Currently receiving oil/gas royalties in Cornell Unit 34-189, Ward C. New well in 2016. Only well in entire 640 acres. Production volume steadily being reduced monthly. No sign of any new drilling.
Any ideas re: specific problems in this area. Was supposed to be a good place?
Educated guesses welcome.
Bill H.
AnAdamo is drilling all around that area. Wells are often timed by lease expiration dates. Anadarko will return and fill in that section.
Thanks TD.
I forgot to mention that it was Anadarko. Yes, it seems they have been active all around for years, but not prone to get to that section . Reducing current volume is understandable if oil price is the issue? There is full pooling for all in that 640 acres. Its tempting to sell, but I'm holding onto my 14 acres.
Thanks for response.
Hi, Bill:
When you say that "production volume is steadily being reduced monthly", is it your understanding that it is being intentionally reduced by Anadarko? That is unlikely, so I probably misunderstood your meaning. If your well is horizontal, it is typical for these wells to have a very steep (i.e., rapid) decline curve. If it is a conventional "straight hole" well and has declined rapidly, that usually is indicative of a very small and/or very low quality reservoir.
How soon or if/when they will drill another well may depend on a number of factors. As "TennisDaze" suggested, your well may have been drilled to hold the acreage with production and they may develop it completely over time and simply have other wells to drill elseehere where circumstances are of a more urgent nature.
I don't know anything about your well, but it could be that year-to-date production is inadequate at current prices to qualify other potential locations on your acreage as "prime locations". Companies like Anadarko make a big deal of concentrating on drilling their "prime locations" to make a good impression on their stockholders. By "prime locations", they mean locations that offer a good chance of resulting in wells that offer a fast payout and very good rate of return on investment at current prices.
Should thus be the case, at higher prices the locations on your acreage could become "prime locations" in short order. Or, even if prices stay flat for a long time, as Anadarko's inventory of "prime locations" gets drilled up, lesser but still good locations will rise to become their new "prime locations".
The preceding are just a few possible contingencies worth considering. There are many, many others.
All the best,
Ken
KEN:
Thanks for your response.
Since well was new in 2016 and had normal test and start up quantities, I doubt that capacity is the issue. Likely it is being reduced purposely, and it may be a price issue or limit imposed by govt. ? When asked A.'s reply was that it was a fine well and will likely be used more later, but no real reason given for current reduction.
It is horizontal. All your comments make a lot of sense-it may be that simply holding the acreage is real reason.
Thanks for the info.
Bill H.
A 50% decline is pretty normal in first year. RRC is not restricting production volumes in this field. Anadarko is a responsible operator and will produce well to maintain pressure and maximize long-term production. There are some irresponsible operators which are known to open the floodgates and let oil flow uncontrolled in order to pump stock price. Result is the well is destroyed and much oil and gas is left in the ground. Bad for minearl owners. You need to relax and take the long term view that your minearls will produce for decades, benefitting you and your family. Plans for up to 20 wells in Wolfcamp per section over the years. Our country seems to be obsessed with immediate activity and returns, rather than long term planning. No way to run a company. Anadarko moved 200 employees to Midland this year so that company is committed to this area. Enjoy the ride.
TennisDaze,
I am always impressed with your answers to Forum Members. I consider you as a 'Pro' also on this Wonderful Forum and I'm sure there are others that will agree with me.
Thanks,
Clint Liles
TennisDaze:
Thanks again for great advice. I especially liked your idea to take the long-term view-and
think of 20 wells down the road. Long -term planning was always my strong point- until I hit 78 this year and finally decided to start paying more attention to current issues like mortgage payments, food bills, feeding the cats and automobile insurance.
Reminds me about the DR. who told his patient that he (the patient) only had 6 mos. to live . Terrible shock!! After that, Nurse at the front desk handed patient a bill for $6000. due in 3 mos. at latest . Patient got hysterical yelling at nurse about his awful diagnosis and now an impossible bill to pay in the same period.!! Nurse agreed to go in and tell DR. about the dilemma.
After much loud and heated discussion the nurse reappeared and told the patient .."alright , alright--the DR. said you got a year..."
Thanks again.
Bill H.
TD:
Couldn't resist the chance for a little humor in my last note. I do feel better with your wise advice for the future-and the possibility for A. revisiting the area for drilling.
