This quarter, SynMax will release our first version of a gas production model based on our proprietary satellite observations of frac crews. This model will focus on a backward looking period of four months extending to a forward looking period of two months. The model will be released in regional stages with priority given to the most material regions first.
There is no real-time ground truth for production. Daily production estimates originate from models that use the historical relationship between daily nominations on interstate pipelines and lagged production numbers from state agencies or the EIA. In regions where interstate pipelines capture the majority of flows these models perform well. But, in states like Texas where much more gas flows on intrastate (as opposed to interstate) pipes the models often fail to capture material changes. In Texas, gas can flow from a well and into storage without ever passing a publicly available flow meter. The SynMax production model will back-cast production from our years of satellite completion data to fill this gap. We expect this data will allow for a more accurate forecasting of the EIA weekly storage change.
Historically, the best performing production forecasts have been producer survey models. These models aggregate the producer forecasts released by public E&P companies and apply the growth rate to the missing privately held production share. However, the recent ‘operate within your cashflows’ mantra of public E&Ps has broken the relationship between public and private producers which once held. Additionally, the public portion of producing wells has been slowly shrinking.
SynMax is using a bottom up model, forecasting production at the well level and then aggregating the results into regional changes. These models can be chaotic in their nature, that is to say that a small change in assumptions magnifies across thousands of wells into a meaningful error. Getting these models right requires a nuanced understanding of each region and careful control of variables. Our key differentiator from other production models is our complete and accurate satellite observations of wells being completed in near real-time. Naively, SynMax completions can be used to accurately forecast new well production 30 days in advance with an r-squared ranging between 0.8 and 0.9 in some regions.
Going further than the naive approach is a matter of modeling two major factors: uncertainty in IP rates and ‘turn in line’ timing. Our IP rate model uses well location data along with information about the wellbore itself. Surprisingly, at least for me, the most important input is well location not lateral length or shale formation. You can see this correlation in the plot below which shows the relative ip rates for a section of Haynesville. Certain areas produce far greater IPs than regions just a few miles away, regardless of later length, shale formation, operator, ect.
Our analysis of satellite images and well level production data has shown that wells rarely start producing immediately after the frac crew leaves, there is a ‘turn in line’ (TIL) lag which averages 30 days across most regions. This lag does not appear to be strategic, it has no relationship to price and is indifferent to location which implies that it is not based on any kind of gathering constraint. It does have a loose relationship to frac crew activity in the area, that is as frac crew numbers increase so does the TIL lag. Thankfully this lag is consistent and has a standard deviation of around one week. This consistency makes forecasting based on history reliable.
Production forecasting like this has never been done before simply because data like what Hyperion provides has never been available before. This forecast, once released, promises to offer much needed precision to supply side fundamentals. The timing could not be better with volumes as small as 1bcf/d over a season having the potential to move price in dollar increments. Stay tuned for more updates as we roll out this forecast to Hyperion customers. Subscribe to the SynMax Hyperion Frac Crew Satellite Monitor
Near-real-time frac crews, rigs, DUCs and completions for all major plays in the L48. Powered by 8,000 commercial satellite images every day! Email info@synmax for a demo and 60 day free trial. Visit https://hyperion.synmax.com to learn more about our innovative alternative data.