Info About Decline Rates

Reference: API 389-37243 Pipeline State 58 10-3

This well came online in Oct/Nov 2018 and production was strong. It has declined considerably in the 7+ months, however. From a peak of 22250 bbl of oil in December to 9150 in April. Approximately a 60% decline in production in 4-5 months. Is this typical of an oil/gas well? Gas and NGL have both declined during the same time but not as much as oil. I expected a decline rate over time but am a bit surprised by the significant decline in the early months. I have contacted the operator and I’m waiting to hear their version.

Also…the last two royalty payments have shown a negative number for natural gas. I realize gas is being flared or essentially given away, but didn’t realize there would be deductions in my royalty income. Does this mean the operator is having to pay to dispose of gas?

Thanks for any input!

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Production Decline Curves & Production Rates

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You might also keep an eye on this linked page and check out this.

My well, (in Yoakum County), started in Feb. 2018. Peak month was March 2018, (13,400 bbls). 5 months later output was half. One year later, (3/2019) output is about 25% of peak.

For horizontal wells, oil production decrease is usually about 70% in the first year from first month to last month. Second year production drops by about 40% from the beginning of the second year to the end of the second year. Each year after that should be a much shallower decline rate around 10% less than the previous year’s production. However, some seem to fall off a cliff around year 5 or so. Gas production decline rates are slightly less, but still similar. Expected well life is 10 to 20 years, but that doesn’t always hold up.

Vertical well production declines tend to be much less severe.

Short version, yes the production decline you are seeing in your well is relatively normal.

Forgot to mention that yes, they are probably paying to get rid of the dry gas in Reeves County, but you should still be getting income from the products / liquids portion of the gas.

I appreciate your reply! After the first 2-3 months of production I think my excitement of future royalty income may have overlooked the fact that decline rates begin early and can be steep. With some luck the operator will drill more as called for in the pooling agreement. Thanks again.

The decline shape of horizontal wells is often described as a “hockey stick” if you lay it on its side. The blade is those first few years of decline. Starts off high but declines rapidly. The stick part is the long but low production time period.

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If you happen to get lucky and have multiple horizontal wells, then think of stacking the hockey sticks next to each other. The high times (blades) are the early years somewhat extended in time and the sticks, even though low, will add up for fairly predictable long term royalties. Lots of lows can add up.

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Thank you so much for that analogy! Most helpful for those of us that haven’t been around this for long time. David

Very new to all this and confused to say the least. Recently inherited a very small percentage of a large family held mineral interest in Reeves and Pecos. Primexx drilled two wells in Reeves. The very second check, this month, was 60% less than the first check last month. A bit surprised it dropped that much that fast.

Your first check probably included multiple months of production because the operator has (I think) 90 days to report the production and start paying royalties. My first check for a recent well included 4 months production. The next check was for a single month’s production and for about 1/4 of the first check.

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this might be too open ended for an answer - but if these lateral wells decline so quickly, why are people so anxious to pay so much to purchase them?

granted, i get plenty of bottom feeder offers but also some very nice ones that i calculate (using the rough decline rates outlined in this thread) would take years for a return to me in production to equal the offer amount of sell-out now.

[for reference: reeves, hgn survey, s11, b3]

Mostly because of the potential to drill more wells and at different depths. There are multiple layers of very thick shale in the Delaware Basin (the western Permian’s name). Some of these layers are not economical to drill now, but advances in drilling technology may make them so in the future.

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