The Myth of Sweet Spot Exploration
Authors: Haskett William J. 
Published: October 2014

Enormous effort and expense is put forth to explore for "sweet spots", but is it worthwhile? Is it even possible or, more importantly, a good business decision to attempt to explore for sweet spots? It is contended that, at a minimum, the vast majority of sweet spot exploration activity is wasted time and effort. Chasing the "golden carrot" leads to poor decision making and the investment of vast sums of capital in non-economic plays and basins.

While the term "sweet spot" has taken on several different definitions over the previous decade, Industry seems to be settling on the definition being a limited area of productivity which falls within the upper quartile of the productivity of the opportunity. Ambiguity remains concerning the context, however, the concept and intent to drill the best possible productivity is a misguided remnant of the conventional mindset. Our quest should be to rapidly and efficiently evaluate a material area for economic development potential. In this, the understanding of what will eventually constitute a material opportunity is critical. Materiality ultimately delivers control and competitive advantage. While one may argue a coherent and valid sweet spot prediction method provides a competitive advantage, it does so later in the development phase and not during exploration.

At best, sweet spot exploration is unreliable. In high variability reservoirs, the allocation of scarce resources to define successful sweet spot discovery is inefficient and destroys project value. Simply being "lucky" can derail an entire program as the intent shifts to focus on "successful" efforts while the typical well in the area under-produces for lack of engineering and geoscience attention. As such, sweet-spotting will fail to properly characterize the true economic potential of the opportunity.

The drive to define the best, most productive locations within an acreage position misses the point that the value of the acreage will be the aggregated value of the entire developed area. To base development decisions on sweet spot results even in those rare instances when the "blind pig finds the truffle" over attributes causality, ultimately overvalues the opportunity and misleads investors. Sweet spot exploration oriented programs are based on imperfect interpretation are unreliable, potentially misrepresent the project potential and delay efficient development.

The solution is to adhere to a fair and reliable assessment of the opportunity at hand. The early definition of material interest in a material play bodes well for the success of the company. Once the aggregate results have shown economic development potential of an area capable of providing distinct competitive advantage and control of the Company's domain, then sweet spot techniques come to the fore as they contribute to the efficient early capture of upside productivity.

The quickest and lowest risk pathway into an unconventional opportunity is to seek a fair assessment of the entire opportunity, not simply the presumed sweet spot(s). The initial wells into an opportunity should be placed to provide confidence that the extent and productivity of the recoverable hydrocarbons present are greater than the project execution threshold… that what you have is at least as much as what you need to have in order to create/sustain a viable project.

When we enter a play, we do so expecting the aggregate result to be positive. We need to avoid cloaking the development decision with a shroud of unreliable, unrepresentative early well results. Knowledge and figuring out the game is wonderful, but it needs to happen at the correct point in the development process.