomplished by inserting a device inside the casing or open hole. Or installing mechanical diversion devices on the casing. These mechanical bottom hole assemblies are rapidly becoming more accepted as a method to substantially reduce down time during the reservoir mining process.

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MECHANICAL DEVICES ON THE CASING

Open or Cased Hole BHA

Packer. OD Packer ID 1.94" 1.94" 2.94" 3.75" 4.67" Sleeve Size 2 3/8" 2 7/8" 3 ½" 4 ½" 5 ½" Sleeve OD Sleeve ID Hole Size

3.75" 4.63" 5.875" 6.0" 8.39"

3.61" 4.21" 4.93" 5.75" 7.75"

1.877" 2.315" 2.752" 3.75" 4.67"

3.875" 4.75" 6.25" 6.5" 8.75"

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Open hole completions with hydraulic set open hole packers (Wizard) and sliding sleeves, (Delta Stim Sleeves) that can be actuated with ball drop or mechanical opening/closing tools. The first stage sleeve is usually hydraulically opened. The remaining sleeves are opened by dropping a sized ball during the flush. The ball is sized to pass through the upper sleeves and land on the selected sleeve insert isolating the hole below and shifting open the sleeve for the next stage. Up to 11 stages can be operated in the 5.5" size with ball drops. Inserts can be drilled out and sleeves can be closed or opened using a mechanical shift tool run on coil or jointed tubing.

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ONE DAY COMPLETIONS Swell Packers & Frac Sleeves

Swell Packers

Frac Sleeves

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The mechanical set packers can be replaced with swell packers. These packers swell up to 200% when exposed to 5% hydrocarbon. The swell time is dependent on temperature and the amount of hydrocarbon present. Usually a few days to a week to completely seal. The packer element comes in 1-10 meter lengths with differential pressure rating above 3000 psi. This extended seal length has provided excellent isolation in the Woodford shale from RA traced images. The frac stages are accomplished using ball drops on each frac sleeve.

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Delta Stim Sleeve Cemented in place with Acid Soluble Cement

Sleeve size 5.5" 4.5" 3.5" 2 7/8" 2 3/8" Sleeve OD 7.75" 5.75" 4.93" 4.21" 3.61" Sleeve ID 4.67" 3.75" 2.752" 2.315" 1.877" Hole Size 8.5"-up 6.5"-up 6"-up 5 ¼" -up 4 ¾" -up

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Delta Stim Sleeves or Frac Doors can be cemented in place with acid soluble cement. The sleeves are mechanically opened with coil or jointed tubing. An acid pre-pad is pumped to dissolve the cement and create a fracture initiation site. This method is becoming popular in the N. TX Barnett.

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Single well OR Pad multi well development Pad Drilling Frac Factory

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While multi stage tools and casing attachments are reducing cycle time on single well completions. Operators are also looking at how to improve efficiencies and reduce foot print by adopting multi well pad drilling and frac factory stimulation sites. This process requires a lot of forward thinking and planning. But the cost and time savings can be significant in large acreage development where hundreds of well will be drilled and completed.

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640 Acre Section

Horizontal/Vertical Well Conceptual Pattern

560' Offset To Wells/Unit Boundaries Excepted Surface Location Excepted 23 Wells/Section 1,500 - 2,000' Laterals 500' Curve Section FracFull Length = 1,000'

W L EL r te La 0' 00 '2 `A al

WELL `A' Curve section (400-500' Undrained)

WELL `A' Surface Location

560'

Current Griffin Mtn . Field Rules: 560' Offset from Unit Boundary

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This is a proposed mix of horizontal and vertical well completions that can cover the section with less drill sites.

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Pad Development 320 ACRE 6 Horizontal wellbores 933 ft. appart Length + 3200 ft. Curve 18º/100 500 ft. 3 wellbore SIMUL FRACS 4-5 stages Each

10 ACRE Pad 600,000 BBL 5 ACRE Frac PIT

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Pad drilling with simul-frac completions are being suggested as an attempt to reduce foot print and increase completion efficiency. Shown is a proposed six wellbore pad with 24-30 multi stage fracs pumped form a centralized location. It is estimated that a total of 20,000,000 gal. in 30 stages can be placed in 48 hours. At the present time most pad locations in the Mid-continent have 2-3 parallel horizontal wellbores spaced 500-1320 ft. apart.

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Arial view of three well locations being fracture stimulated from a single frac pad. Frac water pits feed the holding tanks on the frac pad by high rate irrigation pumps.

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ELEVEN WELLHEADS PAD DEVELOPMENT

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Centralized frac pads allow multiple well completion without moving frac equipment from one location to the next. Shown are eleven wellheads with frac iron ready for connection. High pressure surface treating lines, usually high strength casing, is used to distribute the frac energy to each well site.

