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I am not a petroleum engineer, though I often have to pretend to be one in real life, and belong to the Society of Petroleum Engineers as an associate member. Its a fine organization and I learn new things from it almost every day. That's a wonderful thing about the oil and gas business; one never stops leaning. The Journal of Petroleum Technology (JPT) is the SPE community's outlet for engineering news and various technical papers.

A recent SPE paper (SPE 18792) written by several completion engineers for the Apache Corporation is worth reading for a number of reasons. Here is the summary of this SPE paper in the JPT, The Problem With Bigger Fracs in Tighter Spaces. This article pertains to "frac-hits, well interference, frac-bashes," or, the one I like the most, "fracturing driven interactions." That's a goodun.

Here are some very insightful quotes from the article and some brief comments of mine, following:

"The impact of a frac-hit can be big and immediate. The Apache paper included a look at a well whose production dropped 65% after a hit and remained down until it was the Woodford over 90% of frac hits can be (permanently) harmful."

Harmful indeed, particularly when those fracs are traveling up, out of zone and whacking other people's wells:

"But these fracturing-driven interactions may only be apparent with production analysis. Apache’s study found one pair of wells where the area fractured by the second well overlapped with the original well. As a result, it said 'the existing well could have produced the reserves without the infill well,' please see below:

In this case, drilling and completing a second well nearby provided a short-lived production spike, but ultimately added little to what the older well would have produced. Source: SPE 187192.

Likely this is Marathon in Karnes County; "downsized" spacing to less than 40 acres per well. There are a lot of examples of this kind of stuff in the Eagle Ford. Please note the first well was shut in for what appears to be 75 days awaiting the frac'ing of the second well. Generally, that shut in time can be as high as 120 days or more.

"For example, it is clear that more aggressive fracturing designs can lead to hits in places with tightly spaced wells. But Rainbolt said that concern is up against the argument that completing wells using more water, more sand, and more fractures will result in more production from new wells."

I find this a fascinating statement. According to these Apache engineers, even with the high probability of frac-hits to offsetting wells, its still apparently better to drill wells in sweet spots on close spacing because the ensuing result is "more production from new wells." Frac-hits obviously pose significant risks to offsetting wells. But in the reserve-growth-over-profit business model, reserves from legacy wells taking the frac-hit have already been booked and are likely on the, who cares? Squeeze another one into the mix, get a big, but very brief cash flow influx from the new well, book more reserves; the risk to offset wells is worth it. If they can be fixed, they'll fix 'em. Its only money. The important thing is the new well !

The actual SPE paper references occasional benefits to offsetting wells from frac-hits, where induced energy from the new 'parent' well will travel toward nearby, pressure depleted wells and briefly increases the incremental 'rate' of recovery, but I have yet to find any realized production data that suggests there will be an increase in ultimate recovery from those older wells as a result of this so called, "halo" affect.

"Wider well spacing reduces the number and severity of the hits, but that limits the number of higher-producing new wells. 'We can control it with well spacing. We do not want to, but we can,' he said."

Why would a prudent operator, using its own cash flow to drill a well and interested in profitable well economics, with the best interest of its shareholders in mind, not "want" to control well spacing and the drilling of unnecessary wells? This comment is perhaps indicative of why investors have had a belly full of the shale oil industry and its poor financial performance.

"Adding wells close to older ones is not likely to stop because operators need to maintain production in plays where the decline rates are steep. While fracture interaction may mean new wells will not ultimately produce as the ones drilled 3 years ago, they will initially be producing several times more barrels of oil per day."

I guess this last quote from the article about sums it all up. It is astonishing, at least to me, the mindset of the US shale oil industry, to which Apache is one of the biggest of the bunch. You will notice, please, in neither the SPE paper, nor the JPT article about the paper, was there even so much of a mention as to the economic ramifications of frac-hits. Productivity trumps profitability in the shale business, every time, all the time.

You know, this shale stuff seems like sliced bread to most folks. But I'm telling you, in the long run these shale guys are ruining America's hydrocarbon future. When they are done exporting all that shale oil to China, to meet interest payments on debt, there won't be anything left for our kids. Nothing. You'll see.

Mike Shellman

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