WELL PLANNING

Major Components
The well planning process requires the coordinated effort of many individuals
with various responsibilities. The well planning process flow chart (Figure 1,

Figure 1

Figure 2 ,

Figure 2

Figure 3 ,

Figure 3

Figure 4 ,

Figure 4

Figure 5 ,

Figure 5

Figure 6 , Figure 7 ) illustrates the extensiveness of the effort.

Figure 6

Figure 7

The major activities can be outlined as follows:

I. Well Selection (Figure 1)
II. Authorization for Expenditure (AFE) Preparation (Figure 2)
III. Organizing and Data Gathering (Figure 3)
IV. Well Design (Figure 4)
VI. Rig Design (Figure 5)
VII. Procedures (Figure 6)
VIII. Contract (Figure 7)
IX. Cost Estimate
Tasks & Responsibilities
Effective well planning requires good communication among the technical
personnel responsible for its development and implementation. This section
outlines the roles, responsibilities, and objectives of the following personnel:
Geophysicist;
Geologist;

Drilling Engineer;
Production Engineer;
Reservoir Engineer;
Drilling Manager;
Drilling Superintendent;
Drilling Supervisor;
Logistics Coordinator;
Loss Prevention and Safety Specialist;
Environmental and Regulatory Specialist;
Purchasing Specialist.
Geophysicist
The geophysicists role is to identify potential hydrocarbon-bearing structures
from seismic data. Responsibilities include:
processing and interpreting seismic data to identify potential reservoir
structures;
assisting in prospect evaluation, based on structure size and seismic
reflection interpretation;
reporting formation thickness, structure tops, and bed orientation to
engineers preparing the drilling program;
identifying critical anomalies that indicate potential drilling difficulties
( e.g. shallow gas hazards, bedded salt, abnormal pressures, and fault
crossings ); estimating depths for these anomalies;
assisting in development of a logging program;
working with operations personnel to select a rig location;
specifying velocity survey and checkshot intervals.
The geophysicists goals are to:
identify substantial hydrocarbon-bearing structures
interpret seismic data to help the drilling engineers anticipate potential
problems
Geologist

The geologists role is to predict the lithologic sequence of formations in

proposed wells, and to identify formations as they are penetrated by
interpreting cuttings samples, log measurements, and other geological
indicators. Responsibilities include:
conducting surface geology studies to identify lithology sequences from
outcrops;
identifying gross surface features from aerial surveys to establish the
possibility of subsurface trapping mechanisms;
reviewing offset well histories for use in interpreting seismic maps to
develop a stratigraphic column;
conducting or monitoring source-rock studies;
assisting in thermal maturation studies;
preparing AFE cost request forms that provide a geological prognosis for
the expected lithologic sequence;
helping planning logging, coring, and testing programs;
identifying potential hole problems, specifying formation and expected
depth whenever possible;
providing onsite formation evaluation expertise.
The goals of the geologist include:
identifying potential reservoirs and predicting formation types and
thicknesses of the zones of interest;
accurately interpreting the expected lithology in the planned well.
Drilling Engineer
The drilling engineer plays a number of roles in the well planning process.
During initial evaluation of a prospect, he or she conducts preliminary studies
and estimates well-costs. Once well AFEs are approved, the drilling engineer
becomes the designer, coordinator, and monitor of the overall well program.
The responsibilities of the drilling engineer include:
gathering and reviewing available data on previous drilling activity in the
proposed areas of operation;

preparing initial cost estimates;

