Modern Fracking Delivers Bonanza to Royalty Owners

Devon Energy, Oklahoma City, Independent Oil and Gas Production Company bought Mitchell Energy in 2001.  For the last ten years Devon, standing on the shoulders of George Mitchell’s success,  developed and expanded the success of Mitchell Energy to bring a veritable bonanza of oil and gas production to Oklahoma.

The oil was always there, however, the economics and the technology were missing.  Oil and Gas prices were low in 1999, when George Mitchell put his company up for sale and there were no takers.  Larry Nichols, aka, Devon Energy, like a shark, smelled blood in the water, however, he bided his time until the price was right.  At the time he closed on the purchase of Mitchell Energy, paying $3.5 Billion Bucks, not many investment pundits were impressed.  However, Nichols’s vision and implementation of his vision proved the philistines of wallstreet wrong.

It would be three years after Devon purchased Mitchell Energy before the “modern era” of horizontal drilling with huge, AC/DC power and the robust construction to drill 30,000 feet would appear on the scene.

Horizontal drilling and slick water fracking technology was in its infancy in 1999 and it was not until about 2004 that the big rigs made their appearance.  Big rigs had always been around, however, they were few and far between.

Mechanical drilling rigs, where diesel engines powered the draw works, turntable, pumps and provided incidental electricity to operate the rig were the primary rigs available. Diesel electric rigs, primarily DC current rigs were bigger, more expensive and available for deep holes, however, it would be later before the big AC/DC rigs would be available for contract or lease.  For example a recent ad for the sale of a modern drilling rig shows:

Today’s new drilling realities require more power 
than conventional wells and have given rise to 
the development of the AC/DC SCR drill rig 
powered by multiple generator sets. Deep 
horizontal drilling is a growing practice around 
the world and in areas of North America such as 
the Barnett Shale in Texas, the Haynesville Shale 
in Louisiana, the Fayetteville Shale in Arkansas and
the Marcellus Shale in Pennsylvania/New York. 
While AC/DC electric rigs with SCR controls 
dominate petroleum exploration today, operators 
are constantly looking for ways to increase total 
power availability, reliability and fuel efficiency. 
The economics of petroleum exploration demand 
that drilling costs be minimized and that drilling 
speed be maximized. Savings won on the drill rig 
translate directly to the bottom line for the 
exploration company or well service provider. 
These economic realities require generator sets 
to deliver high specific power, low fuel 
consumption and less maintenance. 
n the search for new petroleum supplies and 
better production from existing wells, drillers 
have transitioned from boring simple vertical 
wells to boring horizontal wells using relatively 
new steerable drill motors. By drilling down and 
then turning horizontally once the petroleum 
structure has been located, more of the well 
bore is exposed to the oil- or gas-producing 
zone. Horizontal wells can therefore significantly 
increase production from a fossil fuel deposit 
while also reducing the number of secondary 
wells needing to be drilled. 
Other techniques, such as hydraulic fracturing of 
the petroleum-bearing rock structure to increase 
the flow of oil or gas, are now almost routinely 
done as soon as drilling is completed. Today’s 
wells are also significantly deeper than in the 
past — up to 30,000 feet — involving heavier well 
strings, higher drilling power requirements and 
higher mud pumping pressures.

Devon’s drilling engineer, David Fortenberry said the first rig H&P developed for Devon is still working for the company in western Oklahoma‘s Cana play.

“That was the first application of the high-efficiency rig to an unconventional horizontal play,” he said. “We really feel like we set the standard. “That’s the model that most companies are following now.”

In addition to breaking in new technology, Fortenberry said Devon had to learn the nuances of operating horizontal wells. Many of their intricacies are the opposite of vertical wells.

He said input from H&P and other consultants helped to cut its well completion time from 33 days in 2004 down to 12 days.

David Foster a Devon engineer has been quoted, that wells in some shallower areas of the Barnett can be completed in about seven days.  From Spud to Completion in seven days?  Incredible.

Devon currently has more than 4,200 producing wells in the Barnett Shale.

Thanks to Jay F. Marks for some of the content of this article.


This entry was posted in Business Law, Oil and Gas Law, Real Estate Law. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s