Issue 3 2018 North American Shale magazine

ISSUE 3 2018

Perfecting

Perf

the

Enhanced dD Downhole h l Tools Are Optimizing Well Completions Page 18

Plus Data, Simulation Firms Create New Frack Strategies Page 12

And Research Reveals Water Flow In Shale Page 24 NorthAmericanShaleMagazine.com Printed in USA

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tNavigator CPU/GPU hybrid power Offering unrivalled reservoir simulation speed and scalability.

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INSIDE

VOLUME 2

ISSUE 3 2018

12

18

FEATURES

12

EXPLORATION & PRODUCTION

The Next Level Of Fracture Optimization

18 A Full Spectrum of Downhole PRODUCTS & TECHNOLOGY

Tool Solutions For Shale

BY LUKE GEIVER Armed with data and new software simulation capabilities, several new, shale-focused firms are enhancing what we know about completion engineering and production strategies.

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BY PATRICK C. MILLER Whether it’s a large international company with a long history or small company born during the U.S. shale revolution, oilfield service companies have a wide variety of options from which to choose.

NEWS & TRENDS 8 10

Early-stage public frack firms share 2018 optimism Hallador and Hourglass announce Colorado’s first frack sand operation

DEPARTMENTS 4 EDITOR’S NOTE

Telling The Same Story On Well Completions

ON THE COVER: DynaEnergetics is now building custom perf guns to help clients achieved more optimal fracture placements.

PHOTO: DYNAENERGETICS

BY LUKE GEIVER

5 EVENTS CALENDAR 24 IN PLAY

Q&A: Following The Water Flow In Shale

BY PATRICK C. MILLER

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EDITOR'S NOTE NorthAmericanShaleMagazine.com VOLUME 2 ISSUE 3

EDITORIAL

Telling The Same Story On Well Completions Luke Geiver EDITOR North American Shale magazine lgeiver@bbiinternational.com

Of all the segments within the unconventional oil and gas industry that have undergone the most change in the past decade, it is possible that none has evolved more than the hydraulic fracturing sector. As our team has done in the past, we’ve devoted an entire issue this year to the topic of hy-

draulic fracturing, well completions and pressure pumping. We’re happy to say we’ve provided new intel

Editor Luke Geiver lgeiver@bbiinternational.com Staff Writer Patrick C. Miller pmiller@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com

PUBLISHING & SALES CEO Joe Bryan jbryan@bbiinternational.com President Tom Bryan tbryan@bbiinternational.com Marketing & Sales Director John Nelson jnelson@bbiinternational.com Business Development Manager Bob Brown bbrown@bbiinternational.com Circulation Manager Jessica Tiller jtiller@bbiinternational.com Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com

and fresh stories on the topic through feature pieces, research papers and updates from frack service providers that are now one-year public. Despite all the new information, once again, a major theme can

ART

be used to describe the sector: there is constant progress in performance.

Art Director Jaci Satterlund jsatterlund@bbiinternational.com

In Staff Writer Patrick C. Miller’s piece, “A Full Spectrum Of Downhole Solutions For Shale,” it is clear that downhole tool providers working for the perforation sector are not only successful at providing the right tools at the right time, they are also innovating no matter the oil price. Miller spoke with several downhole tool makers about their offerings and what makes them unique. Each one provided a different perspective and explanation of vastly different tooling options. Miller summed up his piece with a spot-on description of the downhole segment of the industry. “What’s clear in the world of downhole tools is the need for efficiency and cost reduction continues—even in tough times—and that innovation and technological advances are continuing—even as oil prices rebound,” he wrote. Check out the full story to learn more about the makers and their tools.

Through our conversations and interviews with multiple data, software and simulation companies we were able to uncover a new sector of the well completion industry that could change the basics of how a well is completed in the months ahead. Companies like FracGeo, Deep Imaging and Drill2Frac are all less than three years old, but each (in their own way) is rapidly growing due to their ability to help their clients better understand how to plan, execute or monitor hydraulic fracturing efforts. Using surface data, downhole information captured in real-time, algorithms and simulation software each firm is helping to usher in a new era of frack design. From the placement of perf clusters or diverters, to monitoring when or where a screen-out might occur, each company has a unique and exciting offering that is, as the title of the story suggests, revealing the next level of fracture optimization.

Subscriptions Subscriptions to North American Shale magazine are free of charge to everyone with the exception of a shipping and handling charge for any country outside the United States. To subscribe, visit www.

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Advertising North American Shale magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about North American Shale magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number.

Letters may be edited for clarity and/or space. Send to North American Shale magazine/Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email to lgeiver@ bbiinternational.com.

Thank you for your time and commitment to our shale coverage efforts. As always, reach out with story ideas and perspectives. We know, more than anyone, there is always more to the story of shale.

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by BBI International

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NORTH AMERICAN SHALE NEWS

NEWS & TRENDS

Niobrara Highpoint Resources is deploying a 2018-’19 plan that will make the DJ Basin-focused operator free cash flow positive in the second half of next year. Formed through a merger of Bill Barrett Corp. and Fifth Creek Energy, the new company believes its new production plans will help it drive substantial returns to shareholders in the coming year.

