CASE STUDY: WELL PRODUCTION ECONOMICS

Estimating Production with DI Analytics

How Drillinginfo Can Help You Identify Promising Opportunities
When Oil Prices Are Down

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CASE STUDY: WELL PRODUCTION ECONOMICS

CUSTOMER CHALLENGE
Investing in the energy space is a risky endeavor. Wells cost millions to drill and
often take up to several years to break even, if they make money at all. With oil
prices at historic lows, how can investors minimize risk and make better, more
confident decisions?
In this example, we will demonstrate how financial analysts can use Drillinginfo to
better understand the economics of drilling potential wells in an area of interest.
Analysts can use the Well Production Economics workflow in DI Analytics to
estimate how long it will take for a new well to break even, calculate the oil
price necessary for a given well to be profitable, and understand how changing
variables impact profits.
Before DI Analytics, analysts would either collect production data or pull it from
DI Desktop if they were a Drillinginfo subscriber. From there, they would export
the data into a different software to compute decline curves and then into
Microsoft Excel to plot sensitivities. Managing multiple platforms for a single
workflow was a time-consuming, tedious process.

CHALLENGE
Should I invest in a well in a given area of interest? How can I
predict ROI and payback period for a potential new well? How
would well costs or changing oil prices affect the well?

SOLUTION
Using Drillinginfo, financial analysts are able to quickly create
financial models to estimate the well production economics
associated with a potential new well and determine whether to
perform further due diligence around an investment opportunity.

PRODUCTS USED
DI Analytics

CASE STUDY: WELL PRODUCTION ECONOMICS

CUSTOMER SOLUTION WITH DRILLINGINFO

Using the Well Production Economics workflow in DI Analytics, financial analysts are able
to leverage built-in production data and run a complete well economics workflow in a
single application. In this example, we will assume that an analyst is evaluating a potential
opportunity in Dewitt County in the Eagle Ford. The analyst would like to estimate expected
returns from a well at $50 oil.
Using the Production Scenario tool in DI Analytics, the analyst begins by selecting historical
wells drilled in the same quality reservoir as the potential opportunity. Using Drillinginfos
proprietary Graded Acreage model, we assume, in this situation, that the analyst will
evaluate wells drilled in B grade acreage. After selecting the wells, the software generates
a chart depicting historical well counts, associated production, and projected decline curve
with a calculated EUR. The analyst can further customize decline curve inputs, including
peak rate oil, decline rate, and b-factor, to improve the fit of the decline curve.
With this information, an analyst builds a cash flow model to predict results based on
assumed variables. In this example, we assume that oil is $50 per barrel and gas is $3 per
mcf, and the well will cost $7M to drill and $3,000 per month to operate. We also assume a
discount rate of 10% and
a royalty burden of 25%.
Under these conditions,
will a well drilled in B
grade acreage in Dewitt
County be a profitable
investment?
The Drillinginfo Well
Production Economics
workflow generates
outputs specific to the
customized decline
curve and cost inputs.
In this example, the well
achieves an after tax
IRR of 23%, breaking

Oil production type curve

CASE STUDY: WELL PRODUCTION ECONOMICS

even in 25 months. Viewing the

associated sensitivity charts shows
that a typical B grade Dewitt well
breaks even at around $30 a barrel,
and will generate 60% after tax IRR
if oil rises to $80. If well costs fall to
$6M, the after tax IRR increases to
37%. The well could cost as much
as $10M and still break even in this
scenario.
Drillinginfo allows users to quickly
run a well economics workflow
in a single application. Using this
workflow, an investor can quickly
gauge financial returns from
investing in a specific area, and
decide whether an opportunity looks
promising and warrants further due
diligence.

Charting sensitivites

PROACTIVE

EFFICIENT

COMPETITIVE

Learn more at www.drillinginfo.com

By monitoring the market, Drillinginfo

continuously delivers innovative oil &
gas solutions that enable our customers
to sustain a competitive advantage in
any environment.

Drillinginfo customers constantly

perform above the rest because they
are able to be more efficient and more
proactive than the competition.

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CS_DI Analytics-05final; 11/16/15