I have production data for several wells. I know that a subset has been treated with a product, and I'd like to determine if the difference in production is due to the product treatment, or the placement of the wells.
For each test well I've collected the $K$ nearest neighbors required to obtain $N$ control wells. This gives me $N$ control wells, and $K-N$ test wells. I then perform a two-tailed z-test, using the standard deviation of the production of the $K$ wells as the sample standard deviation.
I was wondering if this sounds like a decent approach to this problem, or if there is a more sophisticated way of incorporating spatial data for testing the hypothesis that the production for the test and control groups is the same.