Permian In the biggest oilfields, even the producers keep getting bigger. Through a deal valued at $9.5 billion, Concho Resources will become the largest-by-volume oil producer in the Permian after it acquires RSP Permian Inc. Once complete, Concho will hold more than 640,000 net acres and roughly 267 mboepd. The rig count will remain the same following the add-on, and Concho believes it will continue to operate within cashflow. With the expansion, the Midland-based company will trail only EOG Resources and Apache Corp. in enterprise value.

Eagle Ford SM Energy has gone all-in on the Midland Basin and Eagle Ford. For $500 million, the Denver-based E&P sold its Powder River Basin assets to Northwoods Operating LLC. Money from the sale will be used to pay down debt.

Shortly after announcing the sale of its Powder River Basin assets, SM Energy officially exited the Williston Basin through the sale of its remaining assets in Divide County, North Dakota. The asset sale, which included assets in Upton County, Texas, brought in $292.3 million. The company is now focused on the Midland and Eagle Ford plays.

Venado Oil and Gas LLC continues to see an attractive market opportunity throughout the Eagle Ford. After partnering on its first Eagle Ford venture two years ago with KKR, the Austin-based firm has agreed to acquire Cabot Oil & Gas Corp.’s non-operated assets for $770 million. The asset purchase from Cabot will give Venado interests in 112,000 net acres and more than 43,000 barrels of oil equivalent per day from the Eagle Ford.

TPG Pace Energy and Enervest believes the Eagle Ford is worth a $2.6 billion investment. The pair is backing former Occidental Petroleum CEO Steve Chazen in a newly formed exploration and production company that will operate the Eagle Ford assets of EnerVest. Chazen said the assets are oily, have strong margins and low differentials. The acreage can offer five- to six-month paybacks, he also said, “which are about one-third of a typical Delaware Basin Wolfcamp well.” Through Magnolia Oil and Gas, the company should have at least a 10-year inventory of locations with the majority in Karnes County, Texas.

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NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

Haynesville Tellurian updated investors and industry in March on its plans to add upstream development assets through its subsidiary Driftwood Holdings. The plan is to acquire 15 trillion cubic feet of natural gas, Meg Gentle, president and CEO said. The natural gas production will help to build a pipeline network the company is planning as part of its liquified natural gas production interests. “We are looking primarily in the Haynesville shale area speaking with many producers, but we have no transaction close to completion at this point,” Gentle said.

Bakken With oil production on the rise, gas flaring increases are not far behind in the Bakken.

Through the approval of two projects, the North Dakota Public Service Commission is helping to reduce the amount of associated gas that is flared. The ND PSC approved a gas processing plant and a pipeline upgrade that will help process gas near the heart of the Bakken and move it east.

Valued at $251 million, the projects are crucial to the play, according to the commissioners at the PSC. Smart Sand Inc. is making moves in the Bakken. For $15.5 million, the Texas frack sand supplier has bought assets and a transload terminal in the Bakken. Earlier this year, Smart Sand expanded operations at a Wisconsin mine used to supply the Williston Basin. Less than one week after announcing its plans in Van Hook, North Dakota, Smart Sand formed a multi-year take-or-pay contract for sand with a large exploration and production company. "We continue to believe that, over the long term, many customers want a sand service company that can not only provide high quality sand, but also offer efficient and cost-effective solutions for delivering that sand to the wellhead," CEO Charles Young said.

Marcellus / Utica

Capex 2017 vs guided 2018 capex for selected U.S. onshore producers Million USD SOURCE: COMPANY REPORTING, RYSTAD ENERGY RESEARCH AND ANALYSIS

6000 5000 4000

Actual capex 2017 Guided capex 2018

3000 2000 1000 0

G EO

Re

s ce ur o s

SCOOP/STACK SK E&P America Inc., a subsidiary of the second largest business group in South Korea, will soon be a SCOOP/STACK operator. By mid-2018, SK Group is expected to hold the assets of private oil and gas firm Longfellow Nemeha LLC. “This transaction leverages our operational expertise in the region and represents a significant step towards realizing SK’s vision of being a top-tier operator in the lower 48 Mid-continent regions,” said Taewon Kim, president of SK E&P America. Longfellow Nemaha’s Kingfisher and Garfield assets include 81,000 gross acres with more than 60,000 acres that Longfellow holds a 75 percent working interest. To date, the company has drilled 104 horizontal wells, 60 drilling pads that are roughly five acres each, 72 miles of 10-inch saltwater disposal pipeline and 4 SWD wells.

Early-2018 Trend: Optimize, Increase Production

The first part of 2018 has been defined by the choice.

According to global data and energy consulting firm Rystad Energy, shale operators are acting on their assets and deciding which represent the right balance of risk and return. The goal is to safeguard growth and remain cashflow positive. Assets or acreage blocks that impede either, Rystad said, are being sold or traded for core acreage.

While many operators are active in asset activity, some are boosting capital expenditures and increasing production. “U.S. onshore shale producers are also boosting capital expenditures by 20 percent and increasing production guidance,” the data firm said. After committing to $50 billion in 2017, operators are expected to infuse 20 percent more this year than last, Rystad said.

