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Cube Development in Shale – What Does It Mean for US Oil & Gas Markets?


Modern shale drilling has largely to date been a 2-dimensional activity. The operator drills horizontally through a single shale layer with wells then taps one layer at a time.

That is, until now!

Spurred on by the potential benefits of economies of scale and improved well productivity rates, operators, such as Encana and Devon Energy corporations, are starting to drill multiple shale layers simultaneously.

And the numbers are staggering! On the Permian Davidson well pad, Encana has 19 well operations collectively pumping almost 20,000 barrels of crude, according to company reports. Encana also has a 28-well operation in the Montney shale play in Alberta and British Columbia, and Devon has a 24-well enterprise in Oklahoma.

So, what does this mean for the industry?

In Alex Nussbaum’s recent Bloomberg Businessweek article “Permian’s Mammoth Cubes Herald Supersized Future for Shale,” Sarp Ozkan, Head Analyst at Houston-based Drillinginfo, the energy industry’s leading data analytics company, commented on the potential impact of this new large-scale manufacturing technique as opposed to the one-well, one-layer-at-a-time approach of the past.

“A move toward cube development could spur more consolidation as companies without the financial or administrative might to pull off industrial-size operations get snapped up or pushed out,” Ozkan said, pointing to the expense of Encana’s Davidson well pad operations with JPMorgan Chase & Co. predicting costs of up to $120 million.

This would include extra well costs, added pumping power, larger tank batteries and significant numbers of additional personnel required, according to the Bloomberg article.

There are also implications for the delicate global supply and demand market with “production potential only as high as the demand will allow it to go” according to Ozkan.

He continues: “Cube development could have a big influence on oil and gas markets: If the industry takes a more cautious approach, U.S. output could fall below forecasts in the coming years, easing some of the downward pressure on prices. If Permian producers master new manufacturing modes, on the other hand, the global supply glut may only get worse. You add all the numbers up and what you start to come up with is very, very scary.”

Yet, not all operators are sold on cube development. Permian operators, such as Pioneer Natural Resources and EOG Resources Inc, for example, are taking a more conservative approach to well pad expansion because of concerns over costs and well performance when operating so many simultaneously.

According to a spokesperson from EOG, which has limited itself to six to eight well pads so far, “the impact to returns is not clear-cut until you understand the impact to well productivity and other operations costs.”

It would seem that in terms of increased well performance from cube development, the jury is still out. Sarp Ozkan again: “It’s too early to say which side, if either, is right, although that may change this year as more results become available from large-scale production. For now, there’s no sign cube wells are any less productive though.”

What is clear though, is that major changes in production and manufacturing techniques are taking place in the shale market, with Drillinginfo tracking such developments every step of the way.

For more information on Drillinginfo’s leading data analytics products, delivering critical business insight and maximizing investment returns, visit

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Paul Fisher