Oil & Gas News

A Fracking Experiment Fails to Pump as Predicted

WSJ – By Bradley Olson Updated July 4, 2019— Two years ago, Encana Corp. unveiled a supersize fracking operation that many said would represent the future of the U.S. drilling boom.

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To reduce costs and avoid production problems that can occur when single shale wells are spaced too closely together, the company introduced the cube, an experiment in which it would complete as many as 60 oil and natural-gas wells from one location.

Chief Executive Doug Suttles described the results in glowing terms, and many of the wells looked promising when they started producing in 2017. But their performance has fallen off significantly, according to a Wall Street Journal analysis of well data.

In the company’s biggest cube development to date, 33 wells drilled from one location in West Texas are each on track to pump about 300,000 barrels of oil over 30 years. That is about half the amount of oil Encana said a typical well would pump in late 2017, according to the Journal’s analysis of production data from Rystad Energy, Shale Profile and Friezo Loughrey Oil Well Partners LLC.

The results of Encana’s cube—the premier example of scaling up in the heart of the U.S. oil boom—suggest that operators have yet to find a solution to the challenge of production losses that occur when new wells are drilled too closely to old ones. The problem affects dozens of producers, which face the risk of eventually running out of locations, and some executives and analysts have warned that U.S. production could peak far sooner than expected.

“The wells don’t perform,” said Tom Loughrey, president of Friezo Loughrey, a data-analytics firm that has questioned some shale forecasts. “They didn’t solve the problem.”

Encana said the 33 wells drilled in the RAB Davidson development through 2017 were spaced about 330-feet apart, and the company is now putting them about 500 feet apart. Rather than 60 wells from one cube in some West Texas areas, 40 to 50 might be the right number, including as many as five to six wells in each of eight different horizontal layers, spokesman Steve Campbell said.

The loss of 10 or 20 wells is far from a catastrophe for bigger operators but applied across a vast swath of land, it could represent a substantial resetting of expectations for how many future locations companies might have. Such figures are an important factor for investors seeking to estimate future value that producers have in the ground.

Mr. Campbell defended the economics of Encana’s cube model, saying that even if each well in a giant development produces slightly less because of the concentration, overall profitability can increase based on cost savings and higher recoveries in fixed land positions.

“The best well you would ever drill would be one well in a section, but this helps us maximize our resource recovery,” Mr. Campbell said. “I don’t know that the industry has an answer, but you’re seeing that you can make a difference.”

Newer Encana multiwell sites have performed well, and the 33-well development was successful when viewed as an early experiment, according to Rystad Energy.

Most of the new developments have been only 10 or 12 wells at a time, far from the 40 or 50 the company says it can eventually target. Encana’s plan is to evaluate the performance of the smaller subset of wells before returning to drill more.

Many other operators have similar ambitions to go back to old locations and drill out dozens of additional wells. But the prospects of those future wells are far from certain.

Factory-scale fracking is a buzzword in the U.S. shale industry as companies such as Exxon Mobil Corp. and Chevron Corp. look to significantly increase operations, putting pressure on smaller competitors. But while many operators defend the idea of concentrating multiple wells in single locations, citing the potential savings in costs and time, there are some fundamental challenges that are proving hard to solve.

The biggest problem is that new shale wells drilled too near to older ones often perform more poorly. Industry engineers have warned that the newer wells—often called child wells—could produce as much as 50% less as their predecessors in some circumstances. The issue is one of the reasons thousands of shale wells are producing less than companies forecast to investors, according to a Journal analysis.

Hydraulic fracturing, often nicknamed fracking, involves blasting a mix of water, sand and chemicals into rock formations deep underground to unlock the oil and gas trapped inside. Fractures from new wells can interact with those from older locations that have lower pressure, reducing production. That is why some producers such as Encana have sought to frack many wells in one spot at roughly the same time to avoid interference from well to well.

But the early results suggest the technique cannot yet totally overcome the basic problems that occur when wells are drilled too close to one another.

A few companies have acknowledged that they spaced their wells too close together in some large, multiwell developments. Devon Energy Corp., for example, told investors last year that the results of its Showboat pilot project in Oklahoma, in which the company drilled a total of 24 wells in two adjacent areas, showed that it would have been better to drill the wells farther apart, company executives said.

Write to Bradley Olson at Bradley.Olson@wsj.com

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