Drilling Activity & Production Forecast for 2015

March 23, 2015 by

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy.

If someone asked you to predict what the Western Canadian 2015 year-end production and drilling numbers would be, and gave you 1 hour to do it … could you? Well that’s exactly what happened to me last week and I was up for the challenge using VISAGE. Skip to the end of this blog for the Low and High Scenario results.

My approach had to be simple for it to be accomplished in an hour. It all hinged on getting the Drilling Activity numbers figured out first. It turns out that since 2006, the Drilling Activity up to the end of February has consistently been around 31% of the year-end total. With that as a starting point, I created this chart show the 2015 drilling activity forecast relative to the last 9 years.

Cumulative-Annual-Drilling-

Notice the dramatic step change after 2008. This is attributable to a stronger emphasis on horizontal drilling and a reaction to the price drop experienced in 2008 ( go to this blog to see price history charts ).

Here’s a summary of the steps I went through to forecast 2015 drilling activity and the year-end production rate for Western Canada:

2015 Wells Drilled Forecast

Over the last 9 years the number of wells drilled in the first two months of the year was consistently around 31% of the total wells drilled that year. The value was exactly 31% in 2008, 2013 and 2014. The first two months of 2015 saw 2,146 wells drilled. Using the proxy of 31% in the first two months, we can estimate that 2015 will have 6,923 wells drilled. This would be the lowest number of wells drilled in a year since 1992 when 6,141 wells were drilled.

2015 New Production Forecast

Only 47% of wells drilled in 2014 were producing by the end of December. We’ll consider this the “low scenario” (3,282 wells) for the number of wells that will come on production in 2015.

In 2014, 11% of the wells drilled in 2013 came on production. So for our “high scenario” we’ll include 11% of the 2014 wells drilled (1,585 wells) on top of the 3,282 wells outlined in our “low scenario”.

The average exit production rate per well in 2014 was 141.5 BOE/day/well. We’ll apply this to each scenario for the new production estimates.

  • 2015 New Production Low Scenario = 3,282 wells * 141.5 BOE/day/well = 464,279 BOE/day
  • 2015 New Production High Scenario = (3,282 + 1,585 wells) * 141.5 BOE/day/well = 688,445 BOE/day

2015 Base Production Forecast

The WCSB base production rate in 2014 dropped 20% over 12 months. Applying the same annual decline to the 2015 base production rate of 5,788,439 BOE/day, would give us 4,630,751 BOE/day (a drop of 1,157,687 BOE/day).

Total Production Forecast (Low Scenario)

The Low Scenario estimates that 47% of the 2015 drilled wells come on production.

  • New wells producing in Dec 2015 = 3,282 wells
  • Year-end total production rate = 4,630,751 + 464,279 = 5,095,030 BOE/day … a 12% drop in production over the year.
  • *Oil production rate = 2,292,764 bbl/day
  • *Gas prod will be 16,813,599 mcf/day

(*based on 2014 BOE split of 45% oil and 55% gas … which is consistent with percentages since 2012).

Total Production Forecast (High Scenario)

The High Scenario estimates that 47% of the 2015 drilled wells (3,282) will come on production and 11% of the 2014 drilled wells (1,585) will come on production.

  • New Wells Producing in Dec 2015 = 3,282 + 1,585 = 4,867 wells
  • Year-end total production rate = 4,630,751 + 688,455 = 5,319,196 BOE/day … an 8 % drop in production over the year.
  • *Oil production rate = 2,393,638 bbl/day
  • *Gas prod will be 17,553,347 mcf/day

(*based on 2014 BOE split of 45% oil and 55% gas … which is consistent with percentages since 2012).

 

That concludes today’s blog. Check in with me at this time next year and see how close (or far) this quick prediction turned out to be.

___________________________________________________________

Production & Drilling Activity Data: IHS Information Hub

Thanks for reading. I welcome your questions and suggestions for future blogs.

Some other blogs you may find of interest:

About VISAGE – visual analytics for the petroleum industry
VISAGE analytics software equips operators and analysts in the petroleum industry to make the most valuable and timely decisions possible. VISAGE brings together public and proprietary oil and gas data from multiple sources for easy to use interactive analysis.