SPE-175916-MS

The Well Factory Approach to Developing Unconventionals: A Case Study

from the Permian Basin Wolfcamp Play
Jarrad Rexilius, Chevron

Copyright 2015, Society of Petroleum Engineers

This paper was prepared for presentation at the SPE/CSUR Unconventional Resources Conference held in Calgary, Alberta, Canada, 20 –22 October 2015.

This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
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Abstract
In order for operators to grow production and maintain profit margins in unconventional resource plays,
a ‘Well Factory’ or ‘Manufacturing’ style of development is often employed. These types of plays are
commonly termed ‘statistical’ and the popular school of thought is to drill and complete hundreds (or
thousands) of wells in the same manner and design. Such a strategy, likened to the assembly line model
that made the car manufacturing industry so successful, requires making some general assumptions
regarding subsurface and surface homogeneity across the field. There are both merits and potential
drawbacks to employing an overly strict well factory approach to development with standardized designs.
A manufacturing style typically results in faster execution speeds and improved efficiency, meaning more
wells on production over a shorter period of time at a lower cost. This approach also lends itself to taking
advantage of economies of scale, by applying standard designs across multiple rig lines over a large
geographical area. However there are drawbacks to this approach if not implemented appropriately,
including slower adoption of industry best practices, suppressed innovation, and increased likelihood of
value erosion due to lower well recoveries as a result of suboptimal or incomplete subsurface character-
ization.
This paper will analyse differing well factory approaches to unconventional assets, using examples
from the Wolfcamp Unconventional Oil Play in the Permian Basin. The Wolfcamp play is one of most
active and mature unconventional oil plays in the world, with over 200 industry rigs currently developing
the resource base, and more than 12,000 industry wells already drilled.
An emphasis is placed on utilizing a factory model that enables flexibility for project execution teams
to optimize, while maintaining the efficiency and execution speeds that a classical factory model provides.
Ultimately it is imperative that operators can adapt to the ever-evolving nature of these plays, as
technology, research, and well performance data matures. It is also important that operators can trial new
ideas and concepts with a ‘learn fast-fail fast’ culture that does not interrupt the factory performance. This
paper will present a framework for a well factory process to most optimally develop an unconventional
resource play, with the caveat that all fields and plays are different and a ‘one size fits all’ approach rarely
applies in any oil field application, let alone an unconventional play.
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Introduction
The initial concept of a true factory manufacturing style was pioneered by Henry Ford over a century ago
with his assembly line process, a breakthrough in the automotive industry. As defined by BusinessDic-
tionary (2015), the principle of an assembly line is “that each worker is assigned one very specific task,
which he or she simply repeats, and then the process moves to the next worker, until the task is completed
and the product is made. It is a way to mass produce goods quickly and efficiently. All workers do not
have to be human; robotic workers can make up an assembly line as well”. This concept has changed the
way we live, and has been applied across multiple industries from automobiles and aeroplanes, to food,
toys and furniture. With the relatively recent boom in unconventional resource plays as a result of several
contributing factors (including high oil prices, technological advancements in hydraulic fracturing &
horizontal drilling, as well as favourable regulatory & fiscal conditions), the concept of manufacturing has
been widely proposed and applied to the upstream oil & gas industry. Many companies across the globe,
large and small, have adopted ‘well factory’ models and a ‘manufacturing mindset’ in developing large
acreage positions in unconventional plays. A common theme across industry literature is the claim that a
manufacturing approach to unconventional resource development leads to greater efficiencies around drill
days and well costs. There are various publications showcasing a reduction in drill days and well costs by
as much as 50%. Stark (2014) presents data from several operators in the Eagle Ford play who have
reduced drill costs and drill days by 40% as a result of the adoption of a well factory approach. These
improvements are largely attributed to supply chain & contract optimization, logistics efficiencies, and
materials management. Additionally, technology improvements in the drilling & completion process have
paved the way to reduced costs in unconventional wells, such as those developed by Hummes et al (2012)
and Isbell et al (2010).
De Wardt et al (2012) describes the concept of lean manufacturing, initially conceived by Toyota in
the 1950’s with great success, and how it can be applied to drilling and completion practices for shale
reservoirs. De Wardt (2012) proposes that lean manufacturing yields improved well construction speeds
and lower costs.
Boyd et al (2013) discusses the concept of a ‘Gas Factory’ applied to the Marcellus play which uses
a set of standard operating practices that are repeated from well to well, leading to highly efficient
operations during a rapid growth period in development activity.
A common theme amongst the well factory literature however is the lack of discussion around well
recoveries and maximizing reserves. By focusing only on costs and cycle times, decisions can quickly be
made which will impact the ultimate recovery of wells and so diminish overall economic return from the
well(s). In low oil price environments this becomes increasingly important as a longer well life with
prolonged production rates will enhance economic models due to oil price forecasts years into the future.
There is a risk that industry professionals, at both a practitioner and management level, will have the
tendency to oversimplify the factory concept when applying it to oilfield development. A one size fits all
approach with standardized designs and strict work processes can lead to suboptimal economic develop-
ment plans and erode value of oil projects, if not conceived thoughtfully. Even the Fordism approach in
the automobile industry has evolved dramatically since the 1920’s. The famous quote from Henry Ford
“You can buy a car in any color you want- as long as it’s black,” hardly applies to current car
manufacturing philosophy, where customers demand many designs and models. Like the automotive
industry, a multitude of designs and options must be made available to technical teams, giving them the
flexibility to optimize projects and achieve best in class economic performance. This paper will present
examples from a highly active unconventional oil play in North America, revealing the potential pitfalls
of applying a strict factory model with standard designs, as well as successes from applying a more
flexible and adaptibe factory model to development.
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Other aspects of unconventional development, such as organisational capability, are explored in this
paper with some recommendations suggested ranging from organisational models, approval processes,
metrics, and company culture.

