Eddy Co Gas Production

#1

I am trying to learn a bit about all this stuff. I have gas royalties, or are they called dividends, that have dropped significantly in the past 10 years. I see in a graph that Gas(MCF) production is up when the Water(BBLS) production is up. But I don’t know what Water(BBLS) is. Is that a production choice to lower the Water(BBLS) to lower Gas(MCF)? I ask because I am looking at this spreadsheet. Those are two columns of a spreadsheet. I have just randomly taken different years’ data. |Gas(MCF)|Water(BBLS)| |325293|0| |292644|0| |208100|1| |134871|10| |209307|541| |247344|3446| |259516|773| |74516|200| |69179|5| I see no patterns to help me figure this out on my own. Would any of you be able to give me a short lesson on this, please?

#2

Hi Pam,

The operator reports the volume of oil, gas, and water produced to the state. Water (bbls) is the amount of water produced by the well. Normally as the pressure goes down in a well, all of them decline. There are exceptions. I’d guess you have a Morrow gas well, and yeah, they are going to decline quite a bit over 10 years. All of those annual water numbers are pretty low. I’m happy to try to explain what might be going on with your well, it may just be easier if you gave me the well name and operator. Cheers

#3

Section 31, Township 22S, Range27E. The well I am speaking of is Little Jewel. Thanks for responding. I was just trying to learn a tiny bit more about all of this. From what you have said before, I think I am force pooled. I think I understand what pooling is. And I see from your maps, I am not under Potash, which is a good thing. So now I understand a bit more about the gas and water from a well. Thanks so much!

#4

Hi Pam-

We also have interest in Little Jewel. There are a few things going on with this property. -First, Little Jewel started producing back in the late 60’s. The lease that holds our interests is from 1966. It has been a solid producer for many decades but there has and will continue to be an inevitable decline.

Here is the OCD link to the well data: OCD Permitting - Well Details

-Second, with gas prices having been so low in the Permian due to lack of transportation options, many wells have had their production slowed and managed month to month leading to fluctuations month to month.

-Finally, WPX is the current operator, taking over from Chapparel in 2014. WPX has not been a very consistent nor easy to work with Operator. Not only do they take significantly higher deductions than any other operator we’ve dealt with (as high as 65/70% in some months on Little Jewel) but they have not had a very consistent production schedule even taking the lowered gas pricing into consideration. When asked about both topics they have been very difficult providing little information or rationale.

I’m not sure what interest you have or terms of your lease but I assume all your interest was held by the original lease given the age of the well. The good news is that Mewbourne (a really great company to work with) bought out all interests in the section other than those held in Little Jewel. They have drilled new wells in the Sec although we have yet to see division orders for the new wells. We are optimistic though given the success of Little Jewel for all these years. Here is an OCD Link to one of the wells: OCD Permitting - Well Details

Let me know if you have any questions. Happy to share what info I have.

Thanks!