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NA SHALE NEWS

900,000

Horsepower Growth and Utilization SOURCE: PROPETRO Chart based on end of period HHP counts

800,000

Total Horsepower Utilized Horsepower

700,000

Modern Homogeneous Fleet

600,000

89% of current fleet built by single manufacturer since 2013

83% of Fleet Currently Works 24/7 Fully Maintained Through the Downturn No Speculative New-Builds

500,000 500,000 400,000 300,000 200,000 100,000

Early-stage public frack firms share 2018 optimism Two young hydraulic fracturing service companies—Liberty Resources and ProPetro Holding Corp.—are adding equipment to keep up with client demand this year. During its first quarterly investor call, Liberty CEO Chris Wright explained the companies plan for future growth.

“The frack market remains very strong,” Wright said. With more than 1,000 employees added in the past year, Liberty is still adding two new frack fleets that will be ready for its shale clients by mid- to late-2018.

Dale Redmond, CEO of ProPetro, believes there has never been a time in the Permian with so much opportunity. “We believe the market is undersupplied,” he said. “We expect pricing for our services to remain solid.” Operating mainly in the Permian, ProPetro has 20 pressure pumping fleets active with plans to add two additional cementing units.

8

2018 Q3E

2018 Q2E

2018 Q1E

2017 Q4

2017 Q3

Period End HHP Capacity SOURCE: PROPETRO (1) As of end Q3 2018

Both Wright and Redmond believe 2012A 2018 is about well site execution, as many operators in the Permian look to perform multi-well pad work and complete zipper 2013A fracks. Wright said in addition to pressure pumping demands, water supply services, 2014A wellhead maintenance and flowback manifold services are also in great need.

Liberty is active in multiple basins, in2015A cluding the Bakken, Permian, Eagle Ford and DJ Basin. By the end of the year, the 2016A Denver-based company believes each of its frack fleets could generate $22 million per quarter.

2017A With an unprecedented opportunity in shale right now, according to Redmond, efficient operations by service providers 2018E(1) will be key, he said.

Wright agrees. “The culture of our company is to figure out how to get more done in a day,” he said.

NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

2017 Q2

2017 Q1

2016 Q4

2016 Q3

2016 Q2

2016 Q1

2015 Q4

2015 Q3

2015 Q2

2015 Q1

2014 Q4

2014 Q3

2014 Q2

2014 Q1

2013 Q4

2013 Q3

2013 Q2

2013 Q1

2012 Q4

2012 Q3

2012 Q2

2011 Q4

2012 Q1

2011 Q3

0

98

218

380

420

420

690

905

NA SHALE NEWS

Hallador and Hourglass announce Colorado’s first frack sand operation

WILL IN-BASIN WORK: With operators across the U.S. looking to source sand from within their active basin, a group in Colorado is hoping to test Colorado-based sand for DJ Basin-focused producers.

From its coal mining experience in Indiana to its previous work in the exploration and production sector, Hallador Energy Co. believes it has everything needed to enter the frack sand mining business. Based in Denver, Hallador has announced plans to open a frack sand mining operation in Colorado. Once operational, the mine will be the first-of-itskind in the state.

Hallador believes operators in the DJ Basin are looking for in-basin sand much like their peers in the Permian are doing.

Through a $4 million investment into Hourglass Sands LLC, frack sand from a state-permitted mine near Colorado Springs could give operators an in-basin option.

“We feel that frack sand

mining is well within our core competency,” said Brent Bilsland, president and CEO of Hallador.

“We also believe Hourglass can meaningfully contribute to Hallador in future years.”

The initial plan for the mine is to produce 800,000 to 1 million tons of sand. Hourglass will bring in a third-party to process the sand. This summer, an operator will test the sand from the mine to determine its quality and mesh size.

“To us, the trend we are seeing in the industry,” Bilsland said, “is that it seems most of the shale plays are using greater volumes of sand and are willing to use lower quality. Part of what we are trying gauge is how much of our product the market will accept.”

NorthAmericanShaleMagazine.com

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NA SHALE NEWS

BIGGER OPTIONS: As producers prove-out longer laterals and methods to increase gas production, the Appalachia's ability to supply massive volumes of shale gas is only increasing.

Tri-State Shale Coalition to spur growth in Appalachia

POWERING THE PLAY: In addition to oil and gas development, the region is undergoing an infrastructure upgrade and overhaul that the Tri-State Shale Coalition hopes will continue.

Shale gas development in Ohio, West Virginia and Pennsylvania will continue to flourish thanks to the extension of the Tri-State Shale Coalition agreement.

Formed with the blessing and agreement of Gov. Jim Justice, R-West Virginia, Gov. John Kasich, R-Ohio and Gov. Tom Wolf, D-Pennsylvania, the shale pact is meant to bring investment to the region and maintain a strong workforce. “Instead of competing, our three states are working together to promote the region as a center for shale-related manufacturing,” Justice said. “Shale gas presents an opportunity to spur economic growth beyond the wellhead.”

First formed in 2015, the recent coalition agreement will run through 2021.

“We are working to attract investors and downstream partners,” Justice added. “We are encouraging chemicals and plastic manufacturers to come here, stay here and grow with us in the Appalachian region.”

10 NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

Under the agreement, the states work together on issues related to infrastructure systems, workforce development and marketing activities to better enable the region to harness the potential of Appalachian gas and natural gas liquids. The agreement identifies key areas in which the states cooperate to grow the natural gas industry, including workforce development, infrastructure and research.

