Decline curves are one of the most extensively used forms of data analysis for evaluating reserves and projecting future production. By predicting production behavior at different points in time based on the well’s past production history, analysts are able to identify well problems and predict performance and estimate ultimate recovery (EUR) for a single well, or a group of wells on a single Lease (Wells in Texas are aggregated at the lease level).
Automated and intuitive, Drillinginfo’s production charting application speeds up the time it takes to complete your analysis. It provides 3 Decline Curves to choose from; Exponential, Hyperbolic and Multi-segment.
In addition to projecting decline curves, the application allows you to:
- Perform automatic primary phase selection.
- Automatically pick decline curves and assign them as an exponential or hyperbolic decline cases.
- Once refined, import auto-forecasts into the OMSYS economics calculator with a single mouse click.
- Use the Decline Curve Analysis toolbar to view completions data in just one or two clicks.
- Take the guesswork out of economic forecasting.
Under the Hood
Our Decline Curve Analysis method is modeled after Arps (1956). It is widely used in the Oil & Gas industry to model production curve behavior and its associated forward prediction. However, it is important to understand the limitations of the technology to most accurately create economic forecasts and model future production for a given lease or well.
When using the Decline Curve feature, view the computer generated auto-pick as a guiding start. Depending on the well history and type, adjusting the “B” factor or Nominal Decline rate sometimes obtains the best data fit. But, if the production data is very noisy, the computer may pick a very low or high (3.0) value for “B”. This is usually not a valid pick and needs to be adjusted. When adjusting the “B” value or Nominal Decline, the Reserve Replacement Ratio (RRR) & EUR values are automatically recalculated. Offset well values or corroborating output from type wells in journal articles is always helpful when narrowing down the EUR’s for a lease or well. Again, the customizable nature of the tool makes it great for users to apply their own professional opinion.
The Last Analysis
Another unique benefit to the charting application is the ability to save your Parameters before starting your Economic Analysis.
The Economic Analysis feature allows you to determine the decline rate between any two points of major phase production history. It uses the decline rate from Decline Curve Analysis or a user input decline rate, as well as other user inputs, to determine estimated future production, remaining recoverable reserves, net present value and other metrics.
To fully calculate a proper Reserves/Economic Analysis, you will need 6 pieces of information: Forward prediction with RRR/EUR values (including gas analysis, such as BTU of gas), current pricing information (or 5-Yr price deck), proper values for Ad Valorem/Severance taxes, proper ownership percentages (WI/NRI), acquisition costs (CAPEX) and operating costs (OPEX). The OMSYS calculation routine contains inputs for these items and many more as shown below:
Most Mineral Owners and operators tend to use Flat/Escalated Pricing, but if known, enter the 5-Yr price deck. Otherwise, consult published reports from trusted sources to obtain the desired information. In the case of calculating company valuation for loan approval, the price deck is often fixed by a bank. The BTU content, GOR and other gas parameters are found in gas analysis reports provided by the operator. They are also found in field studies. The “Save Default Price Deck” option allows you to utilize the same deck, which makes asset comparisons much easier.
The Gas Oil Ratio (GOR), Hyperbolic “B” Exponent and “Nominal Decline” values are automatically imported into the OMSYS parameter screen to speed up the analysis process.
The three primary outputs from the OMSYS report are Net Present Value (NPV) from 0-50% in 5% discount increments, the economic constrained RRR/EUR reserves calculations and Cash Flow estimations.
It is important to note that erratic production rates can be created by fluctuations in reservoir dynamics, variations in water production, changes in the flow path due to paraffin, scaling, recompletion/stimulation and damage to tubular goods. Many evaluators attempt to model the production curve throughout the history of the well or lease. The reality is that flow dynamics may change several times during the life of a well. Therefore, the most recent 1-2 years of production is the most important information for forecasting.
It is also important to note that not every well an evaluator attempts to model will display an ideal (or even adequate) signature. Text book examples are great, but very few wells will follow a discernible pattern. Some wells, due to their inherent signatures, will require intervention from the evaluator to attempt several picks or manual revision of the nominal decline and/or “B” factor in order to bring about the proper outcome. Usually, a minimum of 6-8 monthly production data points are required to accurately model a forward prediction of production.
In many cases, a well may show an inclining production signature because of cleanup after initial production, choke setting changes, re-stimulation, or other factors. The Arps formula is not designed to handle these circumstances. As a result, it is best to set your auto-pick after the event where production is inclining. This enables an accurate and more reasonable estimation of future production.
Alright, that should be enough to make you dangerous. If you have never used the Production Charting Application, please login and see what kind of insights you can glean for your producing wells. And, if you need any help walking through the application, give us a call at (888) 477-7667 ext. 3.
Now it’s your turn. Do you use the Production Charting Application to calculate declines on your wells? Leave a comment below.
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