Maybe I'm just getting old and I should move on. Maybe I'll be the old guy telling logging war stories to the young pups who never ran an open hole run. Back in the day, open hole logging was one of the main points of the process of drilling a new well. The hours were terrible and the conditions were bad but the pay was usually very good. In this post, I'll give brief overview of open hole logging and why open hole logging less important than it used to be.
For readers who don't know what an open hole log is, the basic idea is that when an oil and gas well is drilled, a package of sensors (known as logging tools) is attached to a wire (aka wireline) and those sensors are lowered to the bottom of the well. Once at the bottom of the well, the wireline is pulled out of the hole and the sensors record data along the entire length off the well. The wireline provided power to the tools and a way to send data to the computer in the logging truck. The recorded data is printed on a continuous piece of paper versus the depth of the well and is known as a well log.
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| Figure 1: Example of Wireline Logging (Source: Crain's Petrophysical Handbook) |
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| Figure 2: Example of an Open Hole Log (Source: Schlumberger) |
Figure 1 shows an example of a wireline logging run. The tools have been lowered to the bottom of the well on wireline and are recording data as they are being pulled out of the well. There are many different types of measurements that can be recorded but the main goal of an open hole log is to identify the hydrocarbon bearing zones (also known as the pay zone).
Figure 2 shows an example of an open hole log that has been interpreted to identify the pay zones in the well. The open hole log analyst/interpreter should be able to evaluate the data, determine if the data is accurate and make a decision if the well should be kept for production or abandoned due to poor hydrocarbon shows. Before easy transmission of large data sets, this decision was made at the wellsite during the logging run (usually at night or some early hour of the morning).
The following chart from Spears & Associates shows the US Open Hole Wireline revenue since 2011
From 2011 to 2014, US Land Open Hole Revenue averaged $767 million per year. During the downturn of 2015 to 2016, US Land Open Hole Revenue dropped to a low of $178 million in 2016. There was a slight increase in revenue in 2017 as rig count recovered but total open hole revenue never returned to previous levels.
Figure 4 looks at Open Hole Revenue per Rig in US land. Open Hole revenue is dependent on rig count because 99.999% of open hole revenue is generated from logging new wells.
The revenue per rig from 2011 to 2014 averaged $411,000 per active rig. Revenue per rig spiked up in 2016 as the rig count dropped but activity began to recover. From 2017 to 2019, Open Hole Revenue per Rig averaged $252,000 per rig, a 38% decrease from the average before the downturn.
So why have has there been a reduction in open hole logging. I think there are several reasons we can point too.
The first reason is that in the past, logging vertical wells was easy* compared to horizontal logging. You lowered the logging tools into the well, reached the bottom of the well and started recording data as you pulled out of the hole.
(*open hole logging was never easy. If you commented that it was easy, karma usually showed up and crushed you)
Logging Horizontal wells is much more difficult. The logging tools cannot reply on gravity to carry them to the bottom of the well. The tools must be pushed by drill pipe to the bottom of the well and they must remain connected to the wireline at the same time. Drill Pipe Conveyed logging in horizontal wells is much more difficult, dangerous and expensive when compared to vertical logging
Traditional open hole logging companies were slow to evolve with the changing market. During the initial stages of growth in horizontal drilling, traditional wireline tools were deployed so that operators could identify the target zone, determine the properties of the rock in the target zone and identify changes along the lateral. As horizontal drilling matured, operators required fewer measurements and open hole logging revenues began to drop.
Figure 5 shows that the percentage of vertical wells and horizontal wells were the same in May 2009. Going back to Figure 3, Open Hole logging revenues didn't decrease until 2015. The open hole logging market evolved through small start up companies like ThruBit, Cordax and Weatherford. These innovative technologies replaced traditional horizontal logging runs with equipment that could be deployed safely, efficiently and at a much lower cost.
The second reason for a permanent decrease in open hole logging revenue occurred during the downturn of 2015 and 2016. During this downturn, operators cut costs where ever they could, including both vertical and horizontal logging runs. What the operators discovered is that they didn't need logs to make better wells, they could increase the size of the frac job (stages, perfs and proppant) and create better wells.
This discovery changed the mindset of the industry, resulting in very few horizontal logging runs during the downturn and a permanent decrease in open hole logging revenues since then. Completion engineers and frac companies continued to evolve frac designs through trial and error, measuring success by the initial production of the well.
The third reason for the loss of open hole logging revenue was the nearly complete switch to horizontal drilling. Figure 6 revisits the Revenue per rig but includes horizontal rig count with total rig count.