Early this year, a whitepaper from Petrochemical Update outlined the possibility for the Appalachia region and the Northeast to become a petrochemical hub. “While the region with its ample and reliable supply of ethane is primed for the emergence as a second major petrochemical manufacturing hub in the United States, it faces the challenges of rapidly developing a workforce, as well as storage and pipeline infrastructure to fuel such development,” the whitepaper noted.

MONITORING THE PACE: Although electricity providers in Texas are experiencing record power demand, many believe they do have enough power and infrastructure--for this summer--to keep up with demand.

PHOTO: ELECTRIC RELIABILITY COUNCIL OF TEXAS

Texas electricity demand set for summer record The Electric Reliability Council of Texas, the grid operator for most of Texas, is predicting a record-breaking summer. Driven by a strong Texas economy and the recent retirement of older generating units, the state now has a tight operating reserve of electricity supply.

“The ERCOT market has experienced a series of new peak demand records over the last few years as Texas’ economy continues to grow at record pace,” said Bill Magness, ERCOT president and CEO. “We expect high peak demand will continue this summer.”

According to Magness, ERCOT and the generation and transmission owners will be focused on the performance of their assets this summer with demand stronger than ever. Demand for the summer months will be 77,658 MW. A previous report from ERCOT showed demand for summer months was roughly 73,000 MW. Although a new report detailing summer power demands is expected in May, the ERCOT team believes it will have enough supply to meet demand despite the record-breaking numbers expected this summer.

Most expensive hotel stay is in Permian Average price of hotels in Permian 1. Odessa $186 2. Waco $176 3. Austin $174 4. Dallas $158 5. Fort Worth $153 6. Midland $147 7. The Woodlands $144 8. El Paso $134 9. Beaumont $125 10. Corpus Christie $124

11. Amarillo $114 12. Denton $114 13. Lubbock $112 14. San Antonio $112 15. Houston $107 16. Arlington $97 17. Irving $94 18. Brownsville $94 19. Round Rock $94 20. Garland $87

21. Plano $87 22. Richardson $86 23. Wichita Falls $81 24. College Station $79 25. Tyler $76 26. San Angelo $75 27. Laredo $74 28. McAllen $74 29. Abilene $64 30. Killeen $55

In the heart of the Permian, hotel prices are also setting the pace. Through a survey that looked at 13 cities in the Lone Star state with a population of greater than 200,000 along with another 17 that had a population of more than 100,000, Odessa, Texas, featured the highest costs for hotel prices.

For each city, the average price for the cheapest available double room was established for the time-period spanning April 1 through April 30, 2018. Only centrally located hotels rated at least 3 stars were considered, according to the survey’s creators. Most Texas cities reach their rate peak during the month of April.

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PRODUCTS & TECHNOLOGY

THE NEXT LEVEL OF

Fracture optimization A new breed of data-centric, geomechanically-focused companies is helping completion engineers improve fracture treatments and overall production.

By Luke Geiver

12

NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

PRODUCTS & TECHNOLOGY

Ahmed Quenes and Peter O’Conor believe their shale management solution is the future of the unconventional oil and gas industry. Their Texas-based company, FracGeo, is part of a small cluster of companies created in the past five years to provide geological modeling and geomechanical simulations to decision makers, asset managers, completion engineers and geoscientists. Using surface drilling data, algorithms and simulation software, FracGeo and others have ushered in a new era for shale development that includes a vastly improved understanding of subsurface properties affecting reservoir quality, hydraulic fracturing and well spacing. Using new, enhanced or cleaned-up data sources, this new breed of geologically obsessed company has impacted the fracturing and completion process in a way that they all believe—and

PHOTO: FRACGEO

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PRODUCTS & TECHNOLOGY

SUBSURFACE REALITIES Images created by FracGeo like this capture the spatial variability of geology and geomechanical stress challenges and how they impact pad development planning.

PHOTO: FRACGEO

‘We can model the stresses and strains of completion designs.’

- Peter O’Conor, Vice President of Sales and Marketing FracGeo

14 NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

PRODUCTS & TECHNOLOGY

most have proven—can and will improve asset ROR and well performance.

Welcome To The Sweetspot FracGeo was founded three years ago. The team has always been focused on bringing a new generation of collaborative software to reservoir analysis. “The collaboration is between the geoscience people and the engineers,” says O’Conor, the vice president of sales and marketing. With multiple beta sites currently active and already favored by clients, O’Conor says his team is preparing for exciting times ahead.

Previously, clients could provide data to the FracGeo team and they would run and compute the data for fracture placement, reservoir depletion or complex downhole interactions (among a multitude of others) but now they are rolling out a full software line for purchase that will let clients use their system how and when they want.

The package covers geophysics, geological modeling and includes several geomechanical simulator options. The package is the first, they believe, that provides a 3G option: the integration of geophysics, geology and geomechanics. “We can model the stresses and strains of completion designs,” O’Conor says.

FracGeo is trying to address the problem with assumptions in well modeling. “We see a lot of variability with wells that are right next to each other,” O’Conor says. “Investors are asking what is going on.” Because of the variability, operators are now taking a more surgical approach to developing wells, he says. To do that, the key is truly understanding the natural fractures along the well bore and how they will interact with pressure, fluids and proppants.