preparing specific well-cost estimates for Authorization for Expenditure
packages
conducting an initial planning meeting with others involved in specific
well projects to establish objectives for the well;
estimating expected formation pressures and fracture gradients;
anticipating and addressing the most likely drilling problems;
selecting casing sizes and setting depths;
providing the data necessary for submitting an application for a drilling
permit;
resolving directional drilling requirements;
developing the drilling mud program;
designing casing strings;
preparing a hydraulics program;
recommending bottomhole assemblies and bits;
preparing cementing recommendations;
preparing step-by-step procedures for drilling operations;
preparing rig specifications prior to rig bid requests to assist in rig
selection;
identifying necessary mud-processing and solids-control equipment;
preparing drilling-cost and drilling-time curves to plot predicted
performance;
coordinating the well-planning activities of geoscience, purchasing,
operations, environmental and regulatory, and other engineering groups
to ensure that all aspect of well program development will meet schedule
commitments.
The goals of the drilling engineer include:

providing accurate cost estimates;

designing well programs that satisfy well objectives;
reducing cost through the selection of high-efficiency equipment,
systems, and practices;
ensuring safety through the recommendation of sound practices and
thorough contingency planning;
Reservoir Engineer
The reservoir engineers role is to provide engineering analysis and support in
all phases of reservoir evaluation. Responsibilities include:
assisting the geologist and geophysicist in interpreting reservoir size,
characteristics, and potential reserves of the prospect;
assisting economic calculations based on prospect size, estimated
reserves, production rates, and well cost;
assisting in the design of logging, coring, and testing programs;
assisting in the evaluation of data collected during drilling.
The goals of the reservoir engineer include:
accurately evaluating prospect potential;
maximizing the quantity and quality of reservoir data gathered during
the drilling, testing, and completion of the well.
Production/Completion Engineer
The production/completion engineer defines the testing, stimulation, and
completion requirements for the well. Responsibilities include:
predicting formation pressures and estimating production rates to assist
drilling engineers in designing production casing;
preparing testing and completion programs for the subject well;
ensuring that formation testing is done according to the program, and
supervising the testing;

providing the drilling engineer with a completion design;

providing the drilling engineer with an early outline of the potential
stimulation design, including the maximum expected stimulation
pressures;
helping the drilling engineer estimate testing, stimulation, and
completion costs and time during AFE preparation;
providing the drilling engineer with a list of required completion and
wellhead equipment necessary while the drilling rig is on location;
indicating corrosion-protection measures, if warranted;
identifying potential formation sensitivity to assist the drilling engineer in
selecting the best mud program.
The goals of the production/completion engineer are to
maximize data collection during drilling to improve evaluation of potential
production zones;
design a completion program that will most efficiently drain reservoir
hydrocarbons.
Drilling Manager
The drilling manager must review the well plan closely, approve it, and assist
the rig supervisors in its implementation. He or she is ultimately responsible
for operations conducted at the rig site. The drilling manager's responsibilities
include:
maintaining an approved drilling contractor list;;
supervising the compilation of rig bid specifications, rig bid requests,
and bid evaluations;
supervising company rig supervisors on ongoing drilling operations;
communicating drilling-operations status to higher management, as
required;
advising the drilling engineer regarding recommended drilling
practices pertinent to the area of operations;

reviewing well plan procedures, practices, and equipment

specifications;
making critical decisions concerning rig problems, based in part on
the advice and support of the drilling engineers.
The goals of the drilling manager include:
drilling the well to targeted objectives safely and cost effectively;
coordinating the well plan implementation among engineers, rig
supervisors, and contractors.
Drilling Superintendent
The drilling superintendent provides mid-level management support to the
drilling manager and rig supervisor for ongoing drilling operations.
Responsibilities include:
reviewing the daily drilling reports from assigned rigs, and providing
advice and assistance concerning rig operations, as required;
advising drilling engineers on well plan preparation according to field
experience in the area;
assisting the drilling manager in organizing schedules for rig
assignment, time off, and training for rig supervisors;
reviewing regulatory requirements, and ensuring that company and
contractor personnel at the rig are observing these requirements;
providing onsite inspection and support as required;
inspecting proposed drilling rigs and equipment for compliance with
specifications.
The goal of the drilling superintendent is to ensure efficiency, safety, and cost
control in all rig-site activity.
Drilling Supervisor
The drilling supervisor is responsible for the day-to-day operation of his or her
assigned drilling rig. Responsibilities include
making day-to-day decisions on rig operations as the well is drilled;

