Overview
The marginal economics of shale are well-known. Decisions to invest in a shale asset must consider all potential risks and benefits. Misunderstanding even one variable could mean the difference between profit and loss.
Halliburton leads the industry in developing shale plays and has created a method to evaluate the economics of these investments. The process helps clients understand when and where they can generate income, both in the early stages of development and later in the asset's life cycle. Halliburton consulting helped two operators make critical decisions about potential shale plays, enabling both to make informed investment decisions. One profited by acting quickly. The other profited by walking away.
Challenge
- Identify necessary and sufficient data: When investing in a shale play, operators spend much time acquiring and analyzing data. They need to trust that the data is reliable and ensure there is enough data to make an informed decision without delaying the process by seeking unnecessary data.
- Determine when and where to invest: Before leasing acreage for potential development, an operator wanted to know the area's production potential. Preferring oil production to gas production due to the economic factors, the operator sought confirmation that the area would produce the desired hydrocarbons.
- Avoid investment in sub-economic assets: Before investing millions of dollars, an operator with limited shale experience needed to understand the potential benefits and risks. The operator wanted to know the estimated ultimate recovery (EUR), net present value, and the price and production scenarios that would make the investment economical.
Solution
- Understand how shales produce differently: No two shale plays produce alike. Halliburton has more than 500 years of combined industry experience, much of it in shale. Halliburton consultants understand which data is necessary and help collect sufficient data to make an informed investment recommendation.
- Proprietary modeling: Experts worked with the operator to help ensure sufficient data was available. Then, Halliburton applied its unique modeling exercise to determine the potential hydrocarbons in the area. This modeling helped the operator decide to lease in one area but walk away from others.
- Techno-economical analysis of shale play: Halliburton performed a full techno-economic analysis. The analysis examined the depth of the reservoir, hydrocarbon saturation, mineralogy of the shale, net thickness, and well performance histories in the acquisition area. The operator used this analysis to help determine how to bid for the asset.
