Bit Economics

Session Objectives

Drilling cost per foot calculation & comparison

Break-even calculation

The cost of the bit is not the concern !

Performance is more important

projected ROP

projected footage

Relevant cost parameter is the Cost per Foot

daily operations cost

trip time

bit cost

Applications of Bit Economics

Cost per Foot (CPF)

where

B bit cost, $

R rig rate, $/hr

T rotating hours

t round trip time, hr

F footage drilled, ft

bit cost + rig rate x (rotating hours + trip time)

footage drilledCPF =

B + R x ( T + t )FCPF = $ / ft

Cost per Meter (CPM)

where

B bit cost, Rub

R rig rate, Rub/hr

T rotating hours

t round trip time, hours

F meters drilled

bit cost + rig rate x (rotating hours + trip time)

meters drilledCPM =

B + R x ( T + t )FCPM = Rub / m

Direct application in bit selection

calculate CPF for all bits in all offset wells

combine records for common hole sizes

for each hole size, plot CPF versus depth

select bits based on lowest CPF per interval

Direct Application of CPF

Pros and Cons

? a good approach if there are many offsets

? downside : best bit may not be in database

? rig / crew capabilities may not be consistent

Example - Direct Application of CPF

9-7/8 hole sections, 4 offset wells, 31 bit runs, 6 different bit typesD

epth

, ft

Cost per Foot, $/ft

437

527

537

537

537

8000

9000

10000

11000

12000

13000

14000

0 100 200 300 400

Well 1

Well 2

Well 3

Well 4

Indirect Application of CPF

Indirectly use CPF to select a bit

project the economics of an untried bit

use CPF to derive a break-even curve

make judgement as to which side of the breakeven curve the untried bits performance is likely to fall

Pros and Cons- can provide incentive for an expensive bit

- requires : - reasonable estimates of ROP &

footage- good judgement that breakeven is

feasible

Breakeven Curve

Use best previous bits CPF and untried bits cost (B)

Derive footage equation :

F = B/CPF + R (T+t)/CPF

Use several values of T and calculate F footages

Calculate ROP = F/T

Plot ROP vs. F (BE curve)

0

20

40

60

80

100

0 500 1000 1500 2000 2500

Footage

ROP, ft/hr

Cost Effective

Not Cost Effective

BE

Breakeven Curve

Calculate the actual drilling performance ROP and footage :

ROP = F / T

Plot ROP vs. F

Check this value against

the BE curve

0

5

10

15

20

25

100 200 300 400 500

F bit run length, ft or m

ROP, ft/hr or m/h

Cost Effective

Not CostEffective

BE

Summary of the Bit Selection Process

Collect information

Identify potential bits

derive compressive strength log

match formation strength to bits

Use offset data to make a CPF or CPM plot

Select bit with lowest historical CPF or CPM

Identify alternative bit opportunities

Conduct break-even analysis

Class Exercise

Bit Selection Problem

CPM = 3690 + 4865 (6 + 26 )312

= 510.80 $/m

CPM = 2449 + 4865 (7 + 14.5 )

131= 817.15

Analyze Previous Bit Runs

CPM = 4390 + 4865 (7 + 31)417

= 453.86

Bit Cost Depth In Depth Out Rig Rate Trip Time Rotating Time ROP CPM

Bit ($) (meters) (meters) ($/hr) (hrs) (hrs) Meters (m/hr) ($/m)

6 3,690 1,345 1,801 4,865 6 26 312 12 510.80

7 2,449 1,801 1,932 4,865 7 14.5 131 9 817.15

8 4,390 1,932 2,349 4,865 7 31 417 13.5 453.86

9 46,400 2,349 4,865 7

Calculate Data for BE Curve

L9 = B9 + R (t + T9)

CPM8=

46,400 + 4865 (7 + T9)

453.86

ROPi = Ti

Li

Li = 10.72Ti + 177.27

Create a table : Ti Li ROPi2468

198.7 99.4

Price of new bit B9 = $46,400

Proposed Cost of CPM to be Rig Trip Rotating Meters ROPPDC Bit Prop. Bit Competitive Rate Time Hours Drilled (m/hr)

Brand x 46400 453.86 4865 7 2 198.7 99.4Brand x 46400 453.86 4865 7 4 220.1 55Brand x 46400 453.86 4865 7 6 241.6 40.3Brand x 46400 453.86 4865 7 8 263 32.9Brand x 46400 453.86 4865 7 10 284.5 28.5Brand x 46400 453.86 4865 7 12 305.9 25.5Brand x 46400 453.86 4865 7 14 327.3 23.4Brand x 46400 453.86 4865 7 16 348.8 21.8Brand x 46400 453.86 4865 7 18 370.2 20.6Brand x 46400 453.86 4865 7 20 391.7 19.6Brand x 46400 453.86 4865 7 22 413.1 18.8Brand x 46400 453.86 4865 7 24 434.5 18.1Brand x 46400 453.86 4865 7 26 456 17.5Brand x 46400 453.86 4865 7 28 477.4 17.1Brand x 46400 453.86 4865 7 30 498.8 16.6Brand x 46400 453.86 4865 7 32 520.3 16.3Brand x 46400 453.86 4865 7 34 541.7 15.9Brand x 46400 453.86 4865 7 36 563.2 15.6Brand x 46400 453.86 4865 7 38 584.6 15.4Brand x 46400 453.86 4865 7 40 606 15.2Brand x 46400 453.86 4865 7 42 627.5 14.9Brand x 46400 453.86 4865 7 44 648.9 14.7Brand x 46400 453.86 4865 7 46 670.3 14.6Brand x 46400 453.86 4865 7 48 691.8 14.4

Data for the BE Curve

be

0

20

40

60

80

100

120

198.

7

214.

8

230.

9

247.

0

263.

0

279.

1

295.

2

311.

3

327.

4

343.

4

359.

5

375.

6

391.

7

407.

8

423.

8

439.

9

456.

0

472.

1

488.

2

504.

2

520.

3

536.

4

552.

5

568.

6

584.

6

600.

7

616.

8

632.

9

649.

0

665.

0

681.

1

Meters drilled

RO

P, m

/hr ECONOMICAL

NOT ECONOMICAL

BREAK-EVEN CURVE

Plot the BE Curve

ROP

BE curve

Actual ROP vs drilled length

BE ROP = .. m/h

Drilled m in . hrs

Read the BE Curve

F

BE ROP

BE footage