Decline Curve in E&P companies for oil and gas
Does anybody know how exactly model a decline curve in the oil and gas industry to get estimate ultimate recovery (EUR). Usually companies cite initial production number as either a 30 day of average production rate or a 24-hour average production rate. But if I build an ARPS model using the same b-factor and initial decline parameter using these two initial production numbers, I could end up with completely different EURs. Does anybody know how to reconcile this situation?
Welcome to the vagaries of E&P modeling.
My approach is to iteratively solve for the b-factor and initial decline terms that are implied by company guidance. E.g, when the company tell you that their wells 24-hr IP at X MMcfe/d and the first year decline is Y%, then you can effectively solve for the paramaters in the hyperbolic decline function that produce this curve.
Of course, that doesn't mean that the curve that the company is giving you is in any way realistic...
If you have a 30-day IP and an EUR that is given by a) a company, or b) a sell-side research analyst, how do you back out the b factor and nominal decline rate if you want to generate a type curve to get a model of an individual well or field's cash flows?
Cool.
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