Man vs. Drilling Machine Can be a Productive Thing
Authors: Rassenfoss Stephen 
Published: February 2020

A new automated drilling program on a rig sets off a battle of wits. Drillers first focus on learning to use it, and then figure out the underlying logic of the software.

“The people learn from that and it’s not too long before they have ideas that can be put into practice that can improve whatever the operation is,” said Matt Isbell, drilling engineering advisor for Hess. The oil company uses six Nabors rigs, equipped with digitally controlled systems to drill in the Bakken.

That conflict is good for Isbell, but not for everyone. “In terms of the designers of these automated systems, they’re always disappointed when people try to beat them, and do successfully beat them,” said Isbell.

The tension is required because the value of the Nabors’ rig automation, developed in partnership with Hess, depends on finding new ways to improve drilling.

While the word automation is associated with machines replacing humans, payroll reduction is not their goal. “People are still critical. Machines do not learn by themselves. People learn. We are still counting on people to be the leaders of this,” he said.

Drilling productivity improvements are likely required to meet Hess’ aggressive plans to increase production and profits in the Bakken.

In its recent third quarter report, the company reported an 8% drop in drilling and completion costs since the first quarter, to $6.7 million per well.

A big reason for that was a shift to plug-and-perf completions. Changing old habits, such as fracturing using sliding sleeves, is part of a drive to create a leaner drilling operation.

“Through the continued application of lean manufacturing, we expect to achieve further cost reductions as we progress toward our targeted drilling and completion cost of $6 million per well,” said Gregory Hill, chief operating officer and president of worldwide exploration and production for Hess, during its third quarter earnings call.

Drilling productivity has been synonymous with drilling wells faster. A chart in a recent paper showed how Hess has roughly halved the average time required to drill a well since 2012, and narrowed the difference between its fastest and slowest jobs (SPE 195818).

“Shave off longer delivery wells, you generate improvement—there is still a little inconsistency there in flat (non-productive) time and drilling time. We are hard at work at that,” Isbell said.

Doing what they are doing now even faster is not an option. “If we continue to compress these activities, expecting machines or people to do them faster… the physics does not support that,” Isbell said.

Hess does see an opportunity to use automation to build more and better quality wells. During that recent call, the company said it plans to use its fleet of six rigs to push Bakken production up to 200,000 BOE/d by 2021. Then it will use four rigs to sustain that output in a play where rapid decline rates are a given.

This plan is expected to result “in material, free cash flow generation across a range of prices,” said John Hess, chief executive of Hess during the call with financial analysts.

That bit of financial jargon represents the current Holy Grail for shale producers. It means consistent profits that are high enough to satisfy investors, even when oil and gas prices are low, which is what shareholders are demanding.