 supervising contractors and service company personnel on location;

following the recommended practices and procedures listed in the well
plan as closely as possible, and providing feedback to the supervisors
and engineers if problems with plan implementation occur;
conducting safety and well-control drills;
ensuring that contractor and service company personnel comply with
regulatory stipulations;
maintaining accurate records of operations and cost;
providing daily reports detailing drilling progress, costs, current
operation, mud properties, materials used and in inventory, hole
deviation, etc.;
reviewing and signing all invoices for services and materials used at
the rig;
placing orders for materials, equipment, and service company
personnel with allowance of sufficient lead time;
communicating with drilling engineers for support in drilling
optimization and in critical operations such as cementing, testing,
completion, etc;
supervising location construction, rig move-in, and stockpiling of
material at the beginning of new well activity;
providing feedback as to potential location problems;
supervising location cleanup after the well is completed or abandoned.
The goal of the drilling supervisor is to conduct well operations safely and
efficiently.
Logistics Coordinator
The logistics coordinator provides support to the rig in the form of materials,
equipment, transportation, communications, and invoicing. This role is
especially critical in remote or overseas operations where supplies,
communication, and regulations require additional planning and lead time.
Listing specific responsibilities is inappropriate because of the variable nature

of remote operations. They do involve the following support activities, often

from an intermediate support facility between the office and the rig. The
logistics coordinator must:
maintain equipment and material supplies by ordering with sufficient
lead time;
maintain the communications system to ensure operation according
to the well plan;
coordinate normal and emergency transportation to and from the rig;
coordinate customs clearances and official inspections to ensure
regulatory compliance;
assist in maintaining and forwarding rig invoices, operations reports,
etc. between the rig and the main office accounting department.
The goal of the logistics coordinator is to provide remote operations with the
support needed to keep the rig running according to the well plan.
Loss Prevention/Safety Advisor
The safety advisor is a specialist staff support function. The safety advisor
should provide input to the team in all areas of site selection, rig selection,
operational safety considerations, personnel safety training, and rig safety. The
safety professional's role includes serving as a liaison with governmental and
industry agencies relative to safety, and ensuring compliance with all applicable
codes, standards, rules, laws, and regulations as they apply to drilling
activities.
As a staff support function, the safety advisor is responsible for providing
management with professional, technical support to ensure compliance with
applicable laws, codes, standards, and regulations. Responsibilities include:
determining the environmental and safety impact of the rig-site
location on the surrounding properties;
investigating the drilling contractor's past safety and accident
performance record;
reviewing all drilling contracts to ensure that the contractor's safety
responsibilities are clearly defined;

 reviewing ( with regard to safety ) the layout of mud pits, choke and
blooey lines, high-pressure hoses and lines, BOP control panel location,
etc.;
reviewing the contractor's plans with regard to rig electrical safety
prior to spud to ensure compliance with applicable laws and standards;
reviewing all piping diagrams and equipment specifications for rig fire
protection;
reviewing material safety data bulletins (or equivalent) for all
chemicals to be used on the rig; and ensuring that (if acids and/or
caustics are to be used) an adequate clear water source is provided for
eyewash/emergency showers;
identifying specific hazards, and specifying personal protective
equipment to be provided (e.g., breathing apparatus in a potential H2S
atmosphere; survival suits in cold environments);
reviewing all contingency plans,
shutdown systems;

station bills,

and emergency

reviewing safety programming (e.g., safety meetings, accident

investigations, hot work permits), and outlining contractor safety training
for all employees, including rig management, to ensure consistency with
modern safety management concepts; this includes reviewing the
contractor's safety manual.
reviewing plans for onsite potable water treatment, cooking and eating
facilities, and noise-level documentation, to ensure compliance with
applicable regulations;
attending the pre-spud meeting to ensure that all pressure tests have
been completed, equipment (chains, wireline, etc.) has been inspected,
fuel transfer and personnel transfer procedures are in place, and pit
drills, etc. have been completed.
The ultimate goal of any loss-prevention effort is to minimize risk to personnel
and property. The safety advisor should ensure that the standards and
procedures outlined in the planning stage are strictly followed through the
completion of the well.
Environmental and Regulatory Advisor

