Permian Basin Artificial Lift & II Production Optimization

Permian Basin Artificial Lift & Production Optimization CongressJanuary 2019II

IIThe More Things Change….

2

2016 – Current Crude Oil (WTI) Spot Price

This information is for illustrative purposes onlySource: EIA as of 1//2018

233%

-71%

303%

-44%

384%

690%

-71%

280%

IIRecent Oil Prices

3


This information is for illustrative purposes onlySource: EIA as of 1/24/2018

??%

IIOld vs. New Price Influencers

4


This information is for illustrative purposes onlySource: Instagram, Twitter, OPEC

US SHALE

II

Northern Midland: 25,000 net acresSouthern Midland: 180,000 net acres

5

Ajax Resources Management: Collective Basin & Play Experience

Powder RiverBasin

Haynesville

TGC• Yegua• Wilcox• Hackberry

S LA/Tight Wilcox

GOM ShelfEagle FordAustin ChalkBuda

Permian Basin• Wolfcamp• Spraberry• San Andres• Woodford

SCOOP/STACK

Uinta Basin• Altamont• Bluebell

Marcellus

Williston Basin

Arkoma• CBM

Resource

Conventional

Evaluated (M&A)

Gaines Dawson

MartinAndrews

Eagle Ford: 120,000 net acresHaynesville: 30,000 net acres

n Over the last several decades, Ajax Resources Management has evaluated and / or exploited nearly every primary hydrocarbon producing region in the US

o Conducted operations across 700,000 net acres over the last 10 years

n Over 70 years of cumulative Permian experience in both Midland and Delaware Basins

n Over 400 horizontal wells drilled and $7B+ in M&A evaluation ($2B+ in closed deals) in the Permian Basin

S LA Wilcox: 177,000 net acresAltamont: 181,000 net acres

Ajax Resources: A Northern Midland Basin Story

6

Andrews Martin

DawsonGainesn Ajax Resources, LLC was founded in Oct-15 following the acquisition of the Yellow Rose Field from W&T Offshore for $376 MM

n Dynamic shift in operational execution, balance sheet and production

n Diamondback acquired the Yellow Rose Field in Oct-18 for $1,245 MM, which represents:o 12.2x LQA EBITDAo ~$34,000 per net adjusted surface acre

n 8 rigs are currently running offset to the Yellow Rose Field today

Ajax

Murphy

Diamondback Pioneer

JCT

QEP

Rig

(1) Denotes completion crews for Ajax activity only.

ExL / EQ QEP

Guidon

FANG

FANG

Zarvona

C.R.

Realizing Substantial Production Growth (Net Bopd)

7

-

2,000

4,000

6,000

8,000

10,000

12,000

Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18

Base, W&T Ajax Initial 7 (7-10 thru EQ1) Riesling MS Riesling LS Riesling WA EQ2 Cabernet MS Cabernet LS Cabernet WA 4007LS 4008LS 4009LS 4008WA OBO

+ 47%

+ 56%

+ 75%

IIProduction Optimization is Easy…

8

Resource Development Starts and Ends with the Rock Geologic, geophysical and reservoir properties drive modeling, landing zone and completion/production practices

The solution is 3D and container math isn’t a zero sum game

Landing Zone Matters and Completions Are NOT Blanket Solutions Subtle laminations and changes across the lateral are key Designing completions should be a dynamic process, aiming to make next years P50 your current P10

Productivity Increases via Optimizing By-Bench Develop and optimize flowback procedures, workover programs, initial and long term artificial lift strategy, chemical and field wide infrastructure to support wells by location

Offset frac interference is real and should be optimized in your field-wide development plans

1

2

3

IIProduction Comes from a 3-D Container

9

IICompletions Optimization Driven by Subsurface

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n Selected “valued” rock properties, seismic, core, etc are inputs to regression analysis and completion optimization

n Height is key, and is ultimately the driver to EUR

n Don’t be fooled by pan flashes – IP30/60/90 are great indicators, but can mislead you on completion and production optimization programs

n Parlay effect is real – the sum isn’t the additional of the parts when it comes to optimization