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Single or Simul-Frac stimulation

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The more frac energy you can deliver to a shale formation the larger and more complex fracture network you create. This is usually good for production because a large complex fracture network exposes a lot of surface area. This large area allows the flow of more hydrocarbon into the narrow fracture cracks. Simultaneous fracture treatments of two separate wellbores adjacent to each other is thought to enhance the frac energy delivered to the rock, and create a more complex fracture system.

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Present day simul-Fracs involve massive accumulation of hydraulic horsepower, prop and water. This can be cost effective only in cases where a large inventory of completions need to be made in the shortest period of time. Or where "days to first production" is paramount. View of four well locations being prepared for simultaneous fracture treatments (quad-frac).

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Less complex region Longer extension

Well A

High complex region

Well B

Less complex region Longer extension

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Simul-Fracs have been performed in the N. TX Barnett and Woodford Shale. Parallel and not so parallel wellbores have been fracture stimulated at the same time with the same fluid and prop volumes at high rate +90 BPM. Initial production results look encouraging, RA tracer and microseism mapped results show communication between wellbores and a very complex network. Long term production effect and change in drainage or EUR is still unknown.

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WHAT MAKES ECONOMIC SENSE?

Pay Thickness GIP and Gas Recoverable IP, Decline, EUR Drilling and Completion Costs Overall NPV ROI

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In the end regardless of the design drilling and completion chosen, the expected outcome is to make money. To sustain the development of the resource in the long term minor or major adjustments in drilling and completion type may have to be made in order to meet the changing economic hurdles caused by cost and product price variability. Simply having a high hydrocarbon content in place does not mean the play will continue be commercial without some change.

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Barnett 12 month Histogram

Vertical Barnett Production Distribution

481 456 450 435

Median

400

357 350 328 312 300 287

250

200

199

159 150 115 100 79 77 55 50 28 24 14 472000 8 8 531000

7

0 0 59000 118000 177000 236000 295000 354000 413000

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This is a 12 month production histogram of N. TX Barnett vertical completions. It's log normal characteristic comes from the fact that the resulting production outcome of any well is dependent on the product of many small independent factors. For example production is dependent on depth, porosity, permeability, pressure, saturation, thickness. As we can see from this graph the spread of production outcome is quite large for this "continuous resource play."

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Zone

Barnett Vertical Barnett Horizontal Woodford Vertical Woodford Horizontal Fayetteville Vertical Fayetteville Horizontal

Avg. 12 MO MCF 147,020 313,469 101,710 226,751 25,815 261,485

Median 12 MO MCF 128,693 262,323 65,594 219,658 23,058 200,158

# wells

Qh/Qv Median

3434 1320 107 66 38 58 8.6 3.34 2.03

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The three primary shale plays in the Mid Continent are the Barnett, Woodford and Fayetteville. This data comes from public reported production. The table lists the average and median 12 month gas production for wells in each reservoir. The median value is the value of the middle sample separating the upper half from the lower half, also referred to as the P50 value. The increase in production going from a vertical well completion to a horizontal well completion (or Qh/Qv) for the Barnett and Woodford range from 2-3.5. The Fayetteville production however really benefits from a horizontal completion with a Qh/Qv ratio of +8.

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C U M 4000 ft. P R O D M C F 3000 ft. 2000 ft. VERTICAL

TIME

After primary production profiles are defined, reservoir models can be calibrated to give predicted outcomes to changes in drilling and completion design. This plot illustrates the benefit of drilling longer horizontals. Note however the incremental production increase decreases as lateral length increases. This means that drilling your lateral twice as long will not result in a two fold increase in production.

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C U M P R O D M C F 4 fracs

8 fracs 3 fracs 2 fracs VERTICAL

TIME

The calibrated model can then give good estimates on production outcome from different cases of completions. Again note the incremental increase in production increase with multiple fractures is not linear.

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+$10mm

Best Choice Late Time Best Choice Early Time

NPV

$0

-$4mm TIME

It is important to understand the economic success of a shale project also depends on your time horizon. This example of different designs show the outcome or "success" can be rated based on an economic goal at a specific time. Notice however that depending of you specific time frame, different drilling and completion types may be selected.

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OBSERVATIONS: Resource plays like shale have a wide variability in production outcome. Drilling and completion methodology should evolve to match the realistic production outcome and cash flow. There are many drilling and completion options. Presently methods which reduce cycle time and footprint are in high demand. Sustainable resource development demands constant adjustment to drilling and completion practices to match dynamic market and reservoir changes.

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