Note: in a long note like this there will be typographical and factual errors. I may have made huge errors in simple arithmetic.
Note: I am using $30/bbl for price of crude oil in some examples; in others, $40 oil. I am making assumptions in some examples.
The definition of an ideal well: a well that pays for itself in six months and then provides free cash flow for the next 35 years.
The following well is NOT an ideal well. It took many years to pay for itself. But in the past year it appears to have generated millions of dollars in free cash flow.
This gets back to a discussion we had months ago. This was addressed by the CEO of some oil company operating in the Bakken some months ago when asked about the "return on investment." I don't remember his specific words, but they were something to the effect that in some cases the return on a well in the Bakken can only be defined as "infinite." Some readers took issue with that. That's fine.
Yes, I know how the return can be calculated, but this is the problem. How do you "carry this on your books" when considering return on investment?
The well:
- 17799, 457, BR, Guadalupe 11-23H, Charlson, t3/09; cum 542K 8/19; not re-fracked; for full production profile, see this post;
It was then taken off line for two months. It came back on line in July, 2018, about a year ago. In the past year, this well produced 311,226 bbls. As far as I can tell it was not re-fracked.
At $40/bbl = $12.5 million this past year. For a well that had zeroed out. For a well that was taken off line. For a well that was no longer producing (wink, wink).
So many story lines. Back in 2009 this well might have been considered "uneconomic." But the operator keep it on line.
Now, let's say the original owner of these minerals never sold his 160 acres of minerals (the typical size of a farm in this area). This is a 640-acre-spaced well. The owner controlled/owned 25% of the production, and probably received 18% royalties for the production.
In April, 2018, the mom-and-pop mineral owner would have received roughly:
- 1,157 bbls x 0.25 x 0.18 x x $30 = $1,500.
Then, in August, 2018:
- 28,578 x 0.25 x 0.18 x $30 = $38,580.
For the entire past year:
- 300,000 bbls x 0.25 x 0.18 x $30 = $400,000 in royalties this past year alone.
So many story lines.
Again, this well was not re-fracked according to the NDIC and according to FracFocus. I don't think it was re-fracked.
This well has not been refracked:
Recent production:
Pool | Date | Days | BBLS Oil | Runs | BBLS Water | MCF Prod | MCF Sold | Vent/Flare |
---|---|---|---|---|---|---|---|---|
BAKKEN | 8-2019 | 31 | 8220 | 8416 | 2909 | 35274 | 35169 | 28 |
BAKKEN | 7-2019 | 31 | 9802 | 9556 | 2530 | 30326 | 30058 | 191 |
BAKKEN | 6-2019 | 30 | 13347 | 13680 | 2269 | 33120 | 33046 | 0 |
BAKKEN | 5-2019 | 23 | 14244 | 14229 | 1350 | 24852 | 24066 | 729 |
BAKKEN | 4-2019 | 30 | 22406 | 22430 | 1996 | 23490 | 22854 | 562 |
BAKKEN | 3-2019 | 31 | 29673 | 29576 | 2600 | 25049 | 24972 | 0 |
BAKKEN | 2-2019 | 28 | 28054 | 28231 | 2077 | 27395 | 27325 | 0 |
BAKKEN | 1-2019 | 31 | 29921 | 30008 | 2390 | 29361 | 29284 | 0 |
BAKKEN | 12-2018 | 30 | 29567 | 29553 | 2462 | 27767 | 27693 | 0 |
BAKKEN | 11-2018 | 30 | 28924 | 28924 | 2715 | 26246 | 26172 | 0 |
BAKKEN | 10-2018 | 31 | 26945 | 26520 | 2271 | 27609 | 27532 | 0 |
BAKKEN | 9-2018 | 30 | 25088 | 25570 | 2155 | 26978 | 26904 | 0 |
BAKKEN | 8-2018 | 31 | 28814 | 28578 | 2947 | 32269 | 32192 | 0 |
BAKKEN | 7-2018 | 31 | 16221 | 15949 | 2552 | 17136 | 17059 | 0 |
BAKKEN | 6-2018 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
BAKKEN | 5-2018 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
BAKKEN | 4-2018 | 30 | 797 | 1173 | 73 | 1025 | 951 | 0 |
BAKKEN | 3-2018 | 31 | 1376 | 1157 | 112 | 1981 | 1904 | 0 |
BAKKEN | 2-2018 | 28 | 1290 | 1186 | 123 | 1742 | 1672 | 0 |
Initial production when this well was first drilled / completed back in 2009:
BAKKEN | 10-2009 | 31 | 4657 | 4443 | 279 | 6258 | 0 | 6258 |
BAKKEN | 9-2009 | 28 | 4289 | 4597 | 256 | 6494 | 4948 | 1546 |
BAKKEN | 8-2009 | 31 | 5468 | 5305 | 419 | 8661 | 7609 | 1052 |
BAKKEN | 7-2009 | 31 | 6383 | 6446 | 579 | 8164 | 5829 | 2335 |
BAKKEN | 6-2009 | 23 | 5908 | 6000 | 588 | 7737 | 5963 | 1774 |
BAKKEN | 5-2009 | 31 | 7296 | 7028 | 568 | 8979 | 8247 | 732 |
BAKKEN | 4-2009 | 30 | 8520 | 8716 | 871 | 9571 | 4969 | 4602 |
BAKKEN | 3-2009 | 29 | 9594 | 9177 | 1774 | 8376 | 0 | 8376 |
Not statistically relevant. So what, about one well? And for that matter, what if there are other wells with the opposite impact from nearby fracks? Or if the old wells are cannibalizing new ones?
ReplyDeleteBottom line, you can't solve this problem with well logs. Need someone to do a real study. Doesn't have to be you. Gift horse and all that. But someone needs to actually define what they mean by halo effect (mathematically) and then look at the overall basin and see the evidence for it. Sounds like a good Drilling Info study.
Okay.
DeleteI've pretty much quit posting these "extraordinary wells." To get posted now, they have to be really, rally exta-ordinary. But if anyone wants to do a statistical analysis, they can start with the 315 wells that have shown this phenomenon listed at this post:
Deletehttp://wellsofinterest.blogspot.com/p/blog-page.html.
If one wants to do a statistical study, I would recommend doing it by field. It is obvious some fields are better than others. But, of course, that's anecdotal. LOL
With regard to the "halo" effect, this has already been studied statistically but is proprietary and not available to the general public. However, there is a study that has been published and can be found at this post: https://themilliondollarway.blogspot.com/2019/09/flashback-back-to-2013-spacing-and.html.
DeleteCLR also did a "halo" effect study years ago during the early days of the boom; I posted that years ago. At that time, too few wells to come to a conclusion one way or the other but it was pretty obvious what was happening in this arena.
DeleteOne thing to watch for (not saying it's a problem, just something to check): Frac Focus is known for slow reporting of recent completions. See the discussion by EIA in the DPR. So, I worry that some of your "no refrac" comments may be about wells that did have a refrac that will show eventually. Maybe looking at several of your posts from over a year ago, where you said there was no refrac, will now show that there was a refrac.
ReplyDeleteNot saying this is a major issue. But it may affect some of the wells you look at.