Let's hope we are not all driving electric cars in a few years.
Thanks,
Bill H.
Steep production decline is the norm for any "shale" play wells. There has been a lot posted on various sites / blogs about this production profile style. Depending on operator and landing zone, Ward Co has some pretty good geology that can yield good results.
Personally, I highly doubt that production is being curtailed by the operator due to pricing issues.
Assuming the production unit is holding the entire 640 acres, there is no reason to drill another well since the unit is now holding all the acreage by production.
I know from my limited experience on our well the first royalty checks will be the largest for the first few months then start to dwindle monthly until the production is less than $100 per month then the oil company
accumulates and pays once per year. I often wonder if they reduce flow on purpose to play the market pricing.
Mike
Attached is a real production decline profile from an Eagle Ford well in S Tx. This profile will be typical of Permian Basin horizontal "shale" wells.
X axis is month of production / y axis is the percentage of decline from the first full month of production.
I will stand by my opinion (as a 40 year O&G geoscientist) that this production decline is not intentional and the result of operators choking back wells. With that being said, there are some operators that do some sort of "choke management" to optimize EUR's over time, but these adjustments are minor.
251-EFdecline.pdf (109 KB)I do also,
Mike
RM
Thanks for both responses. Chart shows at about 3 yrs. we begin to hold at 10% of orig. level and continues--to at least 5 yrs. and beyond for ?? As a non-technical person I wonder where the big payback is for the co. Price seems like main driver of any decision to drill more on a section like mine where entire section can be tied up via one well.
Does this situation render sale of rights an unreasonable or impossible alternative for owners like me. ?? Not sure where I stand if I should decide to sell land and mineral rights in the future. Not currently ready to sell anything, but wonder re: options.
Appreciate your candid view of things.
Thanks a lot.
Bill H.
Mike:
I also wonder- let me know if you ever find out!!
Thanks
Bill H.
The "tail" of production in the 8 to 10% of initial production range should go on for 20-25 years (assuming no mechanical failures). The wellbore will be slowing oozing O&G and water into the lateral during this time at low pressures.
ReFracs and other additional stimulation may results in an up tick of production but the same decline will take place over time if this were to be done.
Operators are looking to get back most of their D&C costs in the first 2-3 years of production - sometimes in the first few months. It all depends on how good the initial consistent rates are.
Economics rules the decision to drill - so O&G prices as well as lower drilling costs come into play.
Assuming 640 acres and 5000' laterals, one could see 8 to 16 laterals drilled depending on how the operator views spacing. In some areas, lateral spacing in the 250' to 330' range is the norm. Any group wanting to purchase minerals is looking at this sort of infill drilling EVENTUALLY. Their logic is tied to long term economics and what their investors are looking for as to ROI.
People like you get offers to sell their minerals all the time - usually a low offer with hopes that the mineral owner is not savvy enough to understand upside and overall economics associated with their properties.
Hi, Bill:
Based on my experience, I have to concur with "Rock Man's" two posts as to production being artificially curtailed month to month. I am also a geocientist--a petroleum geologist with almost 50 years in the business--and CEO of a very successful independent E&P company from 1983 until my semi-retirement several years ago. I still hold a seat on that company's board and the title of Exploration Director Emeritus.
To get a better "feel" for the decline curve he presented, you might want to flip it upside down. Then, rate of decline would appear from top to bottom--mirroring the steep drop in production that occurs in a typical horizontal well month to month early in it's history.
I've attached Railroad Commission production figures through March 2017 for a horizontal lwr. Wolfcamp well completed in June 2016 in Loving Co. that I am familiar with. It is a very good well but, as you can see, roughly follows the initially very rapid decline profile shown in "Rock Man's" attachement. I can tell you for a fact that EOG has not artificially reduced this well's production month to month, and EOG is one of the best, most responsible, operators out there when it comes to the southern Delaware Basin.
However, I am not so sure that you may not see additional drilling in your section, near to intermediate term, depending on how good that existing well really is. It is true that any oil company which does not replace reserves as the are produced is in the process of going out of business. However, companies with very large reserves relative to the revenues they produce tend to get bought up cheap. Companies with a good balance between replacing, increasing and producing reserves stay in business and make their shareholders happy by generating revenues. Oil companies are in business to find and sell oil.
All the best,
Ken
250-Screenshot_20170716232005.png (116 KB)