Utilizing data sources compiled during the drilling process, FracGeo has created a suite of software options that can model and predict 11 different segments, ranging from stimulation placements to production predictors. With its fracpredictor option, the company can predict how spacing and timing of frac placements will

create frack hits. “We stimulate how the pressure we are going to pump will interact with the elasticity of the rock,” O’Conor says. The end result allows clients to predict where the sweetspot should be before placing costly fracture treatments in realtime. To date, the company has worked for clients in nearly every major North American shale play and it is also expanding to non-U.S. fields.

‘The completions will still take place in roughly the same amount of time, but now they aren’t using a random approach. Now, they are placing stages and perfs based on what reservoirs are telling us.’

- Kevin Wutherich, Chief Technology Officer, Drill2Frac

Rock Experts Obsessed With Data Prior to becoming the Chief Technology Officer for Drill2Frac, Kevin Wutherich worked for Schlumberger and a private operator on completions. Today, he says, the majority of his time is spent converting drilling data into usable data that can uncover the mechanical properties of rocks. “We look at mechanical specific energy from drilling data already available on virtually every well,” he says.

Using that data, they have also come up with a way to redesign and rethink completions. The team can find better ways to place perf clusters or divide a well into different stages based on the rock property data.

“Our approach is based on the idea that the rock that drills the easiest is likely going to be a softer rock,” Wutherich says.

To find out the properties of the rocks, the team needs to clean and filter out drilling related variables that skew the true properties of the rock downhole. “That is really where our core expertise is, how to clean that data up and help our clients understand if what they are seeing is a response caused by drilling or reservoir effect.”

To date, the company has taken a hard look at perf cluster placement. While other companies that perform engineered completions opt to make only slight changes, Wutherich and his team push for a different approach. “We place every one of the clusters into complimentary rock,” he says. Many approaches are based on a geometric design. An engineer planning a 300-foot stage length will place the clusters equal along the segment. Wutherich makes sure the clusters and the stages are placed in the appropriate lithologies. “We like to keep all of our clusters in similar rock,” he says. To ensure that happens, the team will advocate for resetting stage boundaries and resetting cluster placements. “The completions will still take place in roughly the same amount of time, but now they aren’t using a random approach. Now,” he says, “they are placing stages and perfs based on what reservoirs are telling us.”

To create the appropriate simulation of a well completion, Drill2Frac uses surface drilling data provided by the client.

In roughly two days after drilling ends, the team can turnaround an entire completion plan. Operators in the Permian, Eagle Ford and Mid-Continent have used the service. On a six-month, normalized stage length average, clients that have used the Drill2Frac system have increased production by roughly 22 percent. A product designed to help predict the proper placement and timing of diverters has been the most sought after and popular among Drill2Frac’s offerings. The system can

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PRODUCTS & TECHNOLOGY

help reduce the number of stages needed in a well without impacting production, Wutherich says. In addition to the reduced costs associated with the fracture treatment that a Drill2Frac simulation can provide, he also says operators are always looking to speed up the process so they can move on to the next well and the profits that come with each new well.

Amongst all its offerings, Wutherich is most proud of his team’s obsession with ensuring the quality of it’s data. The team has even developed a program to ensure that the wireline depth—the depth reached from a system that is used to collect the initial depth data—correlates to the actual drilling depth achieved. When clients perforate, he says, they do it on wireline depth and not on drilling depth. Using the best data from the real-life scenario from which it was acquired is crucial he says, and in the data business, nothing is too small.

Following The Fluid The new breed of fracture stimulation data and analysis companies that has cropped up in the past five years isn’t limited to simulations and predictive analysis. John Ughetta and his team at Texas-based Deep Imaging are in the monitoring and imaging business. Using surface-based electromagnetic monitoring sensors, the

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PRODUCTS & TECHNOLOGY

team can show operators where frack fluids actually went after the treatment is finished, and, when or where issues or hazards downhole might occur.

After laying out a tight grid of volt meters above the area of interest, Ughetta’s team transmits a controlled source into the earth with two injection points. Then they record the volts per meter that come back to the surface grid. “We are a direct measurement of a change at the reservoir that is caused from the stimulation,” he says. Using the voltage readings that bounce off of the altered rock below, the team has created a software that depicts where fluid went and how fractures turned out. Because the data can be collected and reassembled quickly, the Deep Imaging team can work in near-real-time conditions with engineers onsite while a fracture treatment is taking place. Because the data compilations can’t be interpreted in different ways, engineers are able to trust what they see and make changes to treatments to avoid situations like screen-outs.

Already working in the Permian, Eagle Ford and the SCOOP/STACK, the company just tripled its capacity and doubled its personnel to meet the demands of clients. According to Ughetta, operators and investors want to know how their fracture treatments performed. To perform the readings, the team

subcontracts out the layout of the sensors, which takes roughly five days. As the frack stages move down the lateral, they move the sensors on the surface. On a microseismic job, nearly 1,000 receivers would be placed on the surface, but the unique sensors used by Deep Imaging reduce the number to roughly 100. Per fracture stage, the system costs roughly $12,000, and includes a clear depiction of where fluids and proppant went after a treatment.

In addition to fluid placement and fracture reach, the team is also gaining interest from clients working on enhanced oil recovery projects, recompletions or those with environmental concerns. This year the team is working to improve operational efficiencies, fine-tune the batteries used during the process and expand its field-required infrastructure. Like FracGeo and Drill2Frac, Deep Imaging is gearing up for a greater demand, Ughetta says, because the data is there, it keeps coming and the answers it provides for shale oil and gas development are near limitless.