Flexible & Adaptable Factory Model

To date, the development philosophy of many operators in the unconventional space has been to drill as
many identical wells as possible, and as fast as possible. These metrics of speed and cost have had the
desired result of enabling production growth for the development area. However, operators are starting to
see that such a method often results in many underperforming wells and more surprises during the
execution phase. This is largely the result of the common misconception in much of the industry, in that
all unconventional reservoirs are homogeneous over large areas. This assumption is quickly becoming
discarded as practitioners are finding that subsurface environments can change drastically over 100’s of
feet and that simply drilling more and more of these wells in the same fashion will lead to value erosion
and production inefficiencies. Another misconception with these resource plays is the notion that data
gathering, such open hole logs, is not important. This is far from accurate, as discussed by Rexilius et al
(2014) where various economic analyses on case studies from an unconventional oil play show the
significant value creation associated with obtaining open hole log and mud log data. Sprunt (2014)
discusses the importance that formation quality plays on the profitability of unconventional wells, and
suggests that the study of geological first principles in these low permeability reservoirs is overlooked in
the rush to create a well factory operation.
As discussed by Forbes (2013), unconventional developments require commitment over a long time
period and over a vast geographical area. This creates a business risk due to the natural volatility in market
conditions and geology. The case study presented in this paper shows how unexpected geological
heterogeneity, together with a fast paced factory model, can result in value erosion of unconventional
projects. It is important that a factory model provides sufficient flexibility to enable operators to modify
plans to prevent poor economic performance of investments. A critical issue that unconventional operators
are trying to grasp is ‘when to stop’ when a factory method is applied to an area that is showing value
degradation. Further study and thought into this concept, likely involving a decision analysis approach,
will help operators in the future.
There is a balance to be made between this adaptive and flexible approach, while maintaining the
efficiencies and economies of scale provided from a well factory style of development. For example, the
drilling practice is primed for a well factory setup whereby standardized designs promote speed and
efficiency, and drive down execution costs. Completions practices however can be a needle mover in
terms of Estimated Ultimate Recovery (EUR) and profitability. Sufficient flexibility should be provided
to practitioners in order to optimize designs based on reservoir/rock mechanic properties, and apply
learnings from well to well. As shown in Figure 1, taking advantage of speed and efficiency from a well
factory, while promoting innovation and adaptability from flexible designs, creates a recommended model
for unconventional project development.
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Figure 1—Balance speed and efficiency with flexibility and innovation. There is a need for more detailed reservoir characterization
efforts and optimization of individual wells, while maintaining execution efficiencies and rapid cycle time

