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Discovery Digest | digest.canadiandiscovery.com 1

IntroductionStrategic decision-making in the oil and gas

industry is based on the analysis of play metrics.

Plays can be evaluated and compared using

the Sproule Play Metrics module in Canadian

Discovery’s Catalyst Play Evaluation Platform.

Play Metrics combines Sproule’s expert opinion

of production profiles and economic parameters

with CDL’s trusted interpretation of the plays

in Western Canada.

The Sproule Play Metrics module contains

estimated ultimate recovery (EUR), capital and

operating cost, cash flow, net present value

(NPV), payout, rate of return (IRR) and profitability

index (PI) information for each of the major

producing formations. Each formation, or play

group, has been subdivided into detailed plays

(herein referred to as plays).

The following comparative analysis of the Cardium

oil plays is one example of how these data can

be used to make decisions.

Theory and MethodologyThe distinction between reservoir behaviour and

reservoir performance is key to the methodology.

Reservoir behaviour is determined by rock and

fluid properties, such as permeability, relative

permeability, temperature, pressure and fluid

type, and can be largely characterized by the

decline exponent (shape of the curve). Reservoir

performance, however, is influenced by other

factors including local variations in reservoir

quality and completion design, which is largely

a function of the operator.

Wells with similar reservoir behaviour are assigned

to detailed plays. Within each detailed play, the

wells are segregated based on performance, and

type curves are generated for each performance

tier using empirical decline curve analysis, in

accordance with industry best practices. EURs

are determined by fitting the type curves to

production data of individual wells.

Cardium Oil Play MetricsWapiti–Lochend, ABMichele Innes, P.Geol, MBA, Exploration Analyst │ November 23, 2017; updated March 15, 2018

Play(s) Cardium Deep Basin, Cardium Pembina Shoreface

Fluid(s) Oil

Area Wapiti–Lochend, AB

Operator(s) N/A

Cardium oil plays are compared based on EURs and economic parameters using the Sproule Play Metrics module in Canadian Discovery’s Catalyst Play Evaluation Platform.

Discovery Digest | digest.canadiandiscovery.com 2

Economics are forecast on strip pricing at

December 31, 2017, with a 10% discount rate,

on a before tax basis. Basic economic definitions

are provided in appendix 1.

Cardium Oil Detailed PlaysFigure 1 shows EURs for the wells in the Cardium

oil plays. How do these plays compare to one

another? Sproule Play Metrics includes multiple

performance tiers, or type curves, for each

Sproule Play Metrics, Powered by Catalyst © Canadian Discovery Ltd.

Cardium Depositional Edge

Cardium Oil Detailed Plays

Cardium Detailed Plays

EUR (mboe)

!

!

!

!

!

< 100

100.1–200

200.1–300

300.1–400

> 400

T25

T50

R1W6 R1W5

WAPITIWAPITI

WILD RIVERWILD RIVER

STOLBERGSTOLBERG

WILDCATHILLS

WILDCATHILLS

LOCHENDLOCHEND

GARRINGTONGARRINGTON

WILLESDENGREEN

WILLESDENGREEN

KAYBOBSOUTH

KAYBOBSOUTH

EDSONEDSON

TWININGTWINING

ROSEVEARROSEVEAR

CARROTCREEK

CARROTCREEK

PEMBINACENTRALPEMBINACENTRAL

PEMBINAWEST

PEMBINAWEST

PEMBINAEAST

PEMBINAEAST

PEMBINASOUTH

PEMBINASOUTH

FERRIERFERRIER

HIGHVALEHIGHVALEWILSONCREEKWILSONCREEK

Cardium Oil Detailed Plays and EURs1

Discovery Digest | November 23, 2017 updated March 15, 2018 3

detailed play and options for typical, more

favourable and less favourable scenarios. In

order to provide a comparative analysis, the

following is based on the average type curve

for each play, the typical outcome scenario,

and current completion techniques. As such,

readers may find these numbers different than

their own; however, the comparative value of

the analysis is valid.

Figure 2 shows net present value (NPV10) plotted

against profitability index (PI10) sized by EUR

for each oil play group in the Sproule dataset

across the WCSB. As expected, value increases

with profitability, but there is considerable

variation amongst and within formations. It is

also worth noting that the relationship between

EUR and profitability is not so straightforward.

Focusing on the Cardium, figure 3 shows the

correlation between NPV10 and PI10 and the relative

magnitude of EUR based on typical parameters

for each oil play. Ferrier has the highest EUR

and is the most profitable play. However, not all

the plays are profitable under current economic

conditions and higher EUR does not always equate

to greater profitability. The NPV10 and PI10 numbers

used in figure 3, along with the total capital costs

(drill, complete and tie-in) and payouts are shown

in figures 4a–d. Ferrier is the highest cost play

(figure 4b), but also has the highest PI10 (figure 4a),

the highest NPV10 (figure 4c) and the shortest

payout (figure 4d).


