The conventional method of drilling “vertical” wells into oil and gas fields and discoveries has declined as new unconventional, “horizontal” wells have increased in popularity.
Two main factors are driving this change...
The first driver is risk .
For generations, oil companies searched for oil in the type of rocks that were known to produce oil and gas. They would use the best tools available to locate accumulations of oil. Then they would plunge a well deep into the ground, hoping to find oil. These were vertical (conventional) wells. Those conventional wells are successful about one out of every 10 times. That means that of every 10 wells a company drills, one produces enough oil to be profitable – like my well in Nebraska. The other nine out of 10 wells are “dry holes.” The one well that does produce oil has to carry the cost burden of the nine nonproductive wells. That’s a risky strategy. The markets have trouble quantifying the risk, and it’s difficult to project growth and profitability. Today, “unconventional” horizontal drilling has changed the way we look at oil exploration. New technologies developed in the mid-2000s by companies like Haliburton (HAL) and Schlumberger (SLB) have cracked the code to drill sideways. We can now drill a mile deep and two miles sideways.
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