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1
PERMIAN WATER OUTLOOK
FEBRUARY 26, 2019
DATA.INSIGHT.OUTCOMES
30 YEARS OF ENERGY DATA INNOVATION
Transforming complex data into actionable, high value intelligence for responsible and profitable decisions about water resources and the water
services market.
Provide comprehensive assessment of Permian Basin water utilization to address future water management approaches.
I. Derive estimates of future:
▪ Water use
▪ Water production
▪ Available disposal capacity
II. Assess water management business structure:
▪ Range of appropriate solutions
▪ Identification of best practices
▪ Consideration of appropriate economies of scale
▪ Impacts of technology
3
B3 Water Study Objectives
I. Permian Basin water budget (study inputs/assumptions):
▪ Oil & gas production forecast
▪ Water use forecast
▪ Water production forecast
II. Current activities:
▪ Water production validation
▪ Pressure forecasts
4
Outline
5
Oil+Gas Production Forecast
0
20
40
60
80
100
2018 2020 2022 2024 2026 2028
$/b
bl
Oil
0
1
2
3
4
5
2018 2020 2022 2024 2026 2028$
/mm
btu
Natural Gas
6
Low price scenario: CME forward curve 11/17/2018High price scenario: Drillinginfo 3Q18 forecast
Forward Price Curves
year year
7
Permian Operator Breakevens
0
20
40
60
80
100
Source: Drillinginfo ProdCast and B3
Most major Permian Basin producers operate Tier 1 and 2 properties with half-cycle breakeven costs <$55
Bre
ake
ven
Pri
ce (
$)
Permian Basin Operator Breakevens
$55
Tier 1
Tier 2
Tier 3
0
2
4
6
8
10
12
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
High price scenario
Low price scenario
Pro
du
ctio
n (
mm
bo
e/d
ay)
8Source: Drillinginfo Prodcast and B3
Year
Permian Basin Production Scenarios
8-10 mmboe/day forecasted Permian Basin production by 2029
Low price scenario with 10% IP improvement Low price scenario with 10% IP improvement & 10% greater costLow price scenario with 10% greater costLow price scenario with 10% IP improvement & 10% greater cost & 15% greater well spacing
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Water Use Forecast
10
Frack Water Forecast Methodology
→ X=
Production/Month
(Forecasted)
Wells Drilled/Month
Average Water
Use/Well
Water Use/Year
10Subareas
37 DifferentSub-Subareas(e.g., Bone Springs, Spraberry, Wolfcamp)
3 Tiers Based on DI Estimates ofBreakeven Price
Water Use Forecast Methodology
=
0
100
200
300
400
500
600
700
800
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Ne
w D
rilli
ng
(We
lls/M
on
th)
High price scenario
11Source: Drillinginfo and B3
Higher price scenario drives development of ~50% more wells by 2028
Low price scenario
Year
Permian Basin Drilling Scenarios
0
1,000
2,000
3,000
4,000
5,000
DE Bone. Spg DE Spraberry DE Wolfcamp Mid - Sprab Mid - Wolf
Mean
High
Low
Median
12Source: FracFocus and B3
Water Use Per Frac Varies WidelyA
vera
ge W
ate
r U
se (
mb
bl/
we
ll)Water Use (2017)
13
0
1
2
3
4
5
6
7
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
High price scenario (mean)
High price scenario (median)
Wat
er
Use
(m
mb
bl/
day
)
Source: FracFocus and B3
Low price scenario (mean)
Low price scenario (median)
Year
Permian Basin Forecasted Water Use
2019: 1.2 Bbbls
2028: 1.8 Bbbls
2028: 1.2 Bbbls
2023: 0.9 Bbbls
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Water Production Forecast
15Source: B3
Permian Sub-Basin Water Use Comparison
0.0
0.5
1.0
1.5
2.0
0
5
10
15
20
2016 2017 2018
BOE
Water:BOE
Water
Mean = 1.90:1
Low Price Scenario
Permian Basin Forecasted Water ProductionP
rod
uct
ion
(m
mb
bl/
day
)
Year
0
5
10
15
20
2019 2021 2023 2025 2027 2029
1.90:1
Wate
r:BO
E
2.05:1
1.60:1
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CURRENT OIL TO WATER RATIOS IMPLY LARGE PRODUCED WATER VOLUMES
0
5
10
15
20
25
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Low price scenario
Low price scenario
Source: B3
2028: 5.6 Bbbls
2028: 7.0 Bbbls
High price scenario
Permian Sub-Basin Water Use ComparisonProduction and Use ComparisonW
ate
r (m
mb
bl/
day
)
Year
High price scenario
2028: 1.8 Bbbls
2028: 1.2 Bbbls
Production
Use
2019: 1.2 Bbbls
2019: 4.1 Bbbls
2023: 0.9 Bbbls
1717
• Production economics in the Permian Basin are generally sub-$55 half-cycle breakeven in many Tier 1 and Tier 2 areas.
