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Drill bit economics

Regardless of how good a new product or method may be to a drilling operation, the result is always measured in terms of cost per foot or meter. Lowest cost per foot indicates to drilling engineers and supervisors which products to use most advantageously in each situation. Reduced costs lead directly to higher profits or the difference between profit and loss.

Overview

For those in administration, engineering, manufacturing, and sales, cost calculations are used to evaluate the effectiveness of any product or method, new or old. Because drilling costs are so important, everyone involved should know how to make a few simple cost calculations.

For example, the cost of a polycrystalline diamond compact (PDC) bit can be up to 20 times the cost of a milled-tooth bit and up to 4 times the cost of a tungsten carbide insert (TCI) bit. The choice of a PDC bit, a milled-tooth bit, or an insert roller-cone bit must be economically justified by its performance. Occasionally, this performance justification is accomplished by simply staying in the hole longer. In such cases, the benefits of using it are intangible.

The main reason for using a bit is that it saves money on a cost-per-foot basis. To be economical, a PDC bit must make up for its additional cost by either drilling faster or staying in the hole longer. Because the bottom line on drilling costs is dollars and cents, bit performance is based on the cost of drilling each foot of hole.

Breakeven analysis of a bit is the most important aspect of an economic evaluation. A breakeven analysis is necessary to determine whether the added bit cost can be justified for a particular application.

The breakeven point for a bit is simply the footage and hours needed to equal the cost-per-foot that would be obtained on a particular well if the bit were not used. To break even, a good offset well must be used for comparative purposes.

If the bit record in Table 1 were used, we could determine whether a bit would be economical.

Example 1

Economic Analysis

Total rotating time = 212.5 hr

Total trip time = 54.3 hr

Rig operating cost = \$300/hr

Total bit cost = \$16,148

Total footage = 3,380 ft

Note: Tripping rate is computed at 1,000-ft/hr average. This rate will vary, depending on rig type and operation. Therefore, the offset cost per foot for this interval (8,862 to 12,242 ft) is calculated with the standard cost-per-foot equation:

where C = drilling cost per foot (\$/ft), R = rig operating cost (plus add-on equipment, such as downhole motor) (\$/hr), t = trip time (hr), td = drilling time (hr), Cb = bit cost (\$), and F = footage drilled (ft).

From the data provided in the example above, the cost per foot is

In determinations of whether an application is suitable for a bit, the offset performances are given, but bit performance must be estimated. Thus, we must assume either the footage the bit will drill or the ROP it will obtain. If the footage is assumed, then we use the following equation to calculate the break-even ROP:

where Cr = rig operating cost (\$/hr), Co= offset cost per foot (\$), t = trip time of bit (hr), Cb = bit cost (\$), and F = assumed bit footage (ft). Therefore, in the above example,

The bit must drill the 3,380 ft at an ROP of 13.7 ft/hr to equal the offset cost per foot of \$28.46 for the same 3,380 ft.

If an ROP is assumed, use the following equation to calculate the breakeven footage:

Thus, in the above example, if we assume an ROP of 20 ft/hr, we have

In this case, the bit must drill 1,627 ft to attain the breakeven point.