Author: Luke Geiver Editor, North American Shale magazine 701-738-4944 lgeiver@bbiinternational.com

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17

PRODUCTS & TECHNOLOGY

A FULL SPECTRUM OF

DOWNHOLE TOOL SOLUTIONS

FOR SHALE Whether it’s a large international company with a long history or small company born during the U.S. shale revolution, oilfield service companies have a wide variety of options from which to choose.

By Patrick C. Miller

18

When it comes to downhole tools for North America’s shale oil and gas industry, what matters most is having the right tool for the job at the right time. From international corporations with decades of history to homegrown companies created to fill a specific niche, if an operator has a problem, chances are there’s someone with a solution or proposed solution to solve it.

For example, DynaEnergetics—a company with global reach headquartered in Houston—specializes in advanced perforating systems for the North American shale market. Innovative Completion Systems in Tyler, Texas, has been making downhole tools for wireline service companies since 2005. D&L

NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

Oil Tools has been in business for 27 years, designing and manufacturing downhole packers, bridge plugs, anchors and accessories at its plant in Tulsa, Oklahoma.

Headquartered in Millsap, Texas, GEODynamics Inc. earlier this year became a subsidiary of Oil States International Inc. It provides oil and gas perforation systems and downhole tools in support of completion, intervention, wireline and well abandonment operations, serving markets in seven states from Alaska to Texas.

High Performance Tool Makers DynaEnergetics—a DMC Global Inc. business—has manufacturing facilities in

Blum, Texas, Troisdorf., Germany, and Tyumen, Russia. It can trace its roots back to 1867 when Alfred Nobel—the scientist for whom the Nobel Prize is named—invented dynamite.

The company operates in all shale basins. Its main customer base is wireline service companies, but also includes Schlumberger, Halliburton and Baker Hughes.

Edwin Reek, vice president of product management and marketing, stresses that DynaEnergetics isn’t a service company. “We're really focused on the equipment itself—the development of the technology and the manufacturing of equipment.” This includes hardware for the company’s DynaStage perforating system, which is comprised of gun barrels, det-

onators, detonation cords, shaped charges and the electronic panels to fire the guns downhole.

All components for DynaStage—except the detonators—are assembled in-house and shipped to the field where the detonators are installed. “It’s a system growing rapidly in the unconventional market at the moment,” Reek notes. “The benefit our customers see is the ease of use, the efficiency and assembly. The string is shorter, which makes it lighter and easier to handle.” He adds that DynaStage is bringing an end to the days service companies bought different components from different vendors and then assembled them in the field.

Reek notes that safety is another advantage of DynaStage, which uses DynaEnerget-

GUNNING FOR PERFECT FRACKS: At a facility in Blum, Texas, DynaEnergetics manufactures and assembles the guns used for its DynaStage perforating system, which features shaped charges designed for shale fracks.

PHOTO: DYNAENERGETICS

NorthAmericanShaleMagazine.com

19

PRODUCTS & TECHNOLOGY

‘We’ve been busy since about 2013 when a lot of people weren’t,. We were very blessed to have equipment that people needed, even in slow times.’

- Charlie Bishop, owner, Innovative Completion Systems

ANCHORED FOR SUCCESS: Heath Bringham with D&L Oil Tools holds a model of the company's patent pending Trilobite Anchor, a slim-hole anchor that provides extra spacing for a variety of downhole applications.

PHOTO: D&L OIL TOOLS

ics’ DynaSelect detonators manufactured at its plant in Germany. He says the detonators are immune to stray currents, stray voltages and radio frequencies, which means other wellsite operations can continue while fracking is occurring. “We’ve really taken the lead in providing a safe approach to the detonator and a safe approach to the gun system,” he adds.

As a result of the shale industry trend toward longer laterals, DynaStage uses closer gun spacing to deliver more shots per foot

with a tighter shot density. “In today's environment where everybody's pushing for efficiency and trying to do things cheaper, the industry is now focusing on how we can be more efficient with what it does and make a living at the $60 oil.”

Reek says DynaEnergetics has developed shaped charges specifically for shale reservoirs—HaloFrac and FracTune—that define the result of fracking. “To do a proper frack job, you want to have equal hole diameters,” he notes. “With a normal charge,

20 NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

you get different hole diameters. Different hole diameters mean different results in the frack job. We’ve developed FracTune to provide equal hole diameters.

“We shoot through casing, we shoot through cement and into the reservoir,” Reek continues. “We create the perforating tunnel and the size of the diameter of the tunnel—the entry hole diameter and the shape and the depth and the cleanness of the tunnel.”

Perforation results ultimately impact the well’s productivity, Reek says. With equal hole diameters, the fluid flow rate and pressure drop through each hole will be very similar, leading to a more consistent frack job.

“The last few years has really been developing into what we call performance charges,” he explains. “We’re moving away from regular charges that just shoot a hole in the casing and into the reservoir. We're trying to learn what's going on there and trying to match the performance of the charge to the requirement of the frack job or what rock we’re penetrating.”

