Well Spacing Watch

Why well spacing and completion design are among the hottest topics in the Permian.
By Luke Geiver | January 18, 2020

Well spacing is dominating the thoughts of completion engineers, CEOs and investors connected to the Permian. With acreage positions continually being solidified, knowledge of formation potential increasing, and infrastructure constraints being dealt with, the issue of spacing wells appropriately for maximum production and return on investment is now a leading topic. From research studies to startup companies to new initiatives by executives, every segment of the Permian is focused on addressing the issues—or opportunities—associated with well spacing. 

The Spacing Challenge
A recent study by Shell Exploration & Production Co. outlines the dilemma with well spacing in the Permian. “Due to the heterogenous distribution of rock properties, fluid types, uncertainties in fracture geometry, multiphase flow, operating conditions and economic criteria, it is very challenging to get a reliable solution for optimum well spacing,” the researchers said. “Although there are more than 4,000 wells that have been drilled in the Wolfcamp formation, it is not clear to the industry what is the optimum well spacing of long-term field development.” 

As operators rush to develop multi-well pads across the Permian that place well bores into multiple formations, many are struggling with the issue of parent-to-child well interference. Well productivity across some wells placed too close together has been compromised to the downside, and long-term production has been forced to be redrafted. Several operators are now addressing the presence of parent-child well issues. Noble Energy included a detail description of its multiple zone well pad design in a 2019 investor call to help show that, above all, its well row development strategy “has helped to reduce parent to child well interference.” 

In Q3 2019, Diamondback Energy explained issues the company had with frac-hits in Howard County, Texas. The Midland-based company lost an estimated 12,000 gross barrels of oil per day due to offset completions with other operators completing large pads on acreage to the east and west of Diamondback’s acreage. Diamondback told investors that production has since returned to normal, but the extent and duration of the impact was unprecedented. Since then, the company has said that spacing assumptions presented are not universally applicable in all areas of each basin. 

Tudor, Pickering, Holt & Co., a major investment group, issued a report in 2019 that explained its stance on well spacing across the Permian. Oil producers are risking up to 20 percent of production potential by spacing wells to close, the report said. “Child wells get progressively worse relative to their parent well with tighter spacing.” 

The answer to the well spacing question has taken many forms in the last two years. Artificial intelligence firms, geophysicists, investment bankers, oilfield service firms and nearly every other entity in the Permian world have created solutions. Some believe right-sizing fracture size (fluid volumes, proppant packs) is the area to focus on. Others believe understanding the in-place geometry better before fracking will help. No matter the focus area for well spacing, the topic will remain relevant across the play for months, quarters and potentially years to come. 

Piecing Together The Shale Puzzle
In Deloitte & Touche LLP’s take on shale oil and gas development, the oil and gas team issued a bold statement about well spacing, completion design and the overall mood investors and others might hold for the future. If Permian operators were to fully optimize completions and well spacing, they could generate capital efficiency gains of roughly 23 percent. While some say efficiency gains have peaked, John England, partner for the oil and gas sector at Deloitte, said otherwise. “It’s time for the industry to choose the right well design, not the biggest, to maximize efficiencies and profitability.”

Beating The Curve
The dilemma with well spacing isn’t just about capital efficiency. Using a new ariticial intelligence-based research system, global firm IHS Markit has outlined a relatable issue for operators and investors to consider when thinking about shale: well decline rates. Because U.S. onshore wells decline by 35 percent (some up to 60 percent) in the first year of production, there is a need to harness production opportunities in order to maintain or grow volumes over time. “The treadmill that producers are fighting is moving very fast,” said Raoul LeBlanc, vice president of North American Unconventional Oil & Gas at IHS Markit. “As producers come under pressure to restrain investment, this decline rate is becoming the main factor that promises to slow explosive U.S. production we’ve witnessed the past few years.” 

Going Digital With Sensors

Investors are on-board with other forms of digitized, sensor-based, data-based oilfield technology. Rice Investment Group provided Calgary-based Cold Bore Technology Inc. with a second round of strategic funding in 2019 to help the company further its work with completion optimization technology. The company has created what it calls SmartPad, a technology that relies on a combination of valve positioning and pressure monitoring sensors, field data collection systems and proprietary software. The goal is to fully digitize completion operations. During a six month period in 2019, Cold Bore signed several contacts for its SmartPad system, including six contracts with major Permian producers. Derek Rice, partner at Rice Investment Group, helped explain the rise of investments in company’s like Cold Bore. “The E&P business model is shifting from production growth to delivering sustainable shareholder returns through efficient resource development,” he said. “An operator’s completion activity typically accounts for over 70 percent of its capital budget and can be a source of dramatic cost reduction with the right digital solutions.” 

Complete Monitoring
As the pressure on operators to optimize well spacing and completion design in relation to well-pad layout continues to increase, some companies are helping operators follow the fracking action more closely. Reveal Energy Services, a 2016 Equinor spin-off company, has now validated more than 10,000 fracturing stages using a simple, pressure-based technology. The system relies on pressure data, which is then reviewed and verified by completion scientists before returning to the client. The goal is to allow operations to remain on track during zipper jobs taking place on multi-well pads without stopping to gather assessment data. Since Reveal reached the 10,000 fracture map completion milestone, the company has created and since released a new product that assesses the presence and severity of fracture hits.

Deep Imaging, a Tomball, Texas-based company, provides a similar service to Reveal. However, the Deep Imaging approach provides real-time analysis of fracture effectiveness and presence. The company uses electromagnetics to track where fluid travels during a frac. Operators can identify the reasons for—and solutions to—frac hits in real-time with Deep Imaging tech. “The problem is the industry is acting on limited data to make intricate operating decisions,” said David Moore, CEO and president. “Without the right instruments to see what is happening during a well completion, operators are experiencing frac hits and are unable to identify poor cement jobs, failed plugs and unclosed zippers, all of which,” he added, “leave valuable resources in the ground. With the ability to see a frac job in real-time, operators can now truly optimize full-field development.” Other companies, like Houston-based RevoChem, are taking a different approach to helping operators understand well communication and production potential as it relates to completion strategies and successfully executing jobs. Using a drop of oil, cores or cuttings, RevoChem analyzes subsurface fluid flow, surface production issues, drainage volume and well communication by assessing the geochemical footprint of their substance provided. Turn-around time takes only hours and samples are collected at the separator without interruption of oil production. PR