Encana finding ways to utilize multi-shale-basin knowledge
With the continued increase in North American shale activity, some exploration and production companies are experiencing higher charges for service costs. Encana Corp., a multi-basin producer, is not one of them. According to Doug Suttles, CEO, the Calgary-based operator was able to secure contracts and stable pricing for roughly two-thirds of its 2017 operations at the end of last year. “We expect to hold total year-over-year drilling and completion costs flat despite cost inflation for some services,” he said.
“Our focus on innovation, combined with the advantage of being in more than one basin is driving stronger well results,” Suttles said. Production growth and success in 2017 will be directly related to the operator’s new well completion design and its ability to utilize lessons learned from one play to increase production in another.
The operator has already ramped up its operations to match its end-of-year projections for rigs and frack crews, in part because of the company’s desire to get ahead of any service cost or supply issues.
In the Eagle Ford, Encana changed its well completion designs in the last part of the year to use slickwater and tighter (25 feet) cluster spacing. Three wells using the approach achieved a 90-day average of 1,450 boepd—30 percent higher than other premium Encana Eagle Ford type curves.
“We were trying to get near well bore complexity to get better drainage,” said Mike McAllister, COO. “We had the same challenges in the Montney.” In less than 12 weeks, a completion manager for Encana was able to help his Canadian team implement the same strategies Encana deployed in South Texas. Using the Eagle Ford approach in Canada created a 50 percent production increase in the new wells.
The technology and strategy transfer approach is something Encana has created an entire team around. A technology chief works on ways to find and rapidly implement technology in the field. “We constantly look for technologies we can move on in real-time,” McAllister said.
Along with technology adds, Encana has also looked at or even contracted with different service companies this year. Disagreements over service prices caused the company to replace suppliers in some cases. Suttles said his team needs to work with service providers on finding a solution, however. In one instance, a fracking crew in the Eagle Ford has been running 20 hours straight to bring wells online faster than normal. The service company, Suttles explained, can actually charge us less and still make a lot more money because that frack spread will be operating more throughout the year because we keep them on the job.
“We want to work with companies that make sure North American shale stays on the low side of the supply cost curve,” he said.
Encana’s work in the Permian this year will include a 5-rig program and $800 million. For $5 million (drilling and completion costs), Encana expects to complete up to 145 horizontal wells this year. The company will also commence work on the Davidson pad, a well pad that will have 33 wells online by years end and could eventually have up to 65 wells in operation.
In the Eagle Ford, Encana will run two drilling rigs and spend roughly $250 million. In the Montney, the company intends to spend $460 million, or roughly $4.5 million per well.
This year Encana will spend up to $1.8 billion and produce roughly 330,000 barrels of oil equivalent per day. Between Q4 2016 and Q4 2017, production could increase by 20 percent. Three fourths of Encana’s 2017 oil production has already been hedged.
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