The demand for DynaStage was evident last year when DynaEnergetics announced plans to triple the capacity of its plant in Blum, south of the Dallas-Fort Worth area. Later this year, the company plans to add a second automated shaped-

PRODUCTS & TECHNOLOGY

SHALE SHAPED CHARGE: DynaEnergetics makes its HaloFrac and FracTune shaped charges specifically for fracking in North American shale plays.

PHOTO: DYNAENERGETICS

charge manufacturing line at Blum and a second automated DynaSelect detonator line at its plant in Germany. A second phase of the Blum expansion—scheduled for 2019-2020—will include a 30,000-squarefoot hardware manufacturing facility.

Experience Meets A Need While the price downturn that began in 2014 was a curse to the oil and gas industry, Charlie Bishop, owner of Innovative Completion Systems (ICS), says it proved a blessing to his company, which provides a variety of downhole tools primarily to wireline and electric service operators not only in the U.S., but also internationally.

“We’ve been busy since about 2013 when a lot of people weren’t,” Bishop notes.

“We were very blessed to have equipment that people needed, even in slow times. A lot of our equipment was equipment they could save money with on their completions. When you can save money and times are slow times, it really doesn’t matter. If you can save the customer money, then you’ve got a demand there.”

The tool ICS produced that wireline

companies discovered they needed is called the addressable disconnect tool. As shale operators drilled deeper wells with longer laterals, having to fish tools out of horizontal wells became increasingly expensive.

With 40 years of experience in the wireline business, Bishop recognized the need for a device to quickly and efficiently do the job.

“You simply send a digital code down your wireline—the conductor and your cable going to your tool string—and it switches a circuit in the top of the tool and routes current to a ballistic device,” he explains. “I’ve got a lot of other tools that did the same thing, but this has been the most successful.”

Operational experience in the field led Bishop to refine and improve the addressable disconnect tool, which is currently available in various models. ICS plans to soon release a non-ballistic version of it, and he has ideas for other downhole tools as well. Bishop says the cable head and wire testing equipment made by ICS has also proven popular with wireline service companies

Bringing New Tools To Market D&L Oil Tools is generating industry interest with its Trilobite Anchors. The hydro and quarter-turn anchors introduced late last year feature a patent-pending cone/ slip shape that’s engineered to customer needs. Heath Bringham, a senior sales engineer at D&L, says the anchor was designed in response to a customer’s need for a slimhole anchor.

“It’s got a lot of room around the outside of the anchor to allow for gas or debris bypass or even injection lines or monitoring cables—anything you want to put around it,” he says. “It’s got the room to do it where a conventional tubing anchor pretty much uses up all that space.”

The anchor’s design is advantageous for oil extraction pumping when a buildup of gas, paraffin or scale can greatly reduce a pump’s efficiency. “The downhole pump is one of the last steps in the life of the well where the downhole pressures are so low that some of the other artificial lift methods or gas lifts are just no longer viable,” Bringham says. “As they’re pushing these pumps further and further down into the NorthAmericanShaleMagazine.com

21

PRODUCTS & TECHNOLOGY

PRECISION PERFING: The shaped charges made by DynaEnergetics are designed to create frack holes of equal diameters to assure consistent frack job results.

PHOTO: DYNAENERGETICS

curve, they’re having some extra challenges beyond the simple vertical wells of old. If a pump gets filled or partially filled with gas, you’re literally getting less oil per stroke.”

In the shale plays of south and west Texas, Brignham says problems with paraffin buildup and scaling are so severe that chemical injection is needed to prevent pumps from becoming plugged.

D&L’s Trilobite Anchors provide the space to locate the injection point at the precise location it’s needed—at the pump intake just below the anchor.

“By injecting that chemical—as long as they have the right chemical and the proper dose—they can keep the pump running indefinitely,” Bringham notes. “You can run a quarter-inch or three-eighths-inch stainless steel injection line right alongside your tubing, all the way down and run it right along the outside of this anchor right to the pump intake. You don’t have to use as much chemical and the injector puts it right where it’s most needed.”

Bringham says D&L has been working with Weatherford on designing a customized anchor to work with their pump technology. In addition, although D&L sells its products to oilfield services companies, E&P operators have heard about the Trilobite Anchors and directly contacted the company about them.

“That’s a different way of doing business for us, but we’re excited to help them out,” Bringham says. “We don’t sell directly to them, but we’re excited that they recognize the advantages and

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22 NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

PRODUCTS & TECHNOLOGY

we’re willing to go out and request it from their customers so that they can get their hands on it and put it in their wells.

“We’re still on a trial basis,” he continues, “but there’s been some early adopters who know what they’re looking at and know the benefits; they’re very excited about it. They’re doing some trials in different areas. All the feedback so far is that they’re very happy with it.”

Bringham notes the D&L’s “bread and butter” is its AS1-X production packer, manufactured at its Tulsa plant to API and ISO specifications. “They’ll run an AS1-X packer in on a wireline with a plug on the bottom,” he says. “Once that packer is set in the well, they can connect tubing with on/off tools at the surface and then pump out that plug and start producing.”

Since being acquired by Oil States, GEODynamics continues to find expanding markets for its perforating systems and unconventional oil and gas completions in North American shale plays.

David Ambler, product line manager for engineered perforating solutions, says GEODynamics is very active in the Permian, but is seeing greater demand for its products and services in the Marcellus and Utica plays in the northeast and the Haynesville play in south Texas.