The environmental and regulatory advisor identifies, gathers, and submits the
necessary permits and reports required by state and/or federal agencies for
approval of a permit to drill the subject well. The responsibilities include
reviewing stipulations of lease sale and permit agreements and
preparing copies of these stipulations for drilling engineers and
operations personnel;
gather information from exploration and engineering groups for
preparation of the exploration plan (if necessary) and the application for
permit-to-drill documentation;
coordinating externally prepared documents such as the Rig Discharge
(NPDES) permit, the Environmental Report, the Oil Spill Containment
Plan, the Environmental Training Report, and the Hazard and Biological
Survey;
providing the drilling engineer with a timetable of permit application
and approval.
The goals of the environmental and regulatory advisor include:
providing support for timely preparation of required pre-spud permits
and reports;
assisting the drilling engineers and operations personnel in
identifying and complying with stipulations of lease and permit
agreements.

Purchasing/Materials Coordinator
The purchasing/materials coordinator's primary role during the planning stages
of a well is to give functional guidance with regard to obtaining critical
materials. Primary responsibilities include:
supplying drilling engineers with information regarding availability,
sourcing, lead time, and pricing of materials required for the well;
serving as a liaison between E&P groups to facilitate inventory and
stock sharing during material shortages;

coordinating supplier selection for common items required by several

units of organization to ensure supply and economic advantage;
coordinating material acquisition, delivery, and payment;
forecasting
purposes;

price

and

supply

variations

for

general

planning

assisting in quality-control programs, operation audits, claim

handling, and task force procurement activity as requested by operating
units;
working with engineers to secure competitive quotations on bid
services and materials within specification;
reviewing requisitions
procurement activities.

and

maintaining

accurate

records

of

The goals of the purchasing/materials coordinator include:

providing timely support in the selection and procurement of required
materials;
providing commercial support in procurement activity;
providing market intelligence as to which manufacturers offer the
most competitive combination of material quality, service, price, delivery,
and operating costs.
Budget Objectives
The items common to budget review and approval that are directly addressed
by well planning are the preparation of cost estimates, and the subsequent
development of well programs to meet the project objectives while staying
within approved fund allocation.
Cost estimation is an engineering function, consisting of coordinating design
parameters for material and procedures with cost expectations. Generally there
are two levels of cost estimates:

Long-range cost estimates are prepared annually for planning purposes.

These cost estimates are usually made without good control data, and
may or may not include such items as contingency funds for inflation,
expected price increases, and market conditions.

"Authorization for Expenditure", or AFE cost estimates are prepared with

good supporting data and after a preliminary well design by the
engineers.

