Hart Energy: Have we found a “recipe” for sand volumes?
Allen Gilmer: I think there’s a recipe that people are satisfied with. Is it optimized? Probably not. Are there huge amounts to be had from a wholesale [point]? No. The stairstep was understanding that we could put a lot more sand in there and reduce the size of the sheer rock volume. So the reality is that optimization in certain rocks is still a lot to be had. In terms of pushing more sand, at the end of day, if you take you a look at the relationships between production and the amount of sand that goes in there is not a real compelling relationship.
Hart Energy: Describe sequencing between laterals. What have you seen come from that?
Allen Gilmer: Once you isolate it to the kind of rocks that are there….10:15% additional production came out of those than one might have expected which I thought was pretty fascinating. Now they're calling it a basket weave, a combination of the fracking methodologies and the drilling methodologies.
At the end of the day it’s all about how you crush up the rock at the subsurface as completely as possible and make sure the crushed rock has a way of being able to deliver its hydrocarbon into a wellbore. We’re seeing more and more interesting methodologies to do that. We are in the early stages with regards to proppant placement and success with regards to what might be an optimization.
Hart Energy: We are starting to see some companies back off in terms of spacing. What are your thoughts on that?
Allen Gilmer: I think people are really worried about what happens when they start to interfere with one another and because you do reach a point where you start to break over and your recovery is less on the incremental well than you had before. Now the question is, does it make sense to still drill that well and if you’re recovering 15% less does it make sense to do that. Generally the answer is yes, but the bigger issue is going to be, how do you keep the energy in the reservoir. We’re seeing gas increase with regards to all of this. At the end of the day, it’s not a bubble point issue. It’s just at the end of the day, the oil declines faster than the gas declines.
Those wells that are actually using what they are calling gas lift, [is] really gas into the reservoir. [In] early stages you kind of maintain that transient flow regime—longer through production than it would otherwise—and you know once you start moving into battery dominated flow then you start going to the exponential side.
I’m probably wrong on the whole thing, but it does seem to me that there is this interference starting to basically drill to inject gas back into the reservoir to keep pressures. What [that] is effectively doing is pushing that break over from transient flow to battery dominator flow further and further down the decline of slope, which is good because that means were just recovering that much more oil.
Hart Energy: What can you comment on in terms of the operator self-sourcing trend?
Allen Gilmer: Self-sourcing especially for commodities like sand all depend on your ability to be able to basically produce it at lowest cost. Certain things like sand in which you have a tremendous amount out of the Permian Basin. So, you’re not going to be dealing with the scarcity factor. You’re going to have access to sand so you better be capable of delivering that sand at the lowest possible price. There are a lot of people who are purely in the sand business that are focused on how do I become the low-cost sand provider. I look at self-sourcing aspects and it made a lot of sense when you had scarcity of supply. If you couldn’t get a rig or if you couldn’t get a crew to go in there and do something like that, and you needed it to make your quarterly numbers, then that is an amazing get out of jail free card with regards to that because you’re under a kind of a discipline that the private guys are not.
On the other side, if it’s a commodity, the winner is going to go to the lowest cost. You may own a whole bunch of sand over here, but you may be able to buy sand from ‘company b’ over here at a lower cost than what you are going to be able to produce it at over here because that isn’t your gig.
Hart Energy: Where is the industry with big data and the digital oil field?
Allen Gilmer: I’m not sure that our industry is any different than any other industry. I think the tools that are necessary to go do these things are commoditized. The issue that we have in our industry is that you have proprietary data. I guarantee you that Walmart doesn’t share their data or Amazon or Google doesn’t share their data. All these guys are basically going out there and doing these kind of things. They are commoditizing the tools. The tools to go and determine multivariate, multilinear/non-variant answers are becoming more and more commoditized. The issues are, how do you structure the data that you are getting in to be able to feed that in there. That still is a major bespoke issue.
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