Double Crown Resources Inc. (fka DDCC)

[ProfitScout]

Refracking extends US oil harvest

BY DAN MURTAUGH, JULY 14, 2015
Bloomberg News

Link: http://www.bdlive.co.za/business/innovation/2015/07/14/refracking-extends-us-oil-harvest

THE technique is nothing new. Oil crews across the world have been schooled on its simple principles for generations — identify ageing, low-output wells and hit them with a blast of sand and water to bolster the flow of crude. The idea originated in the US in the 1950s.

But as today’s engineers start applying the procedure to the horizontal wells that went up during the fracking boom that swept across US shale fields over the past decade, something more powerful, more financially rewarding is happening.

The short lifespan of these wells, long thought to be the single biggest weakness of the shale industry, is being stretched out. Early evidence of the effects of restimulation suggests that the fields could contain enough reserves to last about 50 years.

For an industry that has been hammered by the 50% drop in crude prices over the past year, the finding on the potential of "refracking" — at a fraction of the cost of the initial well — provides hope.

The risks abound — from inadvertently siphoning oil from an adjacent well to ruining a whole reservoir — and the sample size so far is not big enough to be conclusive, but oil giants such as Marathon Oil and ConocoPhillips are not waiting to incorporate refracking into their shale operations.

Mike Vincent, a well-completion engineer who teaches the technique to industry workers, says he has been overwhelmed by the sudden interest in the class.

"I’m booked every week, teaching refrack classes out to November," says Vincent, who runs Insight Consulting in Denver. "It’s amazing how much passion there is."

Traditional wells can be restimulated multiple times, he says. In the industry’s lingo, a well that has been blasted five times is a "cinco de fraco". Eight times gets you an "octofrac". When done right, the procedure not only boosts the flow of crude but can also raise the estimate of reserves held in the well. Vincent says it’s common to see oil recovery climb 60% or more.

"I’ve seen a well get 10 fracs through the same perfs, and it appears that we’re adding reserves every time."

A study of about 80 wells originally tapped in North Dakota in 2008 or 2009 and then refracked again years later shows a clear pick-up in output. The wells on average produced more than 30% more oil in the month after the refrack than they did after the original completion, according to analysts William Foiles and Peter Pulikkan.

These kinds of increases are crucial in the shale industry, where output can start falling within days of a well being tapped.

Companies such as EOG Resources, the largest shale oil producer, have long acknowledged they generally are recovering a fraction of the oil and gas in the biggest and most prolific reservoirs.

"We’ve seen big changes in completion technology, and it looks like that’s only going to continue," says RT Dukes, an analyst at Wood Mackenzie in Houston. He estimates there are 100,000 horizontal wells that could be restimulated.

So far, a few hundred refracks have been done in the US, a figure Vincent predicts will grow to at least 3,000 over the next two years.

The refrack is similar to the original frack. Water, sand and other chemicals are pushed down the well, beyond the previously tapped areas, to create new fissures or to reopen clefts in the rocks.

It’s easy for things to go wrong. If poorly executed, it could take oil from the producing zones of other wells or ruin a reservoir. Then there’s the concern a refrack only accelerates the flow without increasing the total output over the life of the well.

But in an industry trying desperately to cut expenses after oil fell below $60 a barrel from more than $100 a year ago, the low cost of the technique has great appeal.

Sanchez Energy, a Houston oil producer, expects to spend $1m-$1.5m per well when it starts its first refracks later this year. The extra oil and gas it will pull out of each well could have a value of up to $2.5m, says chief operating officer Chris Heinson.

"It’s a compelling prize. There were a large number of wells out there that we know were originally completed with something that we could do better today. That’s really exciting."