The relative importance of well cost to overall exploration and production costs
merits some discussion. Entering into a lease or drilling agreement may require
commitment of tens if not hundreds of millions of dollars. Discoveries in
remote areas could require additional hundreds of millions of dollars for
establishment of a platform, a gathering facility, or a pipeline to get the fluids
to market. How then should the cost of drilling the well, which may only total a
few million dollars, be weighed against these other huge sums of money? How
important is it to get the well cost estimates within 10% or even 25% of the
final well cost?
One answer (if not the answer) is that regardless of an estimates accuracy, a
well-cost commitment represents a real out-of-pocket expenditure. It depletes
the available budget regardless of immediate outcome. A cost estimate that is
too high could negate the chances for approval of a viable project. An
excessively high well-cost estimate could require additional partners to absorb
a portion of the risk at the cost of decreasing the operator's share of the
potential profit. A high well-cost estimate that is approved does, in fact,
withdraw available funds from other possible projects as well. The primary
danger of a low well-cost estimate is that an investment may be made into a
project that would not otherwise be undertaken, again misdirecting resources
from other worthwhile projects. Cost overruns, whether due to poor estimates,
poor performance, or unanticipated problems, could deplete available
resources at the expense of projects not yet begun.
The need for accurate well-cost estimates is critical for budgetary planning.
Exploration personnel may be frustrated when their efforts in developing a
prospect are defeated by pessimistic well-cost estimates prepared by the
drilling engineers. The only solution addressing both of these situations is to
improve the working communication of the team members involved in a well
program, and improve both the cost-estimation process and the preparation of
drilling programs.
Prospect Selection
Production Wells
Production wells are usually identified by the need to maintain or increase
production from an existing field. Also in this category are the secondaryrecovery, water- or gas-injection, workover, and recompletion efforts that team
preparing the well program for these wells usually includes the drilling

engineer, the production geologist, the production engineer, the reservoir

engineer, and the production operations superintendent assigned to the area.
Their combined knowledge of the area should contribute to a well plan that is
programmed toward efficiency in drilling, completion, and production.
The requests for well-cost estimates and well programs should be well
documented. Cost estimates for both drilling and completion activities should
be within 10% of actual, with little or no contingency factors built into the
estimate.

Exploration Wells
Exploration wells usually require a great deal of geological and geophysical
data gathering, processing, and evaluation. Detailed offset well data often is
unavailable. The search for exploration well prospects can include the following
general activities.
Topology Study Surface geological structures that indicate the tectonic or
depositional activity necessary for formation of potential hydrocarbon-bearing
reservoirs must be identified. These structures include:

anticlines;
fault traps;
salt domes;
reef carbonates;
sand-body lenses;
Unconformities.

These structures may be identified in a number of ways. Existing aerial

photographs and radar surveys often are used. Topographic maps can be
created by use of sophisticated satellite photography, with infrared detectors,
computer-enhancement techniques, and cameras that can photograph through
clouds and ocean depths.
Seismic Evaluation: Seismic studies are made and evaluated by geophysicists
to determine the subsurface character of the areas under study. A formation
requires two mechanisms to qualify as a prospective reservoir. First, it must
contain a reservoir type of rock, such as a sandstone or carbonate, with
sufficient porosity to contain appreciable fluid volumes. Second, there must be

a trapping mechanism that has allowed formation fluids to accumulate but not
allowed them to dissipate into other formations.
Although interpretation of seismic data is the job of the geophysicist, the
drilling engineers preparing the well plans often can benefit from studying the
seismic maps. Shallow seismic or shallow "bright spots" on normal seismic
could represent a shallow gas hazard. Other features could indicate formation
type, abnormal pressures, faults, steep formation dips, caprocks, etc.
Surface Geology Study: In addition to the large-scale photographic studies of
an area, local geological study can play an important role in identifying an
exploration prospect. Local surface indications, such as oil or gas seepage, may
identify a prospect. In cases where photographic study of topography gives
broad indications of potential, local surface geology study contributes to the
body of knowledge available by identifying possible lithology sequences.
Surface outcrops of formations that should be penetrated as the well is drilled
can give clues about rock characteristics such as porosity, composition, and
density.
Actual drilling prospects will be selected by management after evaluation of
profit potential. This simplified description of prospect identification is intended
to give some background on the data generated by the geosciences group in
the development of a well prospect.
Reservoir Potential Evaluation
The estimated reserves of the reservoir must be weighed against the estimated
cost to produce those reserves. The calculated rate of return and degree of
confidence in these estimated figures determine the economic viability of
drilling the reservoir.
One critical feature of reserve estimation is the quality of available control
data. Production fields have good control by way of section cores, sidewall
cores, logs, and production tests. Production wells intended for optimum
depletion of the reservoir can be targeted to specified sections and depths of
the structure with confidence of expected production.
Exploration wells must rely on offset well information for reservoir
characteristics that might be similar to those of the structure in question.
Basically, the reservoir engineer must take the structure data from the
geologists and geophysicists and prepare a reserve estimate based on
assumed values for porosity, permeability, and volume of the structure
containing hydrocarbons. Reservoir estimates are prepared by varying these

