Well performance has improved continuously in the Permian Basin. New completion designs, adjustments to formation targeting and general learning have led to better well parameters. Operators are continuing guiding up well performance and most still consider the basin an immature play with plenty of room for continued improvement. We benchmarked and compared the development of well performance for the 13 most-active operators in the Permian Basin by comparing implied well parameters based on actual production for every single operated horizontal well started-up since 2010. The most active operators are the ones that started-up the most wells in the basin since 2010. Figure 1 illustrates the well Estimated Ultimate Recovery (EUR)* creaming curves for the selected operators by comparing the cumulative well EUR to the cumulative number of started-up wells for these operators for the period between 2010 and 2017. If we consider just the x-axis, or the amount of wells started up, Concho Resources comes out as the busiest operator by far. Pioneer Natural Resources and Apache are numbers two and three, respectively. Laredo Petroleum comes out in the last place. *EUR is calculated at well level by estimating a best-fitting well curve and assuming a well lifetime of 30 years. However, if we consider both axes we get a picture not just of which operators started up the most wells but also an image of the development of wells’ performance. If performance remained constant then the line would be straight, but if performance improved, then it becomes curved. In this context, a curved line implies an improvement in operator’s well performance. In that light, Concho comes out closer to the bottom. Pioneer and Cimarex’s cumulative well EUR is about the same as Concho’s despite starting up roughly 400 and 550 fewer wells, respectively. (It also means Cimarex’s well performance was the same as Pioneer despite starting up about 150 fewer wells.) Intuitively, if recent wells with new completion designs targeting different formations are indeed realizing higher IPs and better well parameters, we would expect significant changes in the curvature of the operators’ creaming curves. This can be seen in Figure 1, as there is variance in the convexity of the creaming curves at varying thresholds of cumulative started-up wells among the operators. Cimarex Energy has evidently realized the largest improvement in average well EUR as seen by the change in the slope of their creaming curve. After Cimarex started up about 500 wells, the curvature of their creaming curve increased significantly, suggesting that their new, more-recent wells realized higher well parameters on average than their previous standard. Devon Energy, despite having the lowest slope of the sample, realized a large change in the slope of their creaming curve suggesting significant improvements in performance. The changes in the slopes for Devon and Cimarex Energy are highlighted in Figures 2 and 3 below: Devon Energy realized their first clear change in creaming curve slope after starting up 404 wells and again after starting up 538 wells. Similarly, Cimarex realized their first clear change in creaming curve slope after starting up 153 wells. They also realized a significant slope change for their most recent 106 wells. There are many drivers for changes in well performance. Obviously, acreage, target formation, and completion design are a few. In Table 1 below, we show statistics of average well EUR and completion design for the sample periods where slope changes occurred for Devon Energy and Cimarex Energy. Not surprisingly, there is a clear relationship between a well’s EUR and the length of the horizontal laterals, as well as loading of volume and frac fluids used. From the sample period 01.10.2010-15.06.2012 (153 wells), to the sample period 14.04.2015-20.05.2017 (106 wells), Cimarex Energy’s average well EUR rose 343% while loadings of proppant and fracking fluid increased by 452% and 573%, respectively. Devon Energy, although at a lower rate, has also realized similar trends. Since 2010, operators have experienced significant learning in Permian basin showed by increasing well performance. Among the most active operators in the basin, Cimarex Energy seems to be sitting at acreage, resources and technology enabling them to having unlocked the steepest development of well performance and fastest learning in the basin. As can be seen in Figure 4 below, it was particularly from 2014 going forward that operators starting realizing large increases in well performance. The figure shows the development of implied average well EUR per year for Cimarex, Devon and the remainder of top operators, rebased to 100 in 2010. The average of the remaining top operators is calculated using well count weighted average EUR’s. |