Question about substantial decrease in production


#1

Hello,

We receive royalties from two wells: Hensen Haven and Smedley, both located in McClain County. We’ve leased our mineral rights with Charter Oak since about 2007 approx.

Our monthly royalties have dramatically dropped. The last year, and in the last 6 months it is significant. We’ve called CO and asked what’s going on, but there’s essentially minimal to no communication with us. Any help with concrete info or guidance as what to do to understand this drop would mean a lot to us.

Is there a chance that a member on this forum has some inside info? Anyone else receiving royalties from these two wells?

As a side note: BP has contacted us regarding a horizontal well in the area of one of these wells-we have written about BP before in this forum. That scenario is ongoing. Today’s question though focuses on the lack of production at HH and Smedley 6 - 6N - 2W & 31 -7N - 2W

The knowledge and insight amongst all of you is incredible and for those of us who are relatively new to this venture find it immensely helpful and generous that you share your skills and knowledge.

Thank you so much.


#2

The Henson Haven 1-6 looks like it was in a pretty predictable decline over the years. The oil sales have a see saw sales history. High one month, low the next, Been that way for years. I don’t see much gas sales recently, so that may be part of your difference.

BP’s Henson 6N 2W 6 1HX horizontal well was spud on March 26, 2018. It will end in 31-7N-2W

Smedley Estate 1-7 is in 7-6N-2W. That one has decreased quite a bit in late 2017. Could have been mechanical trouble, or it could have been shut in while nearby horizontal wells are frac’d or it just could be near its natural end. Charter Oak sold quite a bit of their acreage to BP, so the transition time has been long. I don’t see that the well was sold yet, but the paperwork could be delayed.


#3

That is a great map. Csn I ask where you got it?

Debbie


#4

The OCC frequently has exhibits that go with the pending wells. If you know the case numbers that go with your section for a horizontal well, you can track down the exhibits.


#5

Hi Debbie …

Mr Rick Howell, who often responds to questions on this forum, shared a number of maps with us when I requested assistance in understanding where our mineral rights were in relationship to the Woodford basin. Mr Howell posted this along with several other maps. Just look around and you’ll find them. We found his resources, comments and guidance along with Ms. Barnes to be exceptionally helpful and generous.

Best to you!


#6

You are such a treasure! Thank you for sharing this with us. We really appreciate the support and guidance this forum has provided us.


#7

Keep in mind that the decline rates on these wells are pretty steep. Here is an example.

woodfordrates


#8

Although they are not labeled, it appears the graphs you’ve posted here represent the two wells we spoke of in our original post today. If so, it seems as though they’re pretty much close to being exhausted (or whatever the term is for the end/completion). Are we interpreting this correctly? The decline appears so significant and steep. If this the case, how does it all end? Does Charter Oak send us some type of closure statement? We have zero understanding of what is the next chapter :slight_smile:

Thank you for your help, Mr Howell.


#9

These are just some well declines in the same formation they are not your wells. The declines will not be as bad after first year 3-5 declines.

Here is the article that graph came from: https://www.slb.com/~/media/Files/dcs/industry_articles/201105_aogr_shale_baihly.pdf

They will not send you anything.
I’d advise you to start compliing data on your wells. The Name, location, API number, Production Unit Number PUN. Then you can search to see what is going on. The data will lag, but will eventually be there.

The well browse database here Oklahoma Corporation Commission

Production data here. Some wells you can find data from various inquiries and get to other data. https://www4.oktax.onenet.net/GrossProduction/gp_PublicSearchPUNbyLegal.php From a well name, location, API, or PUN, you can sometimes find the remaining info.

Once you have an API number, that is the quickest way to find records is to search here. http://imaging.occeweb.com/imaging/OGWellRecords.aspx


#10

Here is an example of some horizontal wells of mine. I tracked their production sales amounts over quite a few years and made a graph in Excel. These are from the Woodford in Canadian county, just the gas. I had three different wells come on line in 2008 and 2009 in three sections very close to each other with small acreage. You can see how similar the production was after the first few months. In late 2012, I had all sorts of offers to buy my “declining production to help me out”. Made me suspicious. Well, each of those sections ended up having eight more wells each. Look at the difference in the 24 more wells coming online made. The first ones were low on production for a while as they shut them in while they frac’d those other wells and there was some interference. They did come back up a bit over time. This was in the early days of testing spacing, but look how much more was coming out of the sections from my “poor declining production they wanted to take off my hands”. Newer technology also made a difference. Some wells came on higher, some came on lower. Overall, the sections were drained much more effectively. I need to update the graph since I have another five years of production now and I suspect that they all pretty much flatten out at a lower level now. My engineer ran the decline curves on these wells and they are going to last another 25-30 more years. I like 30 years of low production. This was even before the Mississippian shales were discovered, so additional reservoirs can be important later in the life of your minerals.

The left side of the graph is mcf/month. The bottom are the dates and each different well is posted on here. We call the shape of high time in the first two years and then the lower rates of the later years a “hockey stick”. We tithed 10% of our revenue since we were blessed to have it in the first place and then invested the rest and used it to put our kids through college (which is an investment in itself). This was on small acreage, not big fancy acres. I am not promising that everyone’s acreage will be this way, but want to use it to illustrate the concept that you need to think past one well and about three or four decades in the future. And oil and gas prices weren’t all that high when this was happening. You need to get good financial planning and a good accountant to guide you.


#11

Great posts, IMHO.

Future development may occur, but don’t plan on it.


#12

Nice post. I agree, you have to take the money you make and invest it wisely. A kid’s college, stocks, buy some land, a house or whatever. You can parlay your success into other successes. I would advise against blowing it , or developing crazy spending habits! And a lot of people do that. If you have poor spending habits to start with, they will not get better with the inflow of new capital!