major parameters to arrive at optimistic, pessimistic, and most-likely reserve

volume and potential production rates.
Cost Estimation
In the preliminary stages of reservoir-potential evaluation, gross cost estimates
for drilling, completion, and producing the reservoir are prepared. Production
costs could be orders of magnitude greater than drilling and completing the
wells.
The term "threshold reserves" describes the minimum volume of recoverable
hydrocarbons necessary to cover the estimated cost of exploiting the reservoir
while providing a suitable rate of return. The planning department serves as
management's sounding board in weighing the figures calculated by the
technical groups. Time becomes a calculation factor as present dollars must be
weighed against inflation, expected oil and gas prices, and full field production
costs. All of these factors could change drastically in the time span from
initiation to on-line production of the hydrocarbons. Finally, the probability of
success must be weighed against the potential profit.

Prospect Acquisition
The drilling engineer coordinating the well plan usually is not involved in the
prospect acquisition process. It is essential that commitments be made clear, in
writing, at the initial planning meeting by someone knowledgeable of the
agreements. The drilling engineer should follow up on this aspect of well
planning in the event that these commitments are not identified at the initial
planning meeting. Compliance with the stipulations in these agreements in
regard to program review, data copies, etc. are the responsibility of the project
coordinator.
Acquisition of rights to drill a property follow no specific formula. Methods
include:
bidding on leases open to all comers;
individual arrangements made with private property owners;
oint venture agreement to share in a new or existing operation;
arm-in agreements with existing lease holders;
rading of properties for cash, other properties, share of potential
reserves, etc.;
outright purchase of property, including mineral rights.

As signified by the dotted line on the well planning process flow chart (Figure
1), the timing or position of the prospect acquisition in regard to the other
sections could be variable.

Figure 1

Aspects of prospect acquisition that may require special consideration in well

planning are discussed below.
Joint Venture Agreements

These agreements may require any or all of the following:

partner approval of well plan with adequate review time allowed;
attendance of partner representatives in initial, interim, and/or prespud meetings;
partner representation during testing of possible production zone;
copies of drilling reports, mud recaps, logs, cementing reports, etc.;
utilization of specified equipment, procedures, service organizations,
etc.;
timetable for spudding, testing, or production as per scheduled
commitments.
Private Property Owners

Agreements with private property owners may involve any or all of the
following:

provision for a water well;

location and road limitations;
a specified date by which the well is to be spudded;
land reclamation to original condition.

Location Selection
Location Selection is an event rather than a task. The prospective well is given
a designation and a specific location at this time. Management has accepted
the objectives and projected rate of return at the initial estimated gross costs.
The next step involves preparing an official request for funds to drill the well.
AUTHORIZATION FOR EXPENDITURE (APE) PREPARATION
Introduction
AFE preparation requires a thorough geological and geophysical report, a cost
estimate for drilling and completing the well, and an economic analysis of the
proposal. The primary topics of cost-estimate preparation include:

definition of the location, objectives, and geological prognosis;

cost and well design considerations;
preparation of an abbreviated well plan for cost-estimation purposes;
the methods and organization of cost estimation.

