Posts by Bertrand (senior advisor)

January 26, 2015 by

Price Forecasts vs. Futures: A Reserves Evaluator’s Perspective

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. Guest Blog by: Tyler Schlosser, P.Eng., Director of Commodities Research, GLJ Petroleum Consultants Using VISAGE linked to GLJ’s pricing database, we can quickly plot past Brent Crude forward curves (the purple lines) along with historical prompt month prices (the black line). This demonstrates how responsive forward curves are to current market sentiment. While forward curves do not truly represent spot price forecasts, they do tell us the prices that market participants are willing to agree to today for delivery in the future, and are often compared to industry forecasts. It can be seen that following dramatic changes in prompt month oil prices, the whole forward curve often shifts up or down in a big way. In contrast to the often volatile futures pricing, the purpose of GLJ’s price forecast (green line) is to provide a reasonable basis for the valuation of our clients’ oil and gas assets. When big swings in prices occur, it is important for us to make a measured...

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January 19, 2015 by

How Certain are Trading Desks of Their Own Price Forecasts?

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. Guest Blog by: Mike Morgan, P.Eng., Manager of Engineering, GLJ Petroleum Consultants We’ve had a roller coaster ride on oil and gas prices, but what kind of price changes can we expect over the next few quarters?  One way of estimating this is to look at the cost of buying options from a trading desk. To explain this, think of buying insurance: you sign a contract, pay the insurance company a premium and then you have the chance of claiming a payout if disaster strikes.  The insurance company won’t force you to make a claim (they’d probably be happy if you didn’t) but it would be in your best interest to do so if you had an accident.  Now consider how things would change if you suddenly become more likely to make a claim, maybe your teenager started driving or you just bought another five cars.  Pretty clearly your premiums would go up.  You could flip this around and start by looking...

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December 8, 2014 by

Lost Production in VISAGE: Not All Downtime is Created Equal

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. As producers position themselves to survive a market of low oil and gas prices, most of our clients are targeting downtime in an effort to get the most out of their producing assets. One way we help them do this is by setting up “diagnostic measures” like Lost Production. Most people have heard of the concept of Lost Production … some have likely debated different terms for it. The important thing is not to get stuck too deep in the details and leverage the insights it affords you. Without the concept of Lost Production producers might only be seeing a chart like this, showing only production rates and hours down. This does not quantify the impact of downtime nor does it explain the nature of the downtime involved. By introducing the concept of Lost Production, you can quantify the production loss that is attributable to downtime, and understand what types of downtime are involved. This next chart shows the different downtimes responsible for...

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November 17, 2014 by

Frac Analysis in VISAGE: How to Refine Your Insights Using Distributions

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. This is a continuation of the last blog Frac Analysis in VISAGE: Using Distributions as an Alternative to Linear Regressions where we demonstrated that cumulative probability distributions have a unique ability to communicate insights that can not be garnered from a linear regression with a weak correlation. We also demonstrated that distributions can sometimes demonstrate a “correlation window”, which is the range of values where the strongest relationship exists between two variables. Today’s blog is focused on simple (iterative) techniques to further develop insights into optimal ranges for key completion parameters. The techniques include the following steps: 1)     Look at the data from a different perspective to decide what wells to exclude. 2)     Go back to your original chart, now with a constrained well list, and use increasingly smaller bin sizes to hone in on the optimal value. 3)     Repeat as many times as necessary to statistically identify what has optimal impact on production performance. The last blog ended with this chart which identified the “correlation...

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November 11, 2014 by

Frac Analysis in VISAGE: Using Distributions as an Alternative to Linear Regressions

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. We are fortunate in Canada to have rich data sets such as Canadian Discovery’s Well Completions and Frac Database (WCFD) and the IHS Information Hub. When we integrate the frac data with public production data there are immense analysis opportunities. Anyone who has tried to apply a linear regression looking for a correlation between production performance and a particular completion parameter knows that the correlations are typically weak (see the Linear Regression example below). Why are the correlations weak? Some of the reasons are: There are too many factors influencing a wells production performance (e.g. technology, spacing, tonnage, number of stages, base fluids …. not to mention the reservoir). The relationships may not be linear. There can be “thresholds of effectiveness”. Below a lower threshold, there is limited impact. Above an upper threshold there is also a limited impact. The range of values between the lower and upper thresholds is the “correlation window”. This is where the strongest relationships exist between the two...