Case Study: Rex Field, Permian Basin

The Wolfcamp asset, like many unconventional resource plays, has widely been deemed a ‘statistical
play’ requiring a well factory approach to drill and complete hundreds (or thousands) of wells in a
standardized manner to most effectively develop the resources. Practical experience and findings from
benchmarking studies suggest that a modified approach ought to be taken to maximize profitability for
certain parts of this play. It is becoming ever more apparent that a need to be nimble and highly adaptive
is paramount to success. Operators that can be flexible and innovative, and employ a ‘learn fast fail fast’
mentality are the ones that are leading the pack and in the top quartile of economic performance.
The case study presented here showcases the economic results achieved when applying a more strict
well factory model, compared to when a flexible well factory model is applied to a project. Two packages
of 12 wells are compared in the case study.
Development of the Rex Field initially began in 2012 with 1 drilling rig in operation. After promising
initial results, a well factory approach was put into place with an inventory of over 180 drillable locations
with 4 rigs in operation.
From a geological standpoint the Rex Field is relatively complex with depositional environments and
reservoir properties varying both vertically and laterally and across the 30 square mile acreage position.
This inherent subsurface heterogeneity creates challenges for a classical well factory approach.
Figure 2 shows the multiple reservoir targets that exist in the Rex Field, which include;
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Figure 2—Geological Schematic of the Rex Field depicting several target reservoirs with varying depositonal environments

● Upper Bend interval comprising two distinct porous bedding packages

● Lower Bend limestone/siliciclastic section
● Two Wolfcamp B intervals comprising organic shales and stacked deep water carbonate-rich fan
deposits.
The case study presented in this paper focuses on two similar well packages of 12 wells that resulted
in significantly varied economic results, driven by the differing strategy of execution (ie. a strict well
factory versus a flexible well factory).

Well Package 1
Package 1 comprised 12 vertical wells, all of them drilled and completed with the same design. The
execution strategy was to drill all wells in the same fashion in sequential order with the aim of minimising
rig moves between successive wells. The wells were completed via ‘plug and perf multi stage hydraulic
fracture treatments, and put on production immediately following completion.
Given the short cycle time between wells, the drilling rig typically completes 3 or 4 wells before
production comes online for the first well in the package. This is one of the challenges of a well factory
development in general, in that meaningful production results are not available to make execution
decisions until several wells have already been drilled and completed. Moreover, at least a full month of
production is needed to obtain a representative initial production rate. As shown in Figure 3, with the fast
pace of execution and quick cycle times, the drilling program is near completion when the production
from the first handlful of wells is sufficient enough to make a decision on continued execution and well
optimization. By the time a statistically significant number of wells are online (say 8 wells) with at least
one month of production data (possible to make estimates of well recovery), all 12 wells have been drilled
and completed. This is a conundrum the industry faces for unconventionals in general.
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Figure 3—Package 1 execution strategy

Package 1 was executed with a classical well factory model and no well data was used to drive
decisions or make changes to the execution plan. The drilling order was such that rig moves were
minimized to enhace efficiency and cost. Figure 4 shows a cummulitave NPV chart from a lookback of
the Package 1 project. From these economic results we can see that the initial 2 wells had poor
performance, while the next 2 wells were strong performers. After that there is a mixture of high and low
NPV wells, and then several poor performing wells at the end of the package. A detailed analysis on the
production data and well log information aquired suggests that the reservoir quality was superior on the
western part of the acreage compared to the east. This explains the difference in incremental NPV seen
throughout the package. Towards the end of the package, the results even begun to erode value with
successive wells drilled in a poor area of the field. As no signposts were used to make changes to the
execution plan, no attempt was made to alter drilling plans or completion practices based on information
acquired during execution.
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Figure 4 —Cumulative NPV chart for 12 wells drilled in Package 1 in Rex Field. Some good wells are mixed in with several poor
performing wells. No attempt was made during execution to improve economics of wells, or alter drilling plans. This is the disadvantage
of a strict well facory model where no changes are made to designs and projet plans

