Discussion SPEE Monograph 3

Guidelines For The Practical

Evaluation of Undeveloped
Reserves in Resource Plays

Bill Vail
Houston
October 6, 2010
 Genesis of the Resource Play Committee

In 2008, the Society of Petroleum Evaluation

Engineers recognized few, if any, guidelines existed
to assist evaluators with determining reserves and
resources for Resource Play hydrocarbon
reservoirs. Consequently, the SPEE Board formed
a committee to prepare such guidelines. Starting in
2009, our Resource Play Committee began a
dialogue on issues associated with these types of oil
and gas reservoirs.
Resource Plays Committee Participants
Robin Bertram Calgary
Gary Gonzenbach Austin
Jim Gouveia Calgary
Brent Hale Dallas
Russell Hall Midland
Paul Lupardus OKC
Paul McDonald Dallas
Nathan Meehan Houston
Bill Vail Houston
Marshall Watson - Midland
Monograph 3 Guidelines For The
Practical Evaluation of Undeveloped
Reserves in Resource Plays
Table of Contents
Chapter 1 Definition of a Resource Play
Chapter 2 Statistics A Brief Lesson
Chapter 3 Determining Proved Areas
Chapter 4 Estimating Undeveloped
Reserves in a Resource Play
 Chapter 1 What is a Resource Play?
Typical Resource Play Reservoirs

Shale Gas
Coalbed Methane
Tight Gas Reservoirs
Basin Centered Gas Systems
Certain Tight Oil Reservoirs
Chapter 1 WHATS A RESOURCE PLAY ?
Resource Play - Tier 1 Criteria
Exhibits a repeatable statistical distribution
of EURs
Offset well performance is not a reliable
indicator of PUD performance
Contains continuous hydrocarbon systems
that are regional in extent
Hydrocarbons are not held in place by
hydrodynamics
Resource Play - Tier 2 Criteria
Requires Extensive Stimulation to Produce
Produces Little In-situ Water
Does Not Exhibit an Obvious Seal or Trap
Low Matrix Permeability (< 0.1 mD)
 ALL VIRGINIA WELLS --- CBM WELLS
HIGHLIGHTED IN GREEN

Oil & Gas Wells

Oakwood
CBM Wells

Buck Knob

Nora
 Frequency

0
10
20
30
40
50
60
70
80
90
100
0-50
50-100
100-150
150-200
200-250
250-300
300-350
Median

350-400
400-450
450-500
500-550
550-600
600-650
650-700
700-750
Mean

750-800
800-850
850-900
900-950
950-1000
1000-1050
1050-1100
1100-1150
1150-1200
1200-1250
1250-1300
1300-1350
1350-1400
1400-1450
1450-1500
1500-1550

EUR Range
1550-1600
1600-1650
1650-1700
1700-1750
1750-1800
1800-1850
Mean:

1850-1900
1900-1950
Median:

1950-2000
2000-2050
2050-2100
Well Count:

2100-2150
2150-2200
2200-2250
Distribution of EUR results

2250-2300
2300-2350
2350-2400
2400-2450
1121
476 MMcf
394 MMcf

2450-2500
2500-2550
2550-2600
2600-2650
2650-2700
 Chapter 2 - Statistics
Chapter Highlights
Importance & Relevance of Lognormal Distributions
Use of P10/P90 ratios as a measure of uncertainty for
Lognormal Distributions
Recommendations for Minimum Sample Size
Aggregation
 Use of P10/P90 ratios
-2 P1
P2

P5

P10

P20

P30
P40
P50
P60
P70

P80

P90

P95

P98
P99
10 100 1,000 10,000 100,000
GAS EUR (MMCF)

Fig. 2.16Cumulative Probability vs log EUR for Barnett Shale

Plotting EURs using a probit scale

Minimum Sample Size

.
 Aggregation

Figureno.2 27ImpactofAggregationonaLognormalDistributionWithaP10/P90Ratioof10
More Wells leads to tighter spread between P10 and P90

120,000

100,000

80,000
INITIAL RATE (MCF / MO)

60,000

40,000

20,000

0
0 5 10 15 20 25 30 35 40
WELL COUNT

90TH PERCENTILE 50TH PERCENTILE 10TH PERCENTILE

Chapter 3 What Constitutes a Proved
Location in a Resource Play?

How many offset locations can be

classified as proved?
Monograph 3 makes the case that
statistical methods can be applied as
reliable technology for quantifying future
development drilling.
 Chapter 3 Analogous Wells

Analogous Wells Have Similar:

Geology
Completion Procedure
Lateral Length
Spacing
Interference
Wellbore Orientation
 Making the Transition to a
Statistical Analysis
Well Counts for Various Stages of Development

PHASE OF RESOURCE PLAY DEVELOPMENT

Early Intermediate Statistical Mature

RATIO OF ANALOGOUS PRODUCING WELLS

TO RECOMMENDED SAMPLE SIZE <1 1 to 4 >3 Very Large

P10/P90 <4, APPROXIMATE WELL COUNT < 50 100 150 > 500

P10/P90 4 TO 10, APPROXIMATE WELL COUNT < 50-200 100-400 150-600 > 1000

P10/P90 10 TO 30, APPROXIMATE WELL COUNT < 200-700 200-1400 600-2100 > 4500
 How Many Locations Can Be
Identified as Proved?
PUD counts at Various Stages