“We’ve seen a lot more interest and we’re improving our output of composite plugs and our FrackTrap Plus technology,” he says. “One of the best parts of the Oil States acquisition is that

their manufacturing footprint is quite large, and the resources they bring helps us, as well as their ability for capex opportunities.”

Ambler says GEODynamics has plans to introduce new technologies into the unconventional space this year and next year, although the company will also remain active in conventional well applications and the plug and abandonment market where its ISOLOC system for remedial cementing and circulation is gaining interest.

“We all like new technology,” Ambler says, “but from a manufacturing standpoint, it takes time to ramp into them. It’s all based on the operator’s individual science project or review of technology and product availability.”

What’s clear in the world of downhole tools is the need for efficiency and cost reduction continues—even in tough times—and that innovation and technological advances are continuing—even as oil prices rebound.

Author: Patrick C. Miller Staff Writer, North American Shale magazine 701-738-4923 pmiller@bbiinternational.com

NorthAmericanShaleMagazine.com

23

IN PLAY

GOING WITH THE FLOW: Oak Ridge National Laboratory researchers Victoria DiStefano, left, and Larry Anovitz are studying how water moves through shale fractures. Their research could improve oil and gas extraction techniques.

PHOTO: JASON RICHARDS / OAK RIDGE NATIONAL LABORATORY

Q&A: Following The Water Flow In Shale Scientists at the U.S. Department of Energy’s Oak Ridge National Laboratory (ORNL) in Tennessee are studying how water moves through shale, as well as other geologic factors they believe can lead to the more efficient extraction of oil and gas.

Victoria DiStefano, ORNL graduate research assistant and an energy science and engineering fellow, recently coauthored a paper published in the Journal of Earth Science on how water uptake occurs in Eagle Ford shale.

She and Larry Anovitz, senior research scientist, are also researching shale characteristics—such as fracture characteristics, rock roughness and mineralogy—to determine how they affect interactions within shale formations.

By studying how water flows through the microstructure of fractured rock, the researchers can uncover new information that could improve models for drilling, hydraulic fracturing and underground storage of carbon dioxide. They used neutrons

24 NORTH AMERICAN SHALE MAGAZINE ISSUE 3 2018

bounced off the hydrogen in water molecules to “see” inside a rock sample without destroying it and to quantify water uptake in real time.

“One of the biggest challenges with shale is that it’s such a complex system,” DiStefano said. “Neutrons help us grasp the complex rock and fracture properties, which determine how quickly water uptake occurs in the rock.”

DiStefano and Anovitz discussed their research with North

American Shale magazine and how it can assist the oil and gas industry.

How did the neutron imaging capabilities at ORNL assist your research water movement through shale?

DiStefano: Primarily what got us started is that Oak Ridge has this wonderful capability to use neutrons with the High Flux Isotope Reactor. Neutron imag-

IN PLAY

COMPLEX FRACTURE PROPERTIES: Characteristics affecting how water moves through shale include rock roughness and mineralogy. ONRL researchers use neutrons to see inside shale samples without destroying them.

PHOTO: JASON RICHARDS / OAK RIDGE NATIONAL LABORATORY

ing is very similar to X-ray imaging. X-rays allow you to easily see metals. Neutrons allow you to easily see water. With this capability, we can see water movement, which allowed us to image or video how water moves through fractures in shale. We were able to quantify the amount over a period of time to show how water is moving into a fracture.

Can you study both naturally occurring fractures and those from fracking?

DiStefano: Yes. The phenomena that we look at is spontaneous imbibition. We don’t apply any pressure; we just allow

water to contact an open fracture. That water then imbibes into the fracture.

Anovitz: In other parts of our project, we’ve been looking at things like how acids react with carbonated rich materials.

Downhole, producers will often acid-treat the rocks. We’re trying to get some understanding of how that works as well.

Were the results of your research what you expected or were there surprises?

DiStefano: It deviated a bit from what we expected. There are models already out there that try to predict how fluid is going to move through or spontaneously imbibe into shale. What we observed in our experiments is that the models didn’t fit the data precisely. This could be due to dynamic changes in the wetting properties of the rock. As a fluid moves through the rock,

it’s affected by changes over time in the roughness of the rock, the fractures, the wetting properties and the different minerals in the rock. The model we were using was for an idealized fracture. It doesn’t take into account rock surfaces or a porous media where water diffuses into the rock. Some of the models need to be better developed to take into account this diffusion.

Can ONRL’s research in this area help the oil and gas industry extract shale oil and gas resources more efficiently?

Anovitz: Victoria’s work tells industry something about how the properties of the rock around that fracture are going to affect the rate of fluid flow through it. Of course, it’s going to affect the extraction efficiencies. For future work, we’ll be looking at how we can adjust

those fractures—if it’s possible—to improve extraction. Producers could actually change the pressures they use for fracturing, how they do the initial perfing and change where and how they do various chemical treatments.

One of the things Victoria has done quite a bit of is looking at changes in fluid chemistry and how that affects uptake and how much you change your fracking fluid.

How can someone get access to the results of your research?

Anovitz: Our work is public domain. It’s out there in public for anybody to use who wants to. It’s not proprietary in any way.

We have worked with various industry groups and are happy to work with them at any time to try to answer questions that are pertinent in the field. We have other projects being considered and discussed.

NorthAmericanShaleMagazine.com

25

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