3. • The cost of the bit is not the concern !
• Performance is more important
– projected ROP
– projected footage
• Relevant cost parameter is the “Cost per Foot”
– daily operations cost
– trip time
– bit cost
Applications of Bit Economics
4. Cost per Foot (CPF)
• where
B bit cost, $
R rig rate, $/hr
T rotating hours
t round trip time, hr
F footage drilled, ft
bit cost + rig rate x (rotating hours + trip time)
footage drilled
CPF =
B + R x ( T + t )
F
CPF = $ / ft
5. Cost per Meter (CPM)
• where
B bit cost, Rub
R rig rate, Rub/hr
T rotating hours
t round trip time, hours
F meters drilled
bit cost + rig rate x (rotating hours + trip time)
meters drilled
CPM =
B + R x ( T + t )
F
CPM = Rub / m
6. • Direct application in bit selection
– calculate CPF for all bits in all offset wells
– combine records for common hole sizes
– for each hole size, plot CPF versus depth
– select bits based on lowest CPF per interval
Direct Application of CPF
• Pros and Cons
? a good approach if there are many offsets
? downside : “best” bit may not be in database
? rig / crew capabilities may not be consistent
7. Example - Direct Application of CPF
9-7/8” hole sections, 4 offset wells, 31 bit runs, 6 different bit typesDepth,ft
Cost per Foot, $/ft
43
7
52
7
53
7
53
7
53
7
8000
9000
10000
11000
12000
13000
14000
0 100 200 300 400
Well 1
Well 2
Well 3
Well 4
8. Indirect Application of CPF
• Indirectly use CPF to select a bit
– project the economics of an untried bit
– use CPF to derive a “break-even” curve
– make judgement as to which side of the breakeven curve the
untried bit’s performance is likely to fall
• Pros and Cons
- can provide incentive for an expensive bit
- requires :
- reasonable estimates of ROP &
footage
- good judgement that breakeven is
feasible
9. Breakeven Curve
• Use best previous bit’s CPF
and untried bit’s cost (B)
• Derive footage equation :
F = B/CPF + R (T+t)/CPF
• Use several values of T and
calculate F footages
• Calculate ROP = F/T
• Plot ROP vs. F (BE curve)
0
20
40
60
80
100
0 500 1000 1500 2000 2500
Footage
ROP, ft/hr
Cost
Effective
Not Cost
Effective
BE
10. Breakeven Curve
• Calculate the actual drilling
performance – ROP and
footage :
ROP = F / T
• Plot ROP vs. F
• Check this value against
the BE curve
0
5
10
15
20
25
100 200 300 400 500
F bit run length, ft or m
ROP, ft/hr or m/h
Cost
Effective
Not Cost
Effective
BE
11. Summary of the Bit Selection Process
• Collect information
• Identify potential bits
– derive compressive strength log
– match formation strength to bits
• Use offset data to make a CPF or CPM plot
• Select bit with lowest historical CPF or CPM
• Identify alternative bit opportunities
• Conduct break-even analysis
14. Calculate Data for BE Curve
L9 =
B9 + R (t + T9)
CPM8
=
46,400 + 4865 (7 + T9)
453.86
ROPi =
Ti
Li
Li = 10.72Ti + 177.27
Create a table : Ti Li ROPi
2
4
6
8
…
198.7 99.4
Price of new bit B9 = $46,400
15. Proposed Cost of CPM to be Rig Trip Rotating Meters ROP
PDC Bit Prop. Bit Competitive Rate Time Hours Drilled (m/hr)
Brand x 46400 453.86 4865 7 2 198.7 99.4
Brand x 46400 453.86 4865 7 4 220.1 55
Brand x 46400 453.86 4865 7 6 241.6 40.3
Brand x 46400 453.86 4865 7 8 263 32.9
Brand x 46400 453.86 4865 7 10 284.5 28.5
Brand x 46400 453.86 4865 7 12 305.9 25.5
Brand x 46400 453.86 4865 7 14 327.3 23.4
Brand x 46400 453.86 4865 7 16 348.8 21.8
Brand x 46400 453.86 4865 7 18 370.2 20.6
Brand x 46400 453.86 4865 7 20 391.7 19.6
Brand x 46400 453.86 4865 7 22 413.1 18.8
Brand x 46400 453.86 4865 7 24 434.5 18.1
Brand x 46400 453.86 4865 7 26 456 17.5
Brand x 46400 453.86 4865 7 28 477.4 17.1
Brand x 46400 453.86 4865 7 30 498.8 16.6
Brand x 46400 453.86 4865 7 32 520.3 16.3
Brand x 46400 453.86 4865 7 34 541.7 15.9
Brand x 46400 453.86 4865 7 36 563.2 15.6
Brand x 46400 453.86 4865 7 38 584.6 15.4
Brand x 46400 453.86 4865 7 40 606 15.2
Brand x 46400 453.86 4865 7 42 627.5 14.9
Brand x 46400 453.86 4865 7 44 648.9 14.7
Brand x 46400 453.86 4865 7 46 670.3 14.6
Brand x 46400 453.86 4865 7 48 691.8 14.4
Data for the BE Curve