PHASE OF RESOURCE PLAY DEVELOPMENT

Early Intermediate Statistical Mature

RECOMMENDED NUMBER OF PUD OFFSETS PER

PRODUCING WELL (VERTICAL WELLS)
4 8 Statistical Statistical

RECOMMENDED NUMBER OF PUD OFFSETS PER

PRODUCING WELL (HORIZONTAL WELLS)
2-4 4-8 Statistical Statistical
Determining Proved Area From Well Data

Monograph 3 recommends using the

Expanding Concentric Radii method
This method compares ever increasing areas of
potential reservoir around Anchor wells to the
EUR distribution of the Anchors
If the EUR statistical distribution for each area is
comparable, then each area is an extension of
the resource play, and areas bound by the
concentric circles should be Proved reserves
 Expanding Concentric Radii Method
First, create a statistical distribution for
wells located in the center of the
concentric circles, the Anchor wells
Anchor Well Located In
First Circle (Closest Area)

Inside0.5mile

Inside1mile

Inside2miles
Expanding Concentric Radii Method
The second step creates subsequent
statistical distributions for wells located in
each concentric circle

Test Set 1

Test Set 2
Inside0.5mile

Inside1mile

Test Set 3
Inside2miles
Expanding Concentric Radii Method
Step 1 Create one statistical distribution
for Anchor wells
Step 2 Create a subsequent statistical
distribution for wells positioned in
Expanding Concentric Radii (Test Sets)
Step 3 Compare each statistical
distribution from the test sets to the
Anchor wells
Expanding Concentric Radii Method
Legend
ProducingArea

1MileRadius

Test Set 1 Test Set 2 0.5MileRadius

AnchorWell

ProducingWell(NonAnchor)

0.5MileRadiusDistribution 1MileRadiusDistribution
Expanding Concentric Radii Method
Distribution P2

Data Points - 54 AnchorWells P5

P99 = 17025.0
P10
P90 = 31201.0
P20
P50 = 65594.2
P30
Mean = 75996.1 Mean P40
P10 = 137899.4 P50
P60
P1 = 252722.6
P70

P80

P90

P95

P98

1.0 10.0 100.0 1,000.0 10,000.0 100,000.0 1,000,000.0

EUR(barrels)
Determining Proved Area From Well Control

Legend
Anchor Set 1
Analogue Wells
Geologic Subset 1
Project 1
Non Contiguous Drilling Area
LKH
0 3 6 12 Miles
Resource Play
Clipped Polygons within Expanding Concentric Circles
 Chapter 4 -Estimating Reserves for
Undrilled Locations in a Resource Play
Identify Analogous Wells
Create a Statistical Distribution for
Analogous Wells
Determine the Number of Drilling
Opportunities
Prepare a Monte Carlo Simulation
Estimate Reserves using PRMS
Definitions
Alternatives for Running Monte Carlo Simulations

Method #1: Use P^ to approximate P90

value
Method #2: Apply aggregation factor
provided in Monograph
 Method #1 - What Is P^ ?
P^ (P-hat) is the Average of Pmean and P50 for
the single well EUR distribution
P^ is Often Close to the P90 Value for an
Aggregation of Wells
Consequently, it is a useful measurement when
evaluating a large group of wells
Recommended for use when comparing various
EUR distributions in our Concentric Radii
Method
Method #2 - Proved Aggregation Factor
100%

90%

80%

70%
PRO VED AG GREG ATION FACTOR

60%

50%

40%

30%

20%

10%

0%
0 10 20 30 40 50 60 70 80 90 100
WELL COUNT

P10/P90 = 3 P10/P90 = 5 P10/P90 = 7 P10/P90 = 9 P10/P90 = 11

Concepts that deviate from past procedures

Expanding beyond the one-offset constraint

Proved areas or enclosures as defined by this
method are not deterministic
Aggregation results and P90 will vary as a
function of the well count or remaining
locations
Final Comments on Evaluating Resource Plays

Our Resource Play Committee can not

over-emphasize the necessity of exercising
good judgment in evaluating resource
plays.
Maintain perspective
Rely on experience
We see Monograph 3 as a starting point,
not the final say on these issues.
 Current Status Monograph 3
The Resource Play Committee has
submitted a Final Draft to the SPEE Board
This draft is currently undergoing a final
round of peer review
When approved, we anticipate that an
electronic version will be made available to
the public
 Disclaimer

Please note that all of the views and opinions expressed within
this presentation are opinions held solely by the author and by
members of SPEEs Resource Play Committee; they represent
neither the opinions of DeGolyer and MacNaughton (Texas
Registered Engineering Firm F-716) nor of its management.
 Questions?
Id like to express my sincere appreciation to all the
companies that participated in this work:

Pioneer Natural Resources, Chesapeake Energy,

Russell K. Hall and Associates, AJM Petroleum
Consultants, TRC Consultants, Rose & Associates,
Baker Hughes, William M. Cobb & Associates,
ACT Operating Company, and

DeGolyer and MacNaughton