IIBench by Bench Flowback and Artificial Lift Optimization

11

IIFlowback Practices and Optimization

12

5,500 BFPD w/ESP day 15

>3,000 BFPD w/ESP day 23

12

Horizontal Wells Drilled / Completed to Date (Ajax Operated)

IIConsistent Production Growth in Permian

13

SMB Production and Type Curve Growth NMB Production and Type Curve Growth

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800BB

LDays

350

300

250

200

150

100

50

Cum

ulat

ive

Prod

uctio

n, M

BO

2017 / 2018 Average Well (15 Wells)


350

Cum

ulat

ive

Prod

uctio

n, M

BO

50

100

15020

16 / 2

017 A

verag

e Well

(95 W

ells)


Gaines Dawson

MartinAndrews

IIFocus on Base Production

14

Active WO Program –Optimizing Base Production

Post Deal Close

Ajax Base Production, BOPD

Base maintenance including optimization of chemicals and full life artificial lift program by bench

Base focus shift to optimize chemical and AL programs yields ~2% Decline

in Base Qo

~14% decline in Base Qo

0

1,000

2,000

3,000

4,000

Operations Update: Workover Program Economics

15

n 86 workovers have been completed in Q1 2016; $3.01 MM total expense Average of $34,098 per workover

n Base production increase of ~1,200 Boe/d

Workovers with tailored solvent/surfactant systems prove to be highest returns and production uplift

n The uplift in production added $13.8 MM in PV-10 toward legacy wells

Assumes legacy production would continue to decline from 2,257 Boe/d following WDVG decline profile, as depicted in the graph on the right

Total program payback of ~12 months; total program IRR of over 200%

Incremental Legacy Production Uplift (Gross Boe/d)

-

1,000

2,000

3,000

4,000

0

1,000

2,000

3,000

4,000 Historical Projected

Q1 2016 Q2 2016 Q3 2016 Q4 2016

Selected Workover Well Progress Report

Workover Details Production History

Well Date Cost -1 Day +1 Day +30 Days +60 DaysPinotage 7 03/16/16 $61,113 16 56 52 33

UL 6-15-10 02/16/16 $46,375 28 58 35 34

Pinot 65-8 03/17/16 $48,402 15 36 23 NA

UL 6-15-9 02/29/16 $36,924 20 30 34 29

UL 7-3-7 04/06/16 $62,242 15 39 28 NA

Average $51,011 19 +25 +16 +13

IIOFI Impacts Are Real and Usually Under-Estimated

Cabernet Well OFI Impact Riesling Well OFI Impact

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0’

1,00

0’

2,00

0’

3,00

0’

2,00

0’

3,00

0’

1,00

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1,00

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0’

1,000’ Away from Frac’d Wells 2,000’ Away from Frac’d Wells 3,000’ Away from Frac’d Wells Wells knocked 100% offline by Frac

n Vertical wells are good indicators to establish baseline modeling for OFI

n Depending on natural fracture network and orientation, OFI can impact wells over 1 mile away

n Timing of wells returning to production forecasts vary, but are highly dependent upon parent well BHP

n Deals miss OFI impacts consistently, and cause for cashflow and project returns to be overstated

OFI Impact Findings


IINorthern Midland Basin: Historical LOE per Boe

18

2017 Average: $6.08/Boe 2018 YTD: $4.07/Boe

$9.2

7

$8.0

5

$5.7

5

$5.5

8

$4.3

4 $5.0

5

$7.4

1

$6.8

3

$5.8

8

$5.2

4

$5.0

5

$4.5

6

$4.5

9

$4.2

5

$4.3

4

$4.6

2

$4.2

6

$4.5

6

$3.1

8

$2.8

0

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Jan-

17

Feb-

17

Mar

-17

Apr-

17

May

-17

Jun-

17

Jul-1

7

Aug-

17

Sep-

17

Oct

-17

Nov

-17

Dec

-17

Jan-

18

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

41%


Documents

Permian Basin Artificial Lift & II Production Optimization