Improved Well Cost Estimation Through Uncertainty Quantification

Abstract

The study was initiated to develop more accurate well cost estimations for drilling and completion Authorization for Expenditures (AFE). Specifically, a privately funded company (Company A) is interested in analyzing historical drilling and completion AFEs to determine a more accurate and reliable estimation process to efficiently develop their core assets in the Montney play of northeast British Columbia.

In 2014, Company A and working interest affiliates underestimated well cost AFEs by 23% reducing the amount of available capital which could be used for further development. The uncertainty in these estimates was quantified at a sub-cost level which determined the locations of focus for strategic intervention and a workflow was created which utilized previous years’ estimates, actual costs, and a probabilistic cost model to convert deterministic well cost estimates into probabilistic to better estimate well costs.

The uncertainty can be represented through a series of tornado charts showing the primary areas requiring improvement, based on an evaluation of 97 cost codes related to drilling and completion operations. The areas selected, are those with the largest ranges of uncertainty in terms of dollar value. For example, 11 cost codes were found to exceed ranges of $500k per well and these require immediate attention. The developed workflow examined each cost code through a probabilistic analysis determining the optimal procedure for adjusting future AFE estimates’. As a result, the workflow reduced well cost underestimation from 23% to only 5%. The improved well cost estimations provide the opportunity for a more accurate allocation of funds.