In your research, is there any relationship to the increased number of permits and larger drilling budgets by the drilling companies? Or do you think these permits are just front loaded?
The companies put together an annual business plan. They allocate a certain amount of capital to drilling. They turn that over to those who decide how to use that money: location of drilling, well design (to include fracking/completing), type of rigs. Each of those parameters has their own issues. I would assume well design and rigs are pretty much standard, evolving over time, but location is much more difficult.
They divide those wells into each month (again, probably based on experience) and start putting together the "blueprint" they will need to show the NDIC to get a permit.
They can only allocate so much time to developing those exhibits for the NDIC and the NDIC can only work through so many permit requests.
So, no, I don't think permits are "front-loaded" per se: they are working through their plan. It is possible that as they enter the fourth quarter, if they have more money than they expected (well costs come in less than projected) or less money (well costs more than projected), they will tweak the number of wells they will drill.
However, the planning process can continue as planned. A permit is good for one full year, and is easily renewed (a letter requesting renewal) and a $100 filing fee.
I assume you are thinking that 217 permits this past January compared to 147 last January was a huge increase suggesting "front loading." I think it has more to do with pad drilling.
Bruce,
ReplyDeleteIn your research, is there any relationship to the increased number of permits and larger drilling budgets by the drilling companies? Or do you think these permits are just front loaded?
The companies put together an annual business plan. They allocate a certain amount of capital to drilling. They turn that over to those who decide how to use that money: location of drilling, well design (to include fracking/completing), type of rigs. Each of those parameters has their own issues. I would assume well design and rigs are pretty much standard, evolving over time, but location is much more difficult.
ReplyDeleteThey divide those wells into each month (again, probably based on experience) and start putting together the "blueprint" they will need to show the NDIC to get a permit.
They can only allocate so much time to developing those exhibits for the NDIC and the NDIC can only work through so many permit requests.
So, no, I don't think permits are "front-loaded" per se: they are working through their plan. It is possible that as they enter the fourth quarter, if they have more money than they expected (well costs come in less than projected) or less money (well costs more than projected), they will tweak the number of wells they will drill.
However, the planning process can continue as planned. A permit is good for one full year, and is easily renewed (a letter requesting renewal) and a $100 filing fee.
I assume you are thinking that 217 permits this past January compared to 147 last January was a huge increase suggesting "front loading." I think it has more to do with pad drilling.