One frequent point of discussion is the expected timing of a
particular well to be "spud." A well is considered spud at the moment
the drillbit hits the ground. The same goes for offshore drilling --
passing through water on the way to the seabed doesn't count. StatoilHydro (NYSE: STO) describes "spud fever" as the moments of anticipation preceding the spudding of a new well.
A well's spud date marks the starting point from which you measure
how long it takes to drill a well. So, why is this important for
investors?
Ultra Petroleum (NYSE: UPL) sometimes references
"spud to TD" in its press releases. TD, or total depth, marks the end
of the drill bit's journey. A quicker spud to TD, assuming you're
drilling a series of wells to the same approximate depth, indicates
improved drilling efficiencies and can translate to significant cost
savings across a drilling program. Contract driller Precision Drilling Trust
(NYSE: PDS) prides itself on its industry-beating days-per-well and
metres-per-day metrics, which translate to a quicker spud to TD for its
Canadian E&P clients.
Variants of this measure are "spud to completion" and "spud to
sales." The former refers to the time it takes to complete a well (i.e.
cement casing in place), while firms like Encore Acquisition (NYSE: EAC), GMX Resources (Nasdaq: GMXR), and Quicksilver Resources
(NYSE: KWK) use the latter term to quantify how long it takes to bring
a well online (i.e. have it hooked up to gathering infrastructure and
flowing hydrocarbons). These periods are also referred to as cycle
times, and shorter is clearly better.
© 2009 UCLICK, L.L.C.
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