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1August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Unconventional Oil and Gas
C. H. Scott Rees, III
2August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Disclaimer
This presentation is for general information and illustrative purposes only—its contents should be considered in
context of the entire presentation and the date on which it is presented. All estimates, exhibits, and opinions
presented herein are subject to change. As in all aspects of oil and gas evaluation, there are uncertainties inherent
in the interpretation of engineering and geoscience data; therefore, our opinions necessarily represent only
informed professional judgment. We make no representations or warranties of any kind, express or implied, about
the completeness, accuracy, reliability, or suitability of the information contained herein; we will not be responsible
for any consequence associated with the reliance on such information. Unless indicated otherwise, the information
contained herein does not constitute professional advice or opinions, and it should be considered to be a work in
progress. Netherland, Sewell & Associates, Inc. (NSAI) is a Texas Registered Engineering Firm, No. F-2699.
Copyright 2018 NSAI. All rights reserved.
3August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Presentation Outline
• Unconventional oil and gas development activity in the US
• Trends and observations
• Potential and issues of major basins
4August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Historical Rig Activity in the United States
Daily OilDaily Gas
$12
0$1
0
$5
0$
4
$100$
2 $10
5$
4
$35$1.5
0
$
3
2,500
2,000
1,500
1,000
500
Rig
Co
un
t
US Rig Count Activity1,987Rig
s
932 Rigs
2,000 Rigs
1,905 Rigs
490 Rigs
US Horizontal Rig % Activity
1T
10B
85%
28%
100
80
60
40
20
Rig
Co
un
t
Rig
Co
un
t (P
erce
nt)
1,000
800
600
400
200
2008 2009 2011 2013 20172010 2012 2014 2015 2016 2008 2009 2011 2013 20172010 2012 2014 2015 2016
Co
mp
leti
on
s p
er M
on
th
5
4
3
2
1
Avg
Dai
ly O
il (
MM
BO
/D)
50
40
30
20
10 Avg
Dai
ly G
as (
BC
F/D
)
2008 2009 2011 2013 20172010
2012 2014 2015 2016 20182008 2009 2011 2013 20172010 2012 2014 2015 2016 2018
$120$10
$50$4
$100$
2$105$4
$35$1.5
$
7
5
$
3
70%
15%
$12
0$1
0
$5
0$
4
$100$
2 $10
5$
4
$35$1.5
0
$
3
1,987Rig
s
932 Rigs
2,000 Rigs
1,905 Rigs
490 Rigs
$120$10
$50$4
$100$
2$105$4
$35$1.5
$75$3
1,018Rigs
Horizontal Wells
5August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Impact of Horizontal Drilling – Wells Drilled from 2000 to 2014
• Cumulative production for Pre-2015 oil wells: 4.8 billion barrels of oil (BBO), 9.0 trillion cubic feet (TCF) of gas
• Estimated ultimate recovery (EUR): ~9 BBO, ~15 TCF
2000 – 2014 Wells• Peak well count 28,750• 168 MBO/well cumulative• 300+ MBO/well EUR
2000 – 2014 Wells• Peak well count 33,791• 2.1 BCF/well cumulative• 4+ BCF/well EUR
Wel
l Co
un
t (T
ho
usa
nd
s)
Gas
Rat
e (B
CF/
D)
Cumulative Gas (TCF)
Wel
l Co
un
t (T
ho
usa
nd
s)
Oil
Rat
e (M
BO
/D)
Cumulative Oil (MMBBL)
Bakken, Eagle Ford, and Permian HZ Oil Wells Marcellus, Haynesville, Utica, Eagle Ford, Barnett,
Woodford, and Fayetteville HZ Gas Wells
• Cumulative production for these gas wells: 70 TCF, 0.7 BBO
• Estimated ultimate recovery: ~150 TCF, ~1.4 BBO
6August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Well Performance Trends Normalized by Lateral Length
1st
Year
Cu
mu
lati
ve O
il /
Late
ral L
engt
h (
BO
/ ft
)
Proppant (Lbs/ft)
Completion Year
Lateral Length (ft)
Utica
Marcellus
D-J
SCOOP/STACK
7August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Well Spacing and Improving Completions
Excerpts from RSP Permian 2Q17 Investor Presentation
325’
180’
200’
220’
LowerSpraberry
Dean
WCA
WCB
Microseismic Case Study: Confirming Near-Wellbore Stimulation
Excerpts from RSP Permian 2Q17 Investor Presentation
Excerpt from Goodrich 2017 Investor Presentation
8August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Well Spacing - Eagle Ford Well Density Map
10 wells/section (~500 ft. spacing between laterals)
June 2018
17,037 completed wells24 rigs
Normalized Well Count per 640 acres
1 section = 640 acres(1 sq. mile)
9August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Well Spacing - Bakken and Three Forks Well Density Maps
6 wells/section (~880 ft. spacing between laterals)
June 2018
4,299 completed
wells16 rigs
June 2018
11,816 completed
wells34 rigs
Normalized Well Count
Normalized Well Count
1 section = 640 acres(1 sq. mile)
10August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Well Spacing - Haynesville Well Density Map
5 wells/section (~1,050 ft. spacing between laterals)
June 2018
3,849 completed
wells38 rigs
1 section = 640 acres(1 sq. mile)
11August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Distance from Producing well
2,761 WCB PDP+860 PDP
1,617 WCA PDP+727 PDP
1,116 SPBY PDP+586 PDP
North
Central
South
Blue areas are developed at 4 or greater wells per section in landing zone mapped
Well Spacing – Midland Basin Well Density Maps
12August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Impact of Well Density on Performance
• Increased well density eventually results in interference and decreased well performance for subsequent wells
• Performance for widely spaced initial wells may not be representative of future full-development performance
Well Spacing (wells per 640-acre section)
1st
Yea
r C
um
Oil
/ La
tera
l Len
gth
(B
O/
ft)
1 section = 640 acres(1 sq. mile)
13August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Unconventional Well Development Patterns
• Well spacing in map view is not the only spacing issue to consider
• Plays in US have multiple productive intervals and consideration should be given to the 3D aspects of the development patterns
14August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Optimizing Well Spacing
• Operators plan to optimize development economics
• Economics dependent on price outlook, well spacing, interference and potential of loss opportunity is not downspaced early
15August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
Summary
• Each play and horizon within each play has its own unique characteristics.
• Still improving completion techniques and drilling longer laterals, but…
• Still in early to mid- stages of development in most active basins.
• Many operators seeing necessity of changing completion designs to match with well spacing plans
• Development potential dependent on many variables, including:
• Ultimate well spacing
• Price Outlook
• Economics
16August 6 - 7, 2018Federal Reserve Bank of DallasDallas, Texas
Energy and the Economy: Charting the Course Ahead
Federal Reserve Bank of Dallas & Federal Reserve Bank of Kansas City
Netherland, Sewell & Associates, Inc.
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SINCE 1961
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