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

ROP_BE = RR / CL_O – [((R(TT)) + BC) / INT]

Assumed Penetration Rate

INT_BE = [RR (TT) + BC] / [CL_O – (RR / ROP)

ROP_BE    = Breakeven Penetration Rate

INT_BE       = Breakeven Interval

CL_O        = 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