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Energy Navigator Engineers Urge Industry to Adopt New, Vastly More Reliable Forecasting Methods for Unconventional Reserves

Jan 15 2013 12:00AM

Marketwire

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CALGARY, ALBERTA -- (Marketwire) -- 01/15/13 -- After several years and thousands of hours of research, Boyd Russell, P.Eng, SPE, and Randy Freeborn, P.Eng, SPE, have developed a new method for forecasting unconventional reserves that is consistently accurate to within a few percentage points. Once adopted by the industry, the new method will help oil and gas companies, investors and the financial community to make development and investment decisions with much greater clarity and confidence, improving the prospects for return on investment.

The new method has been incorporated into Value Navigator®, Energy Navigator's industry-leading asset management tool, along with a new proprietary auto-forecasting algorithm that allows the highly accurate results to be obtained quickly and easily across thousands of wells at once. The accuracy of the method, coupled with the speed of the auto-forecasting, will allow companies to pinpoint opportunities and act on them quickly for better business results.

Russell and Freeborn recognized early on that traditional forecasting and type well analysis was wrong for unconventional resources - usually resulting in forecasting errors greater than 50 percent. They knew there must be a better way, and set about to find it. The pair proved the validity of their new methodology by evaluating dozens of fields with known results in both Canada and the US. These back-casting studies matched actual field results almost perfectly. Renowned US professors of petroleum engineering have also reviewed and support Energy Navigator's type well and forecasting research.

"Unconventional plays are game-changers," Mr. Russell told a recent SPE technical presentation in Calgary. "Because of unconventional resource plays, the US is heading toward energy self-sufficiency - something no one would have predicted ten years ago. But unconventional reserves don't respond the way traditional reserves do, so why would we continue to use traditional forecasting and management methods that are simply not valid for unconventional reserves? When you're talking about developing a large-scale play, you'd better be sure of what you've got before you make a decision to start a drilling program that could negatively affect your company and your investors for years to come."

When unconventional drilling programs don't live up to expectations, the first reaction is often to tighten capital and operating costs. But Russell maintains "It's not a cost problem. It's a revenue problem. Industry experts have calculated that two-thirds of the uncertainty around the Net Present Value (NPV) of a shale gas play is attributed to the reliability of the production profile, not the cost of developing and operating the wells."

"Our industry is very good at spending wisely," said Mr. Russell. "But capital and operating costs represent less than 20 percent of the overall equation in determining NPV. Even cutting costs in half won't save you if your forecast is off."

Energy Navigator has published more on Russell and Freeborn's findings at www.energynavigator.com/unconventional. Their research and forecasting methodology is published in a technical paper (SPE 158867) available through the Society of Petroleum Engineers website at www.spe.org.

About Energy Navigator

Energy Navigator specializes in capital and reserve asset management software for the oil and gas industry. The company operates on the principle of continually developing a better way to help oil and gas companies get from data to decision. Energy Navigator's products include Value Navigator (Val Nav), an industry leading oil and gas forecasting, economics and reserves management tool, and AFE Navigator (AFE Nav), an automated AFE creation, tracking and capital management solution. The company has headquarters in Calgary, with offices in Houston and Denver.



Contacts:
Energy Navigator
Shannon Panko
VP Sales & Marketing
403-770-6071
sdpanko@energynavigator.com





Source: Marketwire