• Given the likelihood that prices fluctuate between $55 and $75 for the foreseeable future, water demand for hydraulic fracking will be between 0.9 and 1.8 Bbbls per year.
• Dependent on number and location of new wells, produced water volume is expected to exceed maximum water demand by 3x-5xfor the given production scenarios.
• Over the next decade, 35-60 B bbl of water in excess of water use for hydraulic fracturing will need to be managed. Reuse is, at best, a partial solution.
Summary of Findings to Date
18
Current activities
Permian Basin Pressure
Permian Basin Pressure Water Production Validation
19
Solaris DJK 48 SWD 1900
800
700
600
500
400
300
200
100
0
• P-18 (Skim Oil/Condensate Report) provides water, oil, and condensate amounts received at commercial disposal facilities from producing properties.
• Data collected in platform being used to derive monthly lease-level water production and WOR.
Vo
lum
e (
mb
bl)
Permian Basin Pressure • Empirical/anecdotal evidence suggests
increasing pressure and seismic activity due to subsurface produced water disposal.
• Pressures increases are expected to be both local (generally transitory) and distributed (more persistent), influenced by the rate of fluid injection, the cumulative volume of fluid injection, and associated rock properties.
“The San Andres Problem” (Guidon)OnlineiSource:ihttp://www.aade.org/app/download/7247547316/Th+SanAndresProblem_Permian+AADE_5-10-18.pdf
• Basin-wide description/prediction of spatial and temporal pressure is currently hindered by lack of aggregation/analysis of available geologic and injection data.
Permian Basin Pressure Permian Basin Pressure
Pressure/Rate Limits
101
67
101 102
85
54
3829
13 15
0
20
40
60
80
100
120
Nu
mb
er o
f W
ells
Fraction of Permitted Pressure
Permian Basin (Texas)
238
156
89
53
26 20 12 8 2 10
50
100
150
200
250
Nu
mb
er o
f W
ells
Fraction of Permitted Rate
Mean: 0.36Median: 0.34s2: 0.24
Mean: 0.19Median: 0.14s2: 0.17
21
Pressure Modeling• B3 is using industry standard
groundwater flow simulation software to generate pressure forecasts at Basin and subarea scales.
• Models to account for static/dynamic formation and fluid properties and be calibrated to historical fluid injection/pressure response.
• Results intended to be used to address the nexus of localized, near-wellbore pressure perturbations due to active injection and larger-scale, background pressure changes attributed to cumulative disposal.
Pressure Modeling for Capacity EstimationPressure Modeling for Capacity Estimation
Phi-H Upper DMG
Inputs:• Basin structure• Basin stratigraphy• Basin rock and fluid properties • Injection rates/cumulative volumes• Downhole pressure• Well properties/distribution
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23
Appendices
2424
Absolute Water Disposal (2010-2017)
Total
Midland Basin
Delaware Basin
Other
2525
Relative Water Disposal (2010-2017)
Midland Basin
Delaware Basin
Other