The quality of cost estimates and subsequent well plans can be improved if the
following basic ideas are applied:
The supporting data must be as complete and accurate as possible, and
must be available when it is needed;
The work effort must be organized for optimum efficiency;
Available technology must be used to its full advantage.
These ideas should be used to make the most of the limited time available in
preparing an abbreviated well plan and calculating estimated expenditures.
Geological Input
The geologists' clearly established and communicated objectives for the well
can assist the drilling engineer in preparing the AFE cost estimate. Well Cost
Request Forms should summarize the available geological data and specify
expected coring, testing, and logging intervals. In addition to well identification

and surface location, the following subsurface features and well planning
requirements could assist the drilling engineer in his preparation of the well
plan:

Lithology data
Prognosis of stratigraphic column with formation names and
type of formation rock
Expected formation tops
Expected formation dip ranges

Expected total depth

Likelihood of drilling deeper

Potential shallow gas hazard
Anticipated pore pressures
Potential production zones
Type of reservoir rock
Expected permeability and porosity
Anticipated formation fluids, including acid gases
Anticipated formation pressures

Expected coring intervals

Conventional or sidewall cores

Expected logging program
Log types
Log intervals

Expected intervals for formation testing

Drill stem tests (DST), production tests (PT), or repeat formation

tests (RFTs)
Potential hole problems (from offset well data)
Lost-circulation zones

 Abnormal pressure
Sour or acid gases
Plastic salt beds
Geothermal intervals
Sloughing shales
Other

List of nearest offset wells

List of available offset well data

All potential hole problemsespecially those on exploration wells with limited

offset dataneed to be discussed.
Although the geophysical summary is not normally a part of the geological
information presented, it should be made available to the drilling engineers
preparing the cost estimate.
Completion and Testing Requirements
The AFE cost estimate for an exploration well is normally separated into dryhole and completion costs. The costs for drillstem tests and RFTs are included
in the drilling costs. Production testing is a completion cost. Naturally, these
costs can be more closely predicted if the well being drilled is a production
well. In either case, for the benefit of better well-cost estimates, there needs
to be close communication between the drilling engineer and the reservoirproduction engineers in establishing the planned testing and completion
requirements and associated well costs.
For production wells, the production engineers should prepare the completion
cost estimate for inclusion with the drilling engineers' drilling cost estimate.
Completion costs are based on;

the estimated number of days, and the day rate, for operation;
the type of completion (single, double, commingled, etc.);
the tubing design (size, grade, connections, etc.);
the expected method of stimulation (acidizing, fracturing, etc.);
the formation consolidation (gravel packing) requirements;
the need for remedial cementing for zonal isolation;
tangible well costs for tubulars, equipment, and the wellhead;

additional logging requirements to determine cement bond quality, zonal

isolation, etc.;
the number of intervals to be perforated, and the perforation density;
the need for sour-gas or acid-gas rated equipment;
the expected production rates and pressures;
the production mode (flowing, gas lift, pumping, etc.).

As with drilling costs, completion costs are usually estimated without the
benefit of a comprehensive design. The actual completion program should be
tailored to respond to the information gathered during drilling, testing, and
logging.
Production engineers designing a wildcat testing and completion program must
decide whether the well is to be made into a production well if a discovery is
made. If so, plans must be made and costs estimated for the completion
equipment, tubing, and wellhead. Quite often, an adequate design cannot be
made until formation pressures, fluids, production rates, stimulation
requirements, and other variables are evaluated. In these cases, the wildcat
well is often designed as a testing conduit only, intended to evaluate the
prospect and be abandoned.
If the wildcat has a substantial likelihood of success, and the formation
characteristics are predicted with confidence, the wildcat may be planned like a
production well.
In production wells, the production engineers have access to the reservoir data
necessary to plan future completion programs. In wildcat applications, they
need to have data from the geologist to plan the evaluation program. They in
turn must provide the drilling engineers with information that affects the
drilling design. Specifically, the drilling engineers require tentative plans
concerning:

the type of testing required for specified zones;

whether testing will be done through drillpipe or a test string;
formation fluids and expected pressure (oil, gas, H2S, CO2, etc.);
fracture or acid treatments of specified formations;
maximum expected shut-in tubing pressures, fracture pressures, and
rates;
the size of completion tubing string(s).

