I have a very general question. At what level of production of a horizontal fractured well is it no longer worthwhile or when would a producer stop pumping? I understand wells can be reworked, but at what point is a well dead?
That’s a difficult question to answer generally.
A well is economical when its production results in a net profit over expenses. For some wells, they can produce extremely small amounts of oil (1/3 barrel a day) and still be profitable. For horizontal wells, they are generally far more expensive to drill and operate, thus requiring more production to offset expenses.
The remaining part of your question is the toughest. Let’s use this analogy: At what point is a car considered mechanically totaled? One mechanic uses the parts cannon method and throws new parts at it until the problem is fixed, but may waste a lot of money and still never fix the problem, resulting in the car being junked.
Another mechanic is much more skilled and can identify the issue and repair it at a fair price.
Bottom line is: no two well operators are created equally. Sometimes a well may not be operated at its full potential because the operator isn’t capable of it for various reasons. Economics also play a large role in the decisions on how / when to produce. The true answer probably lies with a reservoir engineer / petroleum engineer to determine if the well is actually depleted and no longer capable of economical production. That requires a lot more knowledge than simply looking at the production volumes, and typically involves data that may be closely guarded by the operator.
It’s a matter of economics. It will depend on whether the well has paid out (broken even) or not. Is there a net revenue after the sale of the product and the cost of operating the well? Does maintaining the lease by operating the well have a future value? These are questions, among others, the operator considers when deciding whether plug and abandon.
Thank You for the information, I appreciate it.
It is important to have a minimum royalty clause in your leases. What is important is what is important to you and your families interest. It’s important to not be HBPed with practically no production. Otherwise you deeded them your mineral rights.
“Otherwise you deeded them your mineral rights” is an incorrect statement. I think what you really meant is to put a limited time frame on a shut in or limit the lease to “economically paying quantities” of production. The lease is not a deed.
Did some chatGBT stuff on the life of the wells of interest and it thru out a 100 barrels per month minimum to be financially worthwhile to continue pumping. Is that even in the ball park, chat GBT CAN be off in left field sometimes
Depending upon the operator, they may hang onto a well that is below the economic limit because they have a strategy in the area and want to keep the lease active. We saw that a lot with uneconomic vertical wells at 1/8th being held until a horizontal was drilled because they wanted to keep HBP leases at 1/8th and not lease again when competitive leasing royalties might have been at 1/5th or 1/4th.
A big enough operator may have the funds from other wells to make keeping lower uneconomic wells online a viable option for a season.
Gas wells may offer upcoming interest from AI needs or bit coin mining operations.
Stripper wells, often defined as less than 15 bbls of oil or 90,000 cubic feet (90 mcf) per day (may differ by state) are often given special tax status in a state in order to prolong their life and extract as much hydrocarbon as possible before releasing.