Baytex is drilling relatively shallow wells (8,500 feet), targeting the Three Forks; drilling short laterals; 16-stage fracs (equivalent to 32 stages for long horizontals); 1.5 million lbs sand (equivalent to 3 million lbs for long horizontals); initial 30-day production about 4,500 bbls; dropping off to 1,000 by end of first year; looking for 50,000 bbls for first year cumulative."The key metric will be total production at 3 years, and then annual production for the next 5 years after that.
Interestingly these low-IP wells are in the same ballpark after one year, comparing their short-lateral production with the long-lateral production of other companies. I would assume cost of these wells are somewhat (much?) lower than cost of the high-IP wells.
Don't take this as gospel; this is early and quick look; and I only looked at most recent wells. I assume mineral rights owners are not real impressed with their returns. But, Baytex wouldn't be drilling so aggressively if they weren't making money on these wells, and 50,000 bbls/year for less expensive, short lateral wells, are nice wells in the aggregate for a company. Especially when these wells will produce for 40 years. Think about that: these wells will pay for themselves in 3 - 5 years (probably closer to 3 years) and then produce for "peanuts" for the next 30 years. An individual mineral rights owner might not do all that well, but the company, with two to four wells/section after ten years of drilling, is going to have a huge annual production out of a small area.