Well Production Allocation

Well Production Allocation

LandGate has developed an innovative process to allocate production to wells from lease reports.  LandGate’s production allocation uses production history, production tests, the geologic region, geologic formation, well lateral length, type curve production forecasts, and production dates to accurately provide the well production data.

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To accurately determine the value of a property, understanding the amount of oil and gas that will be produced in the future is vital. Engineers make these estimates by studying the history of similar, nearby wells to forecast future oil and gas activity.


This analysis, however, is more complicated in Texas. The oil and gas produced from multiple wells are frequently gathered in a storage tank or pipeline before being measured. As a result, Engineers cannot easily study the performance history of individual wells to improve their forecasts.


To accurately appraise the value of a property, it is important to first precisely allocate the combined oil and gas production from multiple wells to individual wells. In this blog post, we will use a lease in the Permian Basin to illustrate the important factors that LandGate uses to uniquely and accurately allocate production:

  • Type Curve Production Forecasts
  • Production History and Tests
  • Production Start Dates

Figure 1: Combined oil production of all wells on the lease before the production allocation process (top) and oil production allocated to individual wells on the lease after the process (bottom)


Type Curve Production Forecasts

To forecast the future oil and gas production of a well, Engineers must compare it to existing wells with similar characteristics:

  • Geologic region: where is the well located?
  • Geologic formation: what type of rock is the well in?
  • Well geometry: does the well have a horizontal segment or is it entirely vertical?
  • Well length: if the well has a horizontal segment, how long is it?


Once these characteristics are grouped, a forecast can be made of how much oil and gas will be produced over time. Figure 2 shows the simulated future oil production for a 1 mile horizontal well in the Wolfcamp formation and a vertical well in the Bone Springs formation.


Figure 2: the production forecasts for two categories of wells. Note that the one mile horizontal well will produce more oil than the vertical well.


Production History and Tests

No two wells will behave the same. Variations can be caused by the local geology; or technological improvements in the drilling, completions or production methods. Figure 3 shows an example of a well outperforming similar wells in the region. Production forecasts must be adjusted to match a well’s history or the results of well tests to accurately predict the well’s future oil production.


Figure 3: The actual production data (green dots) was much higher than the forecasted oil production (dashed line). The forecast needs to be increased (solid line) to correctly model the well’s production.

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Production Start Dates

Now that the well’s oil production behavior has been simulated, the allocation process must take into account when a well was actually drilled and has started producing. Since oil production for a well decreases over time, the more recent wells should get a larger portion of the production allocation. Once a well has stopped producing, it should no longer receive any of the allocation. Figure 4 shows how the number of wells on an active lease can change over time.


Figure 4: The number of wells producing on the example lease from 2009 to 2019.



Figure 5 shows the results of the production allocation process used at LandGate. Since the two vertical wells (blue and orange) have been producing before 2009, they have received a smaller portion of the oil production. The next three wells drilled were the green, red, and finally, purple. They were all allocated large portions of the oil production when they began producing; since a well’s performance declines over time, their volumes taper off.


Figure 6: Allocated monthly oil production (each color represents a well)

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Written by Ohm Doungkhae


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