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April 28, 2014 by

Frac Analysis In VISAGE: How Adding More Stages Impacts Gas Production

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. VISAGE has been working with several clients to integrate production data from the IHS Information Hub with frac data from the Well Completions and Frac Database (by Canadian Discovery Ltd). The ability to analyse the production impact of completion technologies in a visual interactive way has provided our clients with competitive and strategic insights that weren’t easily achieved using other software. This is the first in a series that illustrates some of the analyses that are possible. To do this we invited Jim Gouveia to comment on “how, and why, production per stage changes as more frac stages are added to a well”. Interview Guest: Jim Gouveia, Partner, Rose & Associates LLP. Jim has more than 33 years of industry experience and has been a thought leader in using Statistical Approaches for Effective Economic Modeling. He has co-authored and presented several papers, including being a contributing author on the SPEE’s 2011 Monograph 3, “Guidelines for the practical evaluation of undeveloped reserves in...

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March 24, 2014 by

Understanding Trends in Gas Futures with Just Two VISAGE Charts

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. Guest Blog by: Tyler Schlosser, P.Eng., Director of Commodities Research, GLJ Petroleum Consultants This is the next instalment in a blog series on commodity pricing and how VISAGE is used to analyze pricing data when building GLJ forecasts…  Understanding Trends in Gas Futures with Just Two VISAGE Charts Anyone who follows energy markets could tell you that natural gas prices in North America spiked this winter. Prompt month prices** for the most widely known North American benchmark, Henry Hub, are down from their weather-driven peak, but are still priced considerably higher than 2013 expectations. **Prompt Month Price definition: refers to the futures contract that is closest to expiration and is usually for delivery in the next calendar month (e.g. prompt month contracts traded in February are typically for delivery in March) With North American storage levels now much lower than they have been in recent years, is this the beginning of a new sustained bull market for natural gas? It looks like prices are sure...

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October 8, 2013 by

Q&A with GLJ on Forecasting Commodity Prices

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. Interview Guest: Tyler Schlosser, P.Eng., Chief Commodity Pricing Analyst, GLJ Petroleum Consultants The GLJ October 1, 2013 commodity price forecast was recently released and is available at http://www.gljpc.com/commodity-price-forecasts. This is the first in what will be a regular quarterly blog on commodity pricing and how VISAGE is used to analyze pricing data when building GLJ forecasts. I sat down with Tyler Schlosser, the Chief Commodity Pricing Analyst at GLJ Petroleum Consultants, to ask a few questions about how he uses VISAGE when developing his commodity price forecasts. VISAGE: What goes into building a price forecast? GLJ: In commodity price forecasting, we examine the “fundamentals”, things like regional supply and demand, infrastructure development and geopolitical pressures, and the “technicals”, which include recent pricing trends, comparative ratios and differentials, historical averages and mean reversion tendencies. We use VISAGE to analyze the “technicals”. What are the most important commodity pricing benchmarks to follow? An oil or gas “benchmark” is simply a product that serves as...

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September 3, 2013 by

Drill Bits & Bytes Part 5: Western Canada Oil Keeps Rising

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. Today’s Drill Bits & Bytes blog focuses on 2012 oil production in Western Canada, giving a snapshot of industry activity relative to historical trends. All the analyses presented were generated using VISAGE and data from the IHS Information Hub. Western Canada Oil Production is Still On the Rise The 1973 oil production rate of 1,738,149 bbl/day set a record for Western Canada that lasted 38 years. It was exceeded in 2011 when it hit 1,839,944 bbl/day. 2012 delivered a 14.5% production increase to an all time record of  2,107,181 bbl/day. The 2012 increase was attributable to 4,600 new oil producing wells, now totalling 81,600 oil producing wells, of which 24,000 (30 %) are horizontal. 52.7% of new production in 2012 came from just five plays (hop down to the Plays section below for details). Provincial Oil Production Summary Alberta continues to be the main driver behind Western Canada’s production growth, now comprising 74.2% of total oil production. In 2012, Alberta experienced its largest percentage...

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February 14, 2013 by

Drill Bits & Bytes Part 1: Curious about drilling activity in Western Canada

Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy. My 3-year-old daughter, Amelia, has had a significant influence on me over the last year in particular. Regardless of what we do or where we are she is constantly bombarding me with questions. This has reinvigorated my own sense of curiosity… which is why I woke up the other day wondering, “How many meters were drilled in the Western Canadian Sedimentary Basin (WCSB = MB, SK, AB, and BC) last year?”  I tried to guess … but couldn’t ground myself with enough facts to manufacture a guess. So I jumped into VISAGE and ran some quick and simple charts using the public data from the IHS Information Hub. In just a few minutes, here’s what I discovered: Meters Drilled in 2012:  26,645,125 m That’s almost 27, 000 km of well bore in 2012. The diameter of the earth is 12, 742 km. That means, if we were to line up all of those well bores we could have drilled through the earth...

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