Yankee ingenuity at work
How do you maintain profitability when the crude oil price drops by 60%? For some highly leveraged shale oil and gas operators, the end is near. But the leading operators are still profitable through a three-pronged strategy. First, these operators have negotiated lower rates from their drilling and pressure pumping contractors, and other service companies and vendors. Secondly, they have narrowed their activity focus to the exceptional sweet spots, where the productivity rate is high, and the decline rate is low.
The third strategic approach that the shale operators have employed is operating efficiency. Through lessons learned and improved technologies, these companies have reduced drilling and completing efficiencies by as much as 20%–30%.
Continuing along that chain of innovations is refracturing. Rather than incur the expense of drilling new wells, the idea here is to re-enter previously fractured wells and refracture them at adjacent locations to rejuvenate the production. Many refractures have achieved productivity improvements of as much as 60%. As a result, liquids production from shale plays, such as the Bakken and Eagle Ford, is still increasing, despite the severe decline in the rig count. In North America’s shale plays, necessity is truly the mother of invention.