Figure 6 shows that there were significantly fewer vertical rigs working after the downturn. From 2017 to today, 86% of the rigs working in US Land were horizontal drilling rigs. The open hole logging industry faced a double whammy coming out of the downturn. Horizontal Open Hole Logs were deemed ineffective and too expensive during the downturn and there were very few vertical wells to log. This has resulted in a permanent loss of revenue and expertise in the industry.
Based on the current state of the industry, open hole logging activity is likely not to return. The ability to interpret open hole logs is turning into a lost art and the older generation that interpreted open hole logs are retiring.
I still think there is a place for measurements in horizontal wells but there are other ways to acquire them. Technologies like Drill2Frac and Lateral Science use data from the drill bit to determine changes in rock properties along the lateral. Since the this data is already acquired while the lateral is drilled, this data can be used at any point during the life cycle of the well. I think the ability to evaluate rock properties will be very important in later stages of a wells life when refracing becomes an option.
The following chart from Spears & Associates shows the US Open Hole Wireline revenue since 2011
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| Figure 3: US Open Hole Wireline Revenue (Source: Spears & Associates Wireline Market Report Q2 2020) |
From 2011 to 2014, US Land Open Hole Revenue averaged $767 million per year. During the downturn of 2015 to 2016, US Land Open Hole Revenue dropped to a low of $178 million in 2016. There was a slight increase in revenue in 2017 as rig count recovered but total open hole revenue never returned to previous levels.
Figure 4 looks at Open Hole Revenue per Rig in US land. Open Hole revenue is dependent on rig count because 99.999% of open hole revenue is generated from logging new wells.
 |
| Figure 4: US Land Open Hole Revenue per Rig (Source: Baker Hughes Rig Count, Spears & Associates Q2 2020 Wireline Market Report) |
So why have has there been a reduction in open hole logging. I think there are several reasons we can point too.
The first reason is that in the past, logging vertical wells was easy* compared to horizontal logging. You lowered the logging tools into the well, reached the bottom of the well and started recording data as you pulled out of the hole.
(*open hole logging was never easy. If you commented that it was easy, karma usually showed up and crushed you)
Logging Horizontal wells is much more difficult. The logging tools cannot reply on gravity to carry them to the bottom of the well. The tools must be pushed by drill pipe to the bottom of the well and they must remain connected to the wireline at the same time. Drill Pipe Conveyed logging in horizontal wells is much more difficult, dangerous and expensive when compared to vertical logging
Traditional open hole logging companies were slow to evolve with the changing market. During the initial stages of growth in horizontal drilling, traditional wireline tools were deployed so that operators could identify the target zone, determine the properties of the rock in the target zone and identify changes along the lateral. As horizontal drilling matured, operators required fewer measurements and open hole logging revenues began to drop.
 |
| Figure 5: Baker Hughes Weekly US Land Rig Count (Source: Baker Hughes) |
Figure 5 shows that the percentage of vertical wells and horizontal wells were the same in May 2009. Going back to Figure 3, Open Hole logging revenues didn't decrease until 2015. The open hole logging market evolved through small start up companies like ThruBit, Cordax and Weatherford. These innovative technologies replaced traditional horizontal logging runs with equipment that could be deployed safely, efficiently and at a much lower cost.
The second reason for a permanent decrease in open hole logging revenue occurred during the downturn of 2015 and 2016. During this downturn, operators cut costs where ever they could, including both vertical and horizontal logging runs. What the operators discovered is that they didn't need logs to make better wells, they could increase the size of the frac job (stages, perfs and proppant) and create better wells.
This discovery changed the mindset of the industry, resulting in very few horizontal logging runs during the downturn and a permanent decrease in open hole logging revenues since then. Completion engineers and frac companies continued to evolve frac designs through trial and error, measuring success by the initial production of the well.
The third reason for the loss of open hole logging revenue was the nearly complete switch to horizontal drilling. Figure 6 revisits the Revenue per rig but includes horizontal rig count with total rig count.
 |
| Figure 6: Open Hole Logging Revenue per Rig with Total and Horizontal Rigs (Source: Baker Hughes Rig Count, Spears & Associates Q2 2020 Wireline Market Report) |
Based on the current state of the industry, open hole logging activity is likely not to return. The ability to interpret open hole logs is turning into a lost art and the older generation that interpreted open hole logs are retiring.
I still think there is a place for measurements in horizontal wells but there are other ways to acquire them. Technologies like Drill2Frac and Lateral Science use data from the drill bit to determine changes in rock properties along the lateral. Since the this data is already acquired while the lateral is drilled, this data can be used at any point during the life cycle of the well. I think the ability to evaluate rock properties will be very important in later stages of a wells life when refracing becomes an option.
Thank you for the trip down memory lane, I really enjoyed my days logging open hole in western Canada.
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