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Horizontal Productivity Gains Tapped Out?

Since the beginning of the Shale Revolution in the U.S., horizontal drilling has been on the rise. Starting in 2005, the number of new horizontal wells turned to sales each year has increased from 2,200 to over 18,000 in 2014. This of course does not account for DUCs (Drilled but Uncompleted), but still represents an increase of close to 9 fold over that period. While activity has dropped dramatically in 2015, producers have continued to optimize well designs to boost productivity and increase capital efficiency. As part of that optimization, producers have continued to strive to develop longer lateral wells. By extending the well horizontally, producers are able to increase the surface area in contact with the reservoir, allowing for a greater inflow of hydrocarbons. But are horizontal productivity gains maxing out?

Beginning back as early as 2009 and 2010 producers began to develop the Woodford shale and Bakken with laterals over 5,000 feet for the first time pioneering long lateral drilling. As activity has slowed in 2015, producers have increasingly focused on developing plays with long laterals.  At BTU Analytics, we have started to look at what the actual lateral lengths of some of these wells are in different areas, to see just how much lateral lengths are actually increasing.

In the above, we see that horizontal wells in Colorado, driven primarily by the DJ basin, have had lateral lengths increase from ~4,500 feet in 2012 to the latest completions coming in at nearly 7,000 feet. The trend is consistent with announcements from producers like Anadarko and Noble that have been shifting Niobrara development to long lateral wells. Of course, like everything, there is a constraint on lateral lengths, so it’s not like we can expect to see  lateral length continue to grow forever. In fact, the below graphic gives us a look at what kind of limitations we may start to see.

Looking at lateral lengths by state, we start to see some interesting results. Some states (such as Colorado, Wyoming, and Ohio) have experienced noticeable jumps in lateral lengths from 2012/2013 to 2015. However, Arkansas and North Dakota have seen few gains in recent years in lateral lengths. This indicates that something is causing lateral lengths to hit their limits in these areas. For some regions, such as the Bakken (North Dakota)  this could be due to current technological limits, especially since the Bakken is where we see the longest laterals. For others, it could come down to issues with running out of space on leases. This could be a limiting factor for lateral lengths in the future for states like Ohio and Pennsylvania.

For more on well completions analysis, follow our Energy Market Commentary and keep on the lookout for new BTU Analytics’ content.

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