Horizontal drilling in the U.S. has increased nearly 50% since 2002. One reason: advances made in horizontal-drilling and fracture-stimulation technologies have allowed some E&P companies to realize higher returns, lower finding and development costs, and prolonged production in tight-sand and shale plays, according to Tom Gardner, director of E&P research for Simmons & Co. International. While horizontal wells can cost twice as much as vertical wells, they may generate three times the reserve recovery in unconventional resource plays, he reports. Despite an expensive learning curve, lack of reservoir information and risk of failure, economic returns can be realized via highly predictable production. Additionally, accelerated resource exploitation and improved development efficiencies can return higher net present value, he says. No one debates the fact that horizontal drilling costs more. However, the cost has declined from three times that of vertical wells in early use to as low as 1.5 times today-and is likely to continue to decline-he adds. Horizontal rig use has increased 272% from 2003 to 2006. For more on this, see the June issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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