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Resource Plays as a Manufacturing Process


We’ve all seen claims from various sources within both the E&P community and the investment community that resource plays can be characterized as a manufacturing process.

To call something a manufacturing process implies that you have control of:

  • The raw material supply chain
  • A minimally variable construction or assembly process
  • Predictable product outcomes controlled by good QA controls and QC practices
  • A business model that delivers a predictable margin by controlling costs

So let’s take look at how well the exploitation of resource plays meets these requirements, keeping in mind that a resource play can span a large part of – or the entirety of – a geological basin

First, how good is an operator at controlling the raw material supply chain? What’s in that supply chain? Leases. Rigs. Drilling fluids. Directional contractors. Frac’ing supplies. Frac’ing contractors.

So let’s look at leases. The map below shows the lease positions in a current resource play, color coded by lessee.


The leased acreage (and this is just one part of the company’s holdings) is dispersed over 1,600 square miles. Is it reasonable to believe that shale porosity, permeability, stress regime, gross and micro fracturing, in-situ pressures, adsorbed and expelled gas will be exactly the same at each location in a 40 square mile cube?

Here’s another lessee with a massive leasing presence in TX, District 1. Their acreage position is over 150 miles in length along strike, and about 30+ miles in a a dip direction .

Leasing Presence in Texas, District 1

Leasing Presence in Texas, District 1

Given the scope of either of these positions, developing a coherent set of best practices regarding:

  • Lateral steering
  • Bit selection
  • Drilling fluid make up
  • Completion targets and practices

will require assessing and processing a huge number of variables.

Consider geology. The following slide looks at eight pilot holes in the Haynesville and illustrates the experimentation inherent in choosing what intervals to perforate.

Haynesville/Bossier Shale Pilot Phase Vertical Wells

Would knowledge of this variability be ANY help in developing insight into the distribution and presence of Haynesville high potential areas? It would—AFTER you’d done the hard work and spent the money to work through these “experiments “ to sufficiently develop your knowledge base.

Variability in Geology

Variability in Geology

And this just looks at the variability in the geology. What about the degrees of freedom in developing and perfecting a frac program for a well?

We’ve seen cases where one operator, in the limited span of just three months went from one frac stage to 22 (on the same lease), and boosted their frac job from 1000+ gal of acid and 2.7 MM lbs of 40/70 sand to 1,700 gal of acid and 5.6 MM lbs of both 20/40 and 40/70 sand.

So it seems far too early to say that these plays are dependably predictable regarding play-wide ROIs. It makes more sense to do that if an ROI is being touted for a more limited, coherent acreage position.

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