Package 1 is an example of an unconventional development where a strict well factory model results
in desired low cost and fast cycle time wells, but is not delivering optimal value from an overall economic
standpoint. It is claimed that superior value creation and economic returns could have been achieved if a
modified approach had been employed for this 12 well package.
Well Package 2
Using the learnings from Package 1, the Rex Field team looked at opportunities to improve execution
performance. Package 2 is a 12 well project with very similar characteristics to Package 1. The project is
located in a similar area of the field, has equivalent subsurface properties and reservoir quality, utilizes
the same well design, and targets the same formations at the same depths. During execution planning the
team implemented 3 key changes in order to achieve improved economic performance compared to
Package 1. These changes were as follows;
1. Data gathering during drilling and completions used to drive decisions throughout execution
2. A series of signposts created and a modified well factory model employed that enables changes in
the execution plan to be implemented quickly based on the signposts
3. Backup ready to drill locations planned in order to provide the team flexibility to adjust drilling
plans based on signposts and ‘on the fly’ data analysis
Figure 5 shows the initial drilling plan for Package 2, with the addition of signposts and a series of
backup well locations. The flexible well factory approach applied in Package 2 resulted in a shift in
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mindset within the team. The team became focused on quick decision making and decisiveness when key
signposts were revealed during execution. Another observation was that the cross functional team became
highly engaged and motivated to optimize the project, as well as showing a relentless desire in making
every well better than the last, by deciphering information obtained from each well.

Figure 5—Initial Package 2 execution strategy

In planning for Package 2, subsurface signposts were created based on information acquired from mud
log data, open hole log data and production data from nearby wells, using both internally and publicly
available information.
Figure 6 shows an example of the log signature for a primary target formation which showed a positive
correlation to production performance for wells in the area.

Figure 6 —Log signature comparison of strong versus poor performing wells. This was used as a qualitative signpost to aid the project
team in making tactical completion decisions, as well as strategic decisions related to rig moves and drilling plans
SPE-175916-MS 9

After drilling the first 4 wells, data acquired suggested that the key reservoir target was of poor quality
on the north western part of the area, and of better quality towards the south east. The team was also able
to use the acquired log data to optimize frac designs to suit the observed rock mechanic properties. This
resulted in two important changes to the execution plan.
1. Firstly, a change in the drilling order was implemented, whereby wells were to be drilled on the
south eastern part of the area only, and several backup well locations were now planned for
execution. The north western locations were removed from the drill plan.
2. Secondly, the frac design for each well was tweaked to optimize production from the wells based
on the reservoir characteristics. This required some quick cycle reservoir characterization efforts
which did not impact execution cost or cycle time. Specifically, proppant volumes were adjusted
for various stages (no material impact on overall cost), as well as a change in perforation
placement due to interpreted stress regimes.
Figure 7 below shows the actual drill plan for Package 2, whereby 6 back-up wells were used while
6 of the original planned wells were not drilled.

Figure 7—Final Package 2 execution strategy

Figure 8 below shows the cummulitave NPV chart from a lookback of the Package 2 project. From
these economic results we can see that the first and third well had poor performance, while the second and
forth wells were strong performers. As discussed above this was due to the geological changes observed
across the field, as determined by quick cycle reservoir characterization efforts performed during
execution of the initial 4 wells. The team regrouped after the first 4 wells and conceived a revised
execution plan. Wells 5 and 6 on the original plan were drilled as they were located in the favourable
geological area. The remaining 6 wells however were dropped from the drilling plan due to their
suboptimal locations, and were replacved with 6 back-up wells that were in higher priority subsurface
locations.
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Figure 8 —Cumulative NPV chart for 12 wells drilled in Package 2 in Rex Field. Two good wells are mixed in with two poor performing
wells at beginning of the project. At this point the team made adjustments to the execution plan base don data analysis. The remaining
8 wells in the package performed at or above expectation and resulted in signifcantly improved economic results than what would have
been achieved if the original drilling plan was followed