Drilling Considerations
Drilling engineers often must provide an AFE well-cost estimate without having
the time to prepare a complete well plan. The request for the cost estimate is

normally communicated through a letter from the exploration or production

department specifying a required return date. Pertinent geological data is
usually given on a Request for Well Cost Form, which accompanies the letter.
The task of preparing the AFE cost estimate may be considerably simplified if
the previously prepared "budget" or "objectives" cost estimate was based on
reasonably good data. The initial gross cost estimate is expected to be within
25% of the actual cost to drill the well. The AFE estimate is expected to be
within 10%. This expectation of greater accuracy is primarily the result of
better-defined geological parameters and a more detailed examination of
drilling requirements. The drilling engineer must review the geological
considerations as well as the completion and testing requirements outlined
earlier, and prepare an abbreviated well plan.
In summary, the drilling engineer must:

verify data from geology;

identify completion and testing requirements;
review location considerations;
outline expected formation pressures;
review potential drilling problems;
review directional plan considerations;
select casing sizes and setting depths;
identify likely mud program;
prepare preliminary casing design;
identify tentative wellhead requirements;
review cementing requirements;
predict drilling time from offset well performance.

Cost Estimates
Preparation of well-cost estimates requires research of offset well performance
to review the problems encountered, the materials used, and the effectiveness
of the well programs (mud, cementing, casing, etc.) attempted. Insufficient
offset data will necessitate heavy reliance on assumptions made from the
geological prognosis, which also suffers from the lack of support data.
Offset data sources include:

commercial well data services that can supply drilling curves, bit records, casing
setting depths, and mud type used; major hole problems are also listed;
service companies (mud, cementing, bit), which can provide cost information and
general history for wells they serviced in the area;
in-house well histories for wells drilled in the area.

Once the general sources of information are researched, preliminary decisions are made
by the drilling engineers regarding casing setting depths, tentative mud program, tangible
equipment requirements, and expected drilling time. The next step is to begin listing the
tangible and intangible cost items and assigning estimated costs to these.
There are two techniques that can assist in estimating costs once the
preliminary design decisions are made. Both require substantial detail on the
AFE cost listing. The basic reason for providing greater detail is that individual
activities can be considered separately, which is more accurate than relying on
"contingency" percentages or padded estimates to cover unestimated but
anticipated well costs. The two techniques involve the use of graphs or
computers to select the cost-per-well section for each of the major items. As
long as the data generating the curve or the computer data input relate to well
sections similar to that anticipated on the planned well, an average
performance can be generated.
A system of coding items in the AFE and coding invoices to fit these categories
is necessary to begin saving this data for in-house wells. Once implemented,
this can also provide easy access to information concerning specific operation
performance, problems, and services. The wells must also be categorized
according to depth and type of well. Another potential benefit of this approach
to cost estimating is that if engineers prepare the curves, review the data, and
establish the comparison sections, a technician or clerk may be able to read off
the curves or computer listings and do some of the manual data manipulation,
allowing the engineers to review the generated costs and spend more time on
the actual design of the program.
AFE Approval
Management approval of a project's AFE represents approval of the stated
objectives and the cost to meet those objectives. Major changes to the project
after the AFE has been approved may seriously affect the chances of meeting
the new objectives with the allocated funds. Serious changes, such as a deeper
total depth, additional testing or coring, or target relocation requiring serious
directional control, should be documented and explained, as later AFE
supplements to the original approved cost allowance may need to be justified.
After an AFE has been approved, the project takes on a new perspective. The
change in status is marked by a change in project coordinator. The exploration
or production geologists or engineers who defined the prospect, documented
its potential worth, and prepared a package for management approval must
turn the project over to the drilling engineers for preparation of a drilling plan.