Stacked pay development

Abstract Stacked pay codevelopment is another important concern when developing a field. If more than one viable formation is present, stacked pay codevelopment becomes an important strategic and economic matter of contention. In this situation, one must decide between developing both formations or only one, resulting in the loss of the opportunity cost of an additional formation. The factors that contribute to this economic and strategic decision include gas/oil pricing, capital expenditure to develop each formation, lateral length of development wells, cycle timing, NRI (how much royalty is being paid to the landowners), OPEX, etc. In a high commodity pricing, one might develop both formations and generate net asset value for the shareholders. However, in lower commodity pricing, it could be more challenging to justify codevelopment, especially when the production performance of one formation is lower than the other.