By comparing Figure’s 4 and 8 we note that after the first 4 wells were executed in each packge, the
cumulative NPV is almost identical for Package 1 and 2. Likewise, after 6 wells the NPV’s are similar
for both drilling programs. However the final 6 wells executed for each package diverge significantly in
regards to economic returns. By the end of the the 12 well program, Package 2 has more than twice the
cumulative NPV that was achieved in Package 1. This difference is attributed to the differing well factory
models employed. It is claimed that the performance of Package 2 would not have been achieved if a strict
well factory approach was executed. By using a flexible factory, the Package 2 case study demostrated that
quick decisions based on carefully constructed signposts can have a significant impact on the outcome of
unconventional development projects. One additonal point to note in the success of Package 2 was that
the cross functional team was empowered by management to make these optimization decisions and
utilize a flexible factory model.
A key facet to the success of Package 2 was the gathering (and analysis) of important data during
execution to enable optimization of drilling and completion tactics on subsequent wells, without slowing
down the factory. Rexilius et al (2014) and Prochnow et al (2014) both demonstrate value creation
enhancements related to data gathering (eg. open hole logs and mud logs) and fit-for-purpose data analysis
(for example quick cycle rock mechanic anlaysis) that resulted in significant economic uplifts for the
Wolfcamp unconventional play. These works were incorporated into the success of Package 2 in the Rex
Field.
In large scale well manufacturing operations in unconventionals, with many rigs operating at the same
time, the flexibility to modifiy execution plans without upsetting the factory may become more challeng-
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ing. A balance between flexibility and standardization must be tailored to the operating environment. For
the case of Rex Field, the value creation associated with the flexibility to use signposts to optimnize plans
is significant. In other areas where the subsurface environment is more predicable and continuous, the
balance between flexibility and standardization may be different. Another best practice from this case
study is the advantage of having a deep queue of wells available and ready to be drilled. This allowed the
team to prepare sound signpost action plans, enabling a more economically enhanced project to be
realized. Despite the changes in drill plans and modification of completion tactics, the factory was not
slowed down and drilling efficiencies were maintained throughout the package, with no degradation in
drill days or cost observed. Even with some interruption of drilling efficiencies as a result of adopting a
more flexible factory model, the large uplift in economic value associated with being able to optimize
wells makes it highly desirable to develop signposts and empower decision making of asset teams.
Signposts are not just limited to subsurface data acquisition, but may include many internal and
external factors that prompt a change in execution plans. Examples include production data, drilling
performance, equipment availability, oil price fluctuations, contract negotiations, and so on. As a result
of these many factors that can change from initial investment decisions to execution, operators need to be
aware of important signposts and have a factory model that is adaptable and flexible.

Organizational Capability for Unconventionals

Operators in the unconventional space, particularly large multinational companies, must be mindful of the
organizational structure applied to working these fast evolving and complex plays. Most major oil
companies are staffed to develop and execute large conventional offshore fields as major capital projects,
with years (or decades) long planning phases prior to development. These organizations have built up
several layers of management, dedicated functional teams, as well as long and time consuming assurance
and approval processes to move projects forward. Such an organizational setup does not work as
effectively for unconventional assets. In order to be nimble and adaptable while keeping up with several
rigs with fast cycle times, teams must be organized appropriately. Additionally, metrics, culture, and
governance processes need to be modified when developing unconventional assets. These and other
aspects of organisational capability are discussed in the following section.

Organisational Model
There are various options available to any oil and gas operator with regards to organizational models. In
the unconventional space, it appears that the ‘asset team’ organizational model, whereby a single team
leader/project manager is accountable for projects, with direct line supervision of team members from
multiple functions (eg. reservoir engineering, drilling, completions, facilities, land, geology), is the most
commonly adopted model, particularly with small to mid sized organizations. The advanatges of this
model is the reduced likelihood of functional silos forming, which are more likely to occur when
functional practitioners report up through functional heads & departments. This functional model is
common practice in conventional asset classes around the globe, and to date, larger companies have
chosen to stick with this model for the unconventional asset class. Figures 9 and 10 show schematics of
the two differing organizational models employed in the unconventional industry. Although the ‘asset
team’ model in Figure 10 is more common and has more advantages for a fast paced, quick decision
making environent such as that experienced in unconventional projects, either model can work well as
long as a strong team work focused mentality is instilled and practiced throughout the organization.
12 SPE-175916-MS

Figure 9 —‘Functional Organizational Model’ can potentially lead to ineffective integration and communication across functions in
certain situations. This model is more suceptible to functional silos with less ownership and accountability of overall project
performance. However, within organizations promoting team work as a core value, this model works well for unconventionals

Figure 10 —‘Asset Team Organisational Model’ fosters integration across functions, as well as increased ownership and accountability
of project performance. This model, or the functional model can work well for unconventionals

