In two recent developments in the Denver-Julesburg (DJ) Basin, shale production company Occidental acquired Anadarko and PDC Energy acquired SRC Energy.
Following the acquisition of Anadarko for $38 billion, Occidental became the largest producer in the DJ Basin. PDC Energy overtook Noble Energy after acquiring SRC Energy for $1.7 billion to become the second-largest producer in the basin.
PDC Energy and Occidental are expected to dominate the majority of the production in DJ Basin. The two companies have a combined estimate of 535 million barrels of oil equivalent per day (MMboed), approximately 49% of total production in the basin. The main thrust of production growth originates from Weld County, which has the most productive predominantly oil-bearing acreage.
Weak commodity price in the present climate plays a big factor in suppressing the production growth in the DJ Basin as operators are focused on capital restructuring. Most companies in the DJ Basin are maintaining capital discipline and reducing investment in well development. This is reflected in the declining rig count, down to 20 rigs in February 2020 from 31 rigs in 2019.
Finding efficient completion techniques appeared as a challenge to operators looking to maintain the economic viability of their wells and different operators use different approaches. Noble Energy employs the most aggressive completion approach with the highest proppant mass per lateral foot, which in return generates the relatively higher peak production rate compared to wells from other operators. However, its wells seem to decline relatively quickly, resulting in a lower Estimated Ultimate Recover (EUR). This ultimately affects the economic returns of its well and has led to the company failing to compete with other major operators.
Figure: Peak production rate vs proppant mass per lateral foot. Credit: GlobalData.
The general trend observed in the chart above indicates that operators use a more aggressive proppant mass in fracturing to generate a greater peak production rate. However, PDC Energy uses the approach of having a moderate completion strategy in terms of lateral length and proppant mass. This lowers the capital cost of each well and still manages to maintain high well productivity for an extended period of time, thereby resulting in a more efficient return of capital investment.