Drill Bit Economics

Drill bit economics consists of drilling curves, cost-per-interval and breakeven analysis; all of which

possess significant differences.

There are two types of drilling curves:

1. Depth vs. Time
2. Depth vs. Costs

Drilling costs are comprised of three different components:

Time

 Rotating Time

Drilling / on bottom time

 Non-drilling

 Reaming / back reaming

 Non-Rotating Time

 Connections

 Tripping

 Circulating

 Running Casing

 Logging

 Maintenance / Repair

 Fishing

Bit Cost

 Downhole Tool / BHA Costs

 Standby Charges

 In-Hole Costs

 Up-Front Charges

Indirect Costs

 Borehole Quality

 Trajectory

 Shape

 Open-Hole Risk

 Borehole Integrity

 Formation Damage
 Pressure Risk

 Wireline and Cement Unit Rentals

Basic Cost-Per-Interval

CI =   RR x (HR + TT) + (DT x HR) + BC

                                    INT

CI   = Cost-Per-Interval (Currency)

RR  =  Rig Rate (Hourly)

HR  = Drilling Time (Hours)

TT   = Trip Time (Hours)

BC   = Bit Cost (Currency)

INT = Interval Drilled (feet or meters)

Historical Versus Projected Cost-Per-Interval

Historical

 Uses information from an actual well or wells

 Cost-Per-Interval is actual

Projected

 Used for selection and comparison

 Calculated based on planned or target well

 Calculated based on projected hours and interval drilled

Breakeven Analysis

Breakeven analysis demonstrates rate of penetration or interval required to meet or exceed offset

cost-per-interval.

Assumed Footage

ROPBE = RR / CLO – [((R(TT)) + BC) / INT]

Assumed Penetration Rate

INTBE = [RR (TT) + BC] / [CLO – (RR / ROP)

 

ROPBE    = Breakeven Penetration Rate

INTBE       = Breakeven Interval

CLO        = Offset Cost-Per-Interval (Currency)

RR          = Rig Rate (Hours)

TT           = Trip Time (Hours)

BC          = Bit Cost (Currency)

ROP       = Assumed Rate of Penetration

INT         = Assumed Interval Drilled