Dominator. Showboat. Brass Monkey. These are not player names in the re-established XFL; these are project names given to colossally proportioned drilling pads in the Permian and Appalachia. A single one of these well pads can be home to 20, 30, even 60 or more permitted well spots, each with miles-long laterals branching out in multiple directions. In today’s blog, we begin a series exploring the motivations that sparked this trend to larger pads and discuss the impact they’re having on the upstream and midstream sectors.
Following the price crash in 2014-15, the U.S. oil patch weathered the storm, in part by reducing costs. Then, when prices started to recover, the major basins rebounded with a renewed focus on efficiency (see our Better series). Industry observers who had been skeptical as to the longevity or resilience of the shale boom prior to that had to concede that it wasn’t a flash in the pan but a foundational shift, and that wasn’t going away anytime soon. It was during that time — when prices were recovering but survival was still a battle — that more and more of the smaller independents who initiated the Shale Revolution began to flip their investments to larger producers with deeper pockets. These new owners then sought to exploit the innovations developed by the independents but also to use their substantial balance-sheet strength to fund large capital projects. They also used their economies of scale to transform what had been a bespoke creative endeavor for getting the most out of each well into a large-scale, assembly line-like manufacturing operation (see Piranha!).
It was in this environment that truly large-scale pad drilling projects started gaining traction. Pad drilling itself is nothing new. It’s the practice of drilling multiple wells from a single surface location. Though it was originally developed on the Alaskan North Slope in the 1970s, modern pad drilling techniques more closely trace their development to offshore platforms, where multiple directional wells needed to be drilled from a single structure. Producers recognized that by centralizing drilling efforts on the surface, pad drilling could help solve challenging production conditions such as rough terrain, environmental constraints, or urban restrictions. That’s one reason why pad drilling has represented a growing proportion of total wells drilled since the Shale Revolution kicked off in the Barnett Shale and then in the Rockies in the mid-to-late-2000s. There, the advancement of horizontal drilling techniques synergized well with the drilling multiple wells from a single location and made apparent the economic incentives of pad drilling — namely, splitting the substantial infrastructure, logistical, and rig-mobilization costs among multiple wells. In its current context, the goal of pad drilling is to increase each rig’s productivity by decreasing cycle times while simultaneously reducing costs. But prior to the past few years, the scale of pad drilling projects was generally more conservative than what we’ve seen reported recently.