Technical Review and Approval Processes

Regarding technical approval of practitioner’s work, empowerment of project teams to make decisions on
technical aspects of unconventional projects is recommended. Picking wells locations, selecting proppant
type, and assigning perforation intervals are examples of cross-functional decisions made by project teams
to optimize wells and assets. These decisions should not involve onerous technical reviews and approvals
which slow the well factory and diminish productivity of the team.
High capital conventional projects which have dominated the upstream industry in recent years have
evolved into having multiple technical reviews steps embedded within the project development processes.
These extensive technical oversight processes are paramount to the success of conventional major capital
assets, as a suboptimal subsurface model or completion design can cost millions (or billions) in net present
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value (NPV), with no economical way to resolve the issue over the life of the field. In contrast,
unconventional assets are different as there are potentially hundreds of opportunities to modify designs
and forward plans. Enabling practitioners and teams to mature and execute unconventional projects
unimpeded will speed up the factory and allow teams to capture the learning curve quickly in the
ever-evolving nature of unconventional plays.
Likewise for budget approvals, it is recommended that a simple and straightforward funding approval
process be employed, with a single approval level for projects (eg. Project Leader seeks approval from one
level of management). This will help prevent time consuming recycle of projects and keep the process fit
for purspose to a factory type operation.
Metrics
It is also important that unifying metrics are cascaded from upper management around unconventional
projects. For example a $/BOE or ROR metric for projects will drive teams to deliver optimal economic
projects, by reducing costs and optimizing production and reserves. On the other hand, metrics centered
around drill days and drill cost alone are likely to drive behaviors and decisions that degrade overall
economics, by sacrificing production and ultimate recovery. A common example opserved in the industry
is to cut proppant volume, pump smaller frac jobs, and use inexpensive lower quality proppant in an effort
to reduce upfront capital costs. While this will have the desired result of improving pre-drill economics
due to lower costs, overall value is ultimately lost due to the impact on production and reserves.
Culture
Operators, particularly those historically focussed on large conventional assets, must also refine the
culture of its workforce in order to succeed in unconventional plays. Behaviors necessary for successful
teams working unconventionals include ‘urgency’, ‘fit-for-purpose’, ‘decisiveness’, and a ‘learn-fast-
fail-fast’ mentality. These can be unfamiliar to many industry practitioners who have historically worked
high capital projects, requiring highly detailed engineering plans and multiple review and assurance stages
before final investment decisions are made. Unconventional assets call for a different set of behaviors and
culture than the conventional asset classes do.
Competitor Analysis
All operators in a basin should make it a priority to continually learn from partners and competitors that
operate in that basin, especially companies that are new to the play. Unconventional assets are typically
dominated by small independent operators who have found their niche and become experts in the areas
they operate. It is recommended that large multinational companies take the time to learn from these high
performing independents as opposed to reverting to their own experience in conventional basins they have
histprically operated. All operators must make competitor analysis a key focus before and during
execution of unconventional projects.
Technical Governance
A robust governance framework that specifies how changes to designs are proposed and approved is
important to ensuring a smooth and consistent factory model. Feedback sources from field execution
teams, pilot projects of new technologies, and analysis of competitor data must all be incorporated into
the factory model in a seamless and efficient update process. This requires a well-documented and clear
governance framework that also encourages innovation and ensures optimal designs are implemented in
the field based on learnings. Figure 11 shows an example of technical design governance that is not
recommended for unconventionals. This model is too strict and has multiple reviews, committees, and
approval steps for minor design changes. Ultimately this leads to a slow adoption of best practices and
results in companies lagging behind industry trends. A recommended model is to empower project teams
with less technical oversight and approval processes, to promote fast learning and innovation, as well as
swift cost saving initiatives to be implemented and production enhancing opportunities to be realized.
Figure 12 shows an example of a recommended technical governance process.
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Figure 11—Multiple reviews and approval levels leads to slow adoption of best practices and deters idea generation and innovation

Figure 12—Flexible design standards with operating ranges and multiple options enables project teams to optimize. Streamlined
approval process enables teams to quickly adopt industry best practices as well as fostering innovation and motiving practitioners

