$PEAK - TriOil Announces Successful Lochend Cardium Result, Provides Cardium Operations Update and Announce - $PEAK - InvestorVillage
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Msg  11212 of 61143  at  9/27/2010 10:58:12 PM  by


 In response to msg 11207 by  liverless
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Re: TriOil Announces Successful Lochend Cardium Result, Provides Cardium Operations Update and Announces Closing of Asset Acquisition at Lochend

"I didn't know you could put so much weight on an IP and the ensuing decline over the first few days.  Perhaps I am wrong in my understanding but I thought that until the well hit the boundary the decline told you nothing about the eventual reserves?  I would have thought that until we had more data points we couldn't make much of a guess as to the eventual reserves and that the first day IP was telling you more about the success of the frac then anything else.  Is this wrong?"
The comments and questions you raise liverless are all very perceptive and quite valid and forgive me for predicting an outcome based on what must at first appear to be the flimsiest of initial input data.
I am reminded of the probably apocraphal tale of a lady reporter having the privilege of dining with Pablo Picasso. At the end of lunch after a few glasses of wine the lady asked whether the great artist would honour her by drawing something on her Napkin that she could take away. He took the Napkin and in a matter of seconds had turned it into a work of art - but he demanded that she pay several thousand dollars before he would give it back to her. She was stunned at his arrogance and she berated him for charging so much for something that had taken so little time and effort...
His reply? "Madam! You are quite mistaken - that has taken me my entire lifetime..."
Back to the task at hand - what can be told from that IP and the reported first month average?
I confess here I cheat somewhat. I have spent many years looking at regional, thin, low porosity oil and gas reservoirs. Six years looking at a low phi.h carbonate gas play where I analysed the production of over a thousand horizontal wells - ground truthing them to the detailed local as well as the regional geology - and more recently nearly two years looking at the Bakken in southern Saskatchewan where I have seen numerous reservoir cores, a good few mud gas logs and drill cuttings from actual horizontal wells both as drilled and as a review process, many well logs and quite some time "History Matching" the actual poduction with what might have been expected from original (parsimonious) reserve estimating.
So my guesstimating is not solely based on those two rather flimsy pieces of evidence in isolation. The Cardium play at Lochend and Garrington is really not that dissimilar to the Bakken in many respects - so much so that many corporate presentations use the two in a compare and contrast format when presenting their projects to the investment community.
For the ranges in my estimates I assume that the reservoir is fairly evenly distributed and infinite acting - and that somewhere around the 5-10 bopd range they become somewhat uneconomic to continue producing. You are quite correct in your comment that the initial high IP says more perhaps about the fracture stimulation than the reservoir (but it does say something about the reservoir too) - and that the first month average production has considerably more to say about the reservoir than about the fractures. And you are quite corret that more data points are needed to define the ultimately produced potential reserves. I give quite a reasonable range of potential ultimately recoverable reserves - the high case being 2 1/3 higher than the low case shows that there is considerable room for the well to do better or worse than a median case profile.
But I took the values given and picked out a couple of MSF Bakken hz wells from the Taylorton area with comparable IPs and first month averages - and while recognising that water is a problem in the Bakken but not so in the Cardium - while many other factors remain quite similar - I simply took the liberty of assuming they would have somewhat similar future production histories? (There are from one to nearly two years worth of production on the Taylorton wells and those wells form a small part of a much larger well population with a cloud of likely production ranges based on local variability of the reservoir and the IP and subsequent decline rates observed - most of that cloud behaving worse than the forecasts given.)
But going back to first principles and ignoring history matching and trying to find analogies - just what does a production curve tell you from a successfully MSF treated horizontal well when it begins with a first one or two day average of 700+ bopd and yet returns an average over that first month of 180 bopd? Firstly regardless of where the horizontal was drilled within the gross Cardium Pay - the fracs will have accessed all the Net Pay vertically stacked within several metres both above and below the actual well trajectory itself. The individual frac wings should have extended a "moderate" distance laterally out on either side of the horizontal well bore. The results seem to suggest that while there may be a reasonable porous oil bearing Net Pay thickness (high IP rates) here - lateral permeability stinks? (The very high initial decline rate!) There is almost no way that the well could have ended the first month at much over 100-120 bopd (if it did) with those IP rates and that average production? It is likely that with that sort of initial decline the end of the first 12 months will see production down between 15-40 bopd? And the production out from there over the next several years is really quite academic?!
If there are any boundary effects (ie the wells do not remain infinite acting) from faults or stratigraphic pinch outs or permeability baffles of one kind or another - the ongoing production results will show poorer values than might be expected from taking the hyperbolically declining infinite acting case.
But you are right - i was looking at the rather skimpy data through the lens of many years of history matching production curves and relating that production back to basic geology and then making assumptions based on analogy with similar plays and some simply theoretical underpinnings. It could be that there is something wrong mechanically that affected that first months average numbers and that with a month or two of further production the results may improve considerably for one reason or another. I simply took the data as presented - assumed that all effects are reservoir and geology related - and applied some "learnings" to the projected results. A 700 bopd average first one or two day IP rate yeilding a first month average of "only" 180 bopd for a full 30 day month tells me something very profound about the reservoir - what does it tell you?

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