Following claims that question the accuracy of its FracMax data analytics and visualization software package, which triggered a federal inquiry, Flotek Industries Inc. (NYSE: FTK) released an independent report that generally supports its claims of enhanced productivity.

The report conducted by MHA Petroleum Consultants (MHA), at the request of an independent technical committee formed by Flotek, reviewed the effectiveness of the company’s Complex nano-Fluid (CnF) completion technology and data analysis software on horizontal well performance. It showed that in one basin studied, recoveries were higher using CnF.

CnF is a patented solvent/surfactant mixture that is injected into an oil or gas well during the hydraulic fracturing process.

MHA cautioned that additional factors besides the CnF could influence a well’s productivity, such as reservoir thickness, horizontal length, geological characteristics and the size and design of the hydraulic stimulation among others.

“While it was not possible to completely remove the influence of these other factors from our analysis and to isolate completely on the impact of using CnF, it is the opinion of MHA that by segregating our evaluation into the three focus areas, the analysis was predominately centered on the effect that CnF had on well productivity,” MHA said.

MHA said that generally, a specific focus area’s drilling occurred during the same time period, wells were drilled with similar lateral lengths and the ratio of produced gas and oil was relatively consistent.

MHA also selected sites where reservoir thickness also did not vary significantly and development was confined to a small number of operators to minimize fracking design variations.

The report is the first of several analyses of the additive’s performance in three core basins, with the first focusing on the Greater Wattenberg area of Colorado’s Denver Julesburg (D-J) Basin. Other areas include the Permian and South Texas Basin. Allegations raised in a separate report in November claimed the company—now the subject of an inquiry by the U.S. Securities and Exchange Commission (SEC) and subject of shareholder class action and derivative lawsuits—misinterpreted production data for three wells to its advantage.

However, MHA Petroleum’s report which focused on a larger sampling of wells—1,133 wells concentrated in three areas of the Niobrara Formation with at least a year of production—concluded that wells that using CnF showed gains in productivity. Improvement rates ranged from a 9.8% gain over non-CnF wells in one of the focus areas to 46.9% in another area, according to the results released Jan. 27 by Flotek.

The investigation also examined the performance of wells using the additive in the fracture stimulation process, compared to those that did not, using the estimated ultimate oil recovery.

The report found that in three areas using CnF:

  • Area 1, the oiliest of the test areas, had the largest gains, showing a 58.4% improvement in EUR per foot with CnF present;
  • Area 2 gained 27.6%; and
  • Area 3, the most gas-prone test area, had a 1.4% productivity gain.

“The CnF additive showed a significant increase in both 12-month and ultimate oil production productivity parameters,” MHA said in the report. “The results for Focus Area 3, which is the most gas prone of the three areas, are not conclusive. Two of the parameters show an increase in the productivity performance for the CnF wells in Area 3, while the other two parameters project the opposite result.”

Methodology

The study focused on Niobrara completions in the D-J Basin, MHA said. FracFocus’ full data download database was used to identify and map the horizontal well locations in the areas studied. MHA carefully picked areas with a high density of horizontal wells in the oil-prone north and the gas-prone south parts of the formation.

Since the FracFocus database did not include well production or completion data, MHA said it integrated that data by importing each well’s API number into the IHS Enerdeq Browser, a third-party well information database. The data was then accessed from IHS Enerdeq Browser and exported into application tools, including Excel spreadsheets and the Aries decline curve analysis software tool.

“The individual well oil EUR values were forecast using a hyperbolic decline profile (b-value), and applying a limiting terminal exponential decline rate of 6% per year,” MHA said in the report.

Concerns

In November, Flotek said its initial review of a report that questioned the validity of FracMax data identified three wells in question to be contained in units with multiple wells. The company pointed out that Texas organizes production reporting by units, or leases, that report total production in the aggregate.

“The FracMax application uses algorithms to assign production to individual wells within multiple well units. In this case, the report contends that the wells in question were on single-well units and, as a result, 100% of the production from those units should be assigned to the identified wells,” Flotek said in the release. “After review of the report, data from the Texas Railroad Commission as well as other third-party data providers, it appears that the wells in question are single-well units.”

But the company maintained its conclusion that the CnF well outperformed the non-CnF wells.

“While we are concerned by the unintentional data and processing error that led to this unitization miscalculation and are taking aggressive steps to ensure this process is immediately corrected, our analysis of the wells in question concludes the use of CnF improved productivity when compared to the neighboring wells that did not use CnF in the completion process,” Flotek CEO John Chisholm said in a press release Nov. 10.

Flotek needs to disclose all publically available completion data to set the record straight, James Schumm, an analyst for Oppenheimer & Co. Inc., said in a Jan. 19 report.

“We believe that selective disclosure of a handful of wells over different time periods, with different completion methods, lateral lengths and proppant intensity, etc. is of very limited value,” Schumm said. “Given the continued macro and micro uncertainty, we remain on the sidelines.”

Flotek Fluid Fracas Draws SEC Inquiry

MHA is conducting similar investigations in the Eagle Ford and Permian Basin in Texas. Flotek said it intends to release the completed studies and provide a review of the overall findings during a conference once all analysis is complete.

Velda Addison can be reached at vaddison@hartenergy.com.