Minimize Handoffs
In general it is recommended to keep the number of handoffs of projects/wells to a minimum throughout
the factory process. Pracically speaking, a single cross functional project team should be involved across
a large portion of the well factory from early planning stages to execution, with minimal handoff of work
products. As discussed in the introduction, the definition of classical manufacturing is where “each worker
is assigned one very specific task, which he or she simply repeats, and then the process moves to the next
worker, until the task is completed and the product is made”. This factory model has been a game changer
across multiple industries (automobiles, food, toys etc) but needs to be carefully applied in the upstream
oil & gas industry. Operators should be hesitant to emulate the classical assembly line concept when
applying to unconventional development projects. Multiple handoffs of work products across separate
teams increases the risk of inefficiencies and suboptimal execution.
Figures 13 and 14 show two examples of well factory models adopted in the unconventional industry.
Figure 13 is similar to the assembly line concept, where multiple hopper’s (or mini factories) exist in the
project development timeline. This particular model has four distinct points of handoff from one working
team to another. The concept here is that each work team becomes highly efficient at their part in the
overall factory, and delivers a higher quality and quantity of products. In essence, by focusing on a limited
set of tasks, the practitioners become experts in this specific stage of the assembly and the whole factory
is better off. However, the potential drawback is that each handover point creates a risk that important
details and knowledge is not transferred to the next stage of the factory. The severity of this is often not
realized until the execution phase.
SPE-175916-MS 15

Figure 13—Multipe handoffs across several teams creates higher likelihood of project recycles, delays and suboptimal execution

Figure 14 —Project Teams responsible for large portion of development planning can lead to higher quality projects with more efficient
execution

In contrast, Figure 14 has only two handoff points and working teams are active throughout more
stages of the project development timeline. There are numerous critical constraints and considerations that
must be incorporated and caught early in the planning stages of a development project that directly impact
project execution and subsequent operations. Additionally, during final stages of development planning
and execution, institutional knowledge of the project planning stages is paramount to successful execution
of wells and projects. Once several wells have been executed and the factory is in full swing, having
intimate knowledge of the best practices and lessons learned during execution, while planning the next
package of wells, is critical.
Having project teams that move projects from inception to execution will likely result in smoother
execution, fewer recycles during planning, as well as more motivated and inspired working teams.
There are obviously more variations than these two, any of which can be successful depending on the
specifics of the organization.
When allocating work teams to execute these unconventional factory models, there are two different
schools of though that can be taken, either ‘area focused teams’ or ‘factory element focused teams’. Again,
various options are available to organizations and any could work well, however it is recommended that
more priority be given around ‘area focused teams’, with the caveat that a few elements in the factory do
warrant ‘factory element focused teams’ depending on the specifics of the operation. A preferred option
for example may be to have ‘factory element focused teams’ for early characterization and prioritization
16 SPE-175916-MS

stages, and ‘area focused teams’ for the remainder of the factory (ie. analysing alternatives, detailed
design, and execution).
Figures 15 and 16 show example schematics of an ‘area focused team’ concept and a ‘factory element
focused team’concept.

Figure 15—‘Area Focused team’ ensures institutional knowledge of area specifics are maintained thoughout project planning and
execution
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Figure 16 —‘Factory Element focused team’ facilitates teams becoming highly skilled in one particular part of the factory model,
resulting in more efficient overall factory output. This model is more susceptible to project recycles due to frequent handoff of projects
throughout the factory, as well as more potential for suboptimal economic projects with less accountability for final products

Conclusions
● Applying a flexible well factory model has shown to result in large uplifts in economic perfor-
mance for unconventional projects without interrupting efficiency and cycle time, as compared to
a more strict factory model focused on standardization
● Operators that can be flexible and innovative, and employ a ‘learn fast fail fast’ mentality are the
ones that are leading the pack in industry economic performance. It is important that a factory
model provides sufficient flexibility to enable teams to modify execution plans to optimize NPV
and prevent poor economic performance of investments
● It is recommended that unifying metrics are cascaded from upper management around unconven-
tional developments. $/BOE is an example of a metric for projects that will drive teams to deliver
optimal economic projects, by reducing costs and optimizing production & reserves.
● Unconventional assets call for a different set of behaviors and culture than the conventional asset
classes do. Behaviors such as urgency, fit-for-purpose and decisiveness should be instilled within
the workforce.
● Multipe handoffs across several teams can create higher likelihood of project recycles, delays, and
suboptimal execution. Project teams responsible for a larger portion of development planning can
lead to higher quality projects with more efficient execution.
● Sufficient empowerment should be provided to practitioners in order to optimize designs based on
reservoir/rock mechanic properties, and apply learnings from well to well. Collection and use of
18 SPE-175916-MS

surveillance data such as mud logs and open hole logs can have a significant impact on overall
project economics.
● Carefully constructed signposts during execution of projects can make a big differnce in the
outcome of unconventional development projects

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