≥ 493 ≤ 35

EURs (mboe)

Play Groups

CardiumDunveganVikingCantuarShaunavonLower AmaranthCharlie LakeMontneyMidaleBakkenTorquayDuvernayBeaverhill LakeSlave Point

Bef

ore

Tax

NPV

10 (M

$C)

Before Tax PI10

0.6

0

0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.23.0

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

-500

-1,000

Montney Karr

Cardium Ferrier

Montney Kaybob

Dunvegan Karr

Midale Roche Percee

Bakken 1 mile400m spacing

WCSB Oil Play Group Net Present Value (NPV10) vs Profitability Index (PI10)2


ConclusionWhich is the best play? That depends! There is no

single determining factor, and different corporate

objectives or goals will dictate which metrics

are more important to individual companies. In

this case, the highest EURs can be expected at

Ferrier, along with the most attractive economics

based on PI10, NPV10 and payout.


EURs (mboe)

≥ 401 ≤ 105

Bef

ore

Tax

NPV

10 (M

$C)

Before Tax PI10

0

0

Kaybob South

Ferrier

WapitiPembina Central

Rosevear

Pembina EastGarrington

Pembina WestPembina South

Willesden Green

Carrot Creek

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 2.1 2.2

3,500

4,000

3,000

2,500

2,000

1,500

1,000

500

-500

-1,000

Lochend

Cardium Oil Detailed Plays Net Present Value (NPV10) vs Profitability Index (PI10)3



-2,000

0

0

a. Profitability Index (PI10) b. Total Capital Cost

0

Bef

ore

Tax

PI10

Tota

l Cap

ital C

ost (

M$C

)

c. Net Present Value (NPV10) d. Payout

0

Bef

ore

Tax

NPV

10 (M

$C)

Bef

ore

Tax

Payo

ut (Y

ears

)

0.5

1

1.5

2

2.5Fe

rrie

r

Kay

bob

Sou

th

Wap

iti

Pem

bina

Cen

tral

Pem

bina

Sou

th

Pem

bina

Wes

t

Ros

evea

r

Loch

end

Will

esde

n G

reen

Gar

ringt

on

Pem

bina

Eas

t

Car

rot C

reek

2.13

1.36 1.35 1.32 1.30

1.030.96 0.94

0.68

1.60

1.27

0.94

500

1,000

1,500

2,000

2,500

3,000

3,500

Ferr

ier

Loch

end

Kay

bob

Sou

th

Pem

bina

Eas

t

Pem

bina

Wes

t

Will

esde

n G

reen

Wap

iti

Car

rot C

reek

Ros

evea

r

Gar

ringt

on

Pem

bina

Cen

tral

Pem

bina

Sou

th

2,8002,750 2,7502,700 2,700

3,000 3,000 3,000 3,000

3,1503,200

2,550

-1,000

1,000

2,000

3,000

4,000

Ferr

ier

Kay

bob

Sou

th

Wap

iti

Pem

bina

Cen

tral

Pem

bina

Wes

t

Pem

bina

Sou

th

Ros

evea

r

Loch

end

Will

esde

n G

reen

Gar

ringt

on

Pem

bina

Eas

t

Car

rot C

reek

994 939 886 812

79

-117 -193

-874

1,798

3,616

737

-169

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Pem

bina

Eas

t

Gar

ringt

on

Will

esde

n G

reen

Loch

end

Ros

evea

r

Pem

bina

Cen

tral

Wap

iti

Pem

bina

Wes

t

Pem

bina

Sou

th

Kay

bob

Sou

th

Ferr

ier

Car

rot C

reek

7.4>8.0

6.6

5.0

3.3

2.82.6

2.32.2

6.6

2.8

0.8

Cardium Oil Detailed Plays Economic Metrics4


Selected References

■ Golko, S.J. 2016. A Practical Workflow for Performance Prediction of Low Permeability Reservoirs. Sproule White Paper. Accessed November 2017. https://www.sproule.com/insights/sproule-play-metrics

Appendix 1 Economic Metrics DefinitionsPresent Value (PV)

Present value is today’s value of future cash

flows generated by an investment. To calculate

today’s value, future cash flows are discounted

by an interest rate referred to as the discount

rate. A 10% discount rate was used for this

article.

Net Present Value (NPV)

Net present value is the present value (PV)

minus the initial capital invested.

Profitability Index (PI)

Profitability index is the present value of

future cash flows (PV) divided by the initial

capital invested. The PI can be discounted or

undiscounted, depending on the PV. The PVs

in this article are discounted at 10%, therefore

the PI is considered discounted at 10%. A PI

greater than one indicates an economic project,

and the higher the PI, the more attractive the

project.

Payout

The payout period is the length of time (years)

it takes to recover the initial capital invested.

Break-Even

The break-even point is where revenue is equal

to cost, neither a profit nor a loss is incurred,

net present value is zero and profitability index

is one.

Internal Rate of Return (IRR)

The internal rate of return, or the break-even

discount rate, is the discount rate that makes

the net present value of future cash flows

(NPV) zero.

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