June 8, 2015 by

What production performance measure should I use?

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. Measuring and comparing well production performance is the foundation of production analysis in the oil and gas industry. The challenge is deciding what production performance measure to use and understanding their strengths and weaknesses. To illustrate this, take a look at the following charts which compare the average production profiles of Open Hole completions to Cased completions in a Montney study area. Three different production measures will yield three different conclusions: using Peak Rate, I would conclude that Open is dramatically better than Cased using Cumulative Production after 36 months, I would conclude that Open and Cased are about the same using EUR, I would conclude that Cased is better than Open Why measure production performance? Measure performance against an expectation or plan Compare wells, plays, companies, technologies …. to one another Gain insights into optimal performance design (e.g. proppant loading, frac spacing, horizontal direction …) Use as a proxy for EUR  (I’ll cover this in detail in my next blog with a comprehensive correlation analysis on four...

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April 25, 2015 by

Oil Sands Production Will Attenuate Impact of Reduced Drilling

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. The enjoyable part of writing a blog with a discovery analytics tool like VISAGE is that a simple look into an area of interest quickly unravels into a detailed investigation with many unanticipated insights. My plan to review in-situ oil sands production with a couple of charts turned into a comprehensive story told with 7 charts and 1 map. By the end of this blog you will, hopefully, have a new perspective on the oil sands and the positive impact it will have on the near term Canadian oil production decline. Oil Sands Dominate Oil Production in Canada In February of 2014 oil sands first dominated all other oil production in the Western Canadian Sedimentary Basin (WCSB). As of February 2015 it now makes up 54% of all WCSB oil production (excluding oil sands mining related production). As the chart below shows, production growth in the oil sands has been at a consistent high since 2010. Relative to all the other wells that have ever produced any oil (shown in the...

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April 13, 2015 by

IWCP Non-compliant Wells Will Cost More Than $320 Million

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. The IWCP (Inactive Well Compliance Program) came into effect on April 1st with little fanfare. This is not surprising given the spending cuts companies have been announcing in the current price environment. The anticipated cost of addressing the 32,788 IWCP non-compliant wells over the next five years will be in excess of $320 million. This is an extremely important liability consideration for anyone doing acquisitions in the near future. As of April 1st there are ten licensees with more than 500 non-compliant inactive wells, of those 4 have more than 1000 non-compliant wells. The Provost, Pembina and Cold Lake fields all have more than 1000 non-compliant wells (shown in the chart below), and collectively represent 14% of all of Alberta’s non-compliant wells. The remainder of this blog provides a map of all of Alberta’s non-compliant wells and details about risk levels. About the IWCP The Alberta Energy Regulator (AER) introduced the IWCP to address the growing inventory of inactive wells. The objective of this...

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March 23, 2015 by

Drilling Activity & Production Forecast for 2015

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. 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...

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March 2, 2015 by

Time to rethink the mcf to BOE conversion factor?

Is it time to rethink the 6:1 mcf to BOE conversion factor?

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February 23, 2015 by

Completion Analysis Considerations for Reserve Evaluations

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. As completion designs and technologies change over time it is increasingly difficult to analyze and quantify the impact that completions have on production and value. As a simple illustration, we can see in the Montney how some key completion parameters have changed over time and the impact they have had on initial gas production rates. We can also see that there has been a shift in the dominant technologies year over year. Not understanding the impact that completions have on production could result in a valuation that is not optimized. The challenges of quantifying and communicating the production impacts of completion design parameters can be addressed if you understand them, use a variety of analysis techniques and have the tools to quickly perform those analyses. Check out the SPEE presentation I did last week to learn more about “Completion Analysis Considerations & Techniques for Reserve Evaluations“. ___________________________________________________________ Frac Data provided by: Well Completions and Frac Database from Canadian Discovery Thanks for reading. I welcome your questions...

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February 16, 2015 by

VISAGE Diagnostic Workflows: Variance from Forecast

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. This is the 3nd blog in a series about VISAGE Diagnostic Workflows A big part of successfully navigating through difficult economic times is a predictable cash flow. The backbone of any cash flow is the ability to deliver your forecasted production. It also plays a big part in your ability to execute your plans, shareholder confidence and your reserves evaluation. This week’s blog focuses on a workflow that helps you identify and focus on the wells that are deviating the most from their production forecast. This involves integrating your field data capture system with your forecast/economics system (like Value Navigator or Entero Mosaic). For details on the steps that make up a typical diagnostic workflow, check out our last two blogs: Optimizing Production Performance Optimizing Financial Performance Let’s jump right into our workflow examples… 1) Identify and Prioritize The chart below shows: the Contextual Measure (on the y-axis) Percent Variance (%). This tells us the degree (as a percent) to which we are...

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February 9, 2015 by

VISAGE Diagnostic Workflows: Optimizing Financial Performance

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. This is the 2nd blog in a series about VISAGE Diagnostic Workflows Let’s face it, oil and gas producers are in the business of making money, not making oil and gas. The current market has made this a poignant reminder to the industry. That’s why we’re doing this blog series on “diagnostic workflows”, an analytic approach that helps you focus your efforts where they count the most. This week’s blog is all about Financial Performance: optimizing netback and minimizing operating expenses. Check out last week’s blog on Optimizing Production Performance for the details about the three steps that make up a typical diagnostic workflow: 1)      Identify & Prioritize 2)      Inform & Assess 3)      Investigate Analyzing Financial Data in a Rapidly Changing Market The biggest challenge to analyzing Financial data in a rapidly changing market is “data latency”. It can take months for costs and revenues to get booked to wells … and some of those costs are annual costs. While VISAGE has...

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February 2, 2015 by

VISAGE Diagnostic Workflows: Optimizing Production Performance

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. What oil and gas producer doesn’t want to be efficient, to “achieve maximum productivity with minimum wasted effort or expense”? In a market of low oil and gas prices, efficiency is on the mind of most VISAGE users. That’s why we have been equipping them with “diagnostic workflows.” Diagnostic workflows allow people to identify, prioritize, assess and investigate the greatest opportunities to optimize … in just seconds. The three main areas where our clients have deployed diagnostic workflows will be the focus of this blog series: Production performance: reduce downtime and identify reoccurring patterns Financial performance: optimize netback and minimize operating expenses Performance to forecast: ensure cash flow is there to support upcoming activities and avoid potential reserve write-down. A diagnostic workflow can be applied to any optimization effort. The structure of the workflow is quite simple and relies on a series of charts and/or reports that fulfill each of these steps: 1)      Identify, & Prioritize What are the biggest opportunities? Which...

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January 26, 2015 by

Price Forecasts vs. Futures: A Reserves Evaluator’s Perspective

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. Guest Blog by: Tyler Schlosser, P.Eng., Director of Commodities Research, GLJ Petroleum Consultants Using VISAGE linked to GLJ’s pricing database, we can quickly plot past Brent Crude forward curves (the purple lines) along with historical prompt month prices (the black line). This demonstrates how responsive forward curves are to current market sentiment. While forward curves do not truly represent spot price forecasts, they do tell us the prices that market participants are willing to agree to today for delivery in the future, and are often compared to industry forecasts. It can be seen that following dramatic changes in prompt month oil prices, the whole forward curve often shifts up or down in a big way. In contrast to the often volatile futures pricing, the purpose of GLJ’s price forecast (green line) is to provide a reasonable basis for the valuation of our clients’ oil and gas assets. When big swings in prices occur, it is important for us to make a measured...

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