Resource Plays
With its immense base of developed and undeveloped lands, totalling approximately 7 million acres at year-end 2008, Penn West has exposure to nearly every major resource play in western Canada. Resource plays are large, repeatable and scalable concepts that target known, regionally extensive but technically unconventional oil and natural gas deposits. Through repetition the operator can improve well results and the drilling/completion/production processes, thereby driving down unit costs and increasing profitability. Resource play-type wells typically exhibit long-life production at low secondary annual decline rates (following a steep initial decline); having a base inventory of many such wells helps a large producer maintain stable volumes over the long term.
Today's resource plays are being driven by improving technologies. A key innovation has been applying hydraulic fracture-stimulation in multiple stages along a horizontal well. This technique is highly effective at exposing much more reservoir surface area to the wellbore, a key criterion in less permeable or "tight" reservoirs. Although initial capital outlay is greater on a per well basis, the "multi-stage frac" can drive down the costs of achieving a given production rate and developing a given land area because a single horizontal well can access as much reservoir as several vertical wells. To date, Penn West has experienced success with multi-stage fracs in several plays and applications.
In 2008, Penn West allocated approximately 10-12 percent of its field budget to resource plays. In 2009, the focus is to reduce expenditures while evaluating, sorting and testing various resource play concepts to become ready for development when commodity prices recover. Penn West intends to lever its extensive network of pipelines, oil batteries, gas compressors, processing plants and field operating teams to achieve improved capital efficiencies as it proceeds prudently over the longer term.