Utica's production decline rate

Has anyone heard anything about the rate of production declining abnormally fast?  It was brought to my attention that there is some concern that production might fall off in Utica wells faster than in other shales.  Does anyone know if this is the case?

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Permalink Reply by Bluflame on October 21, 2012 at 5:25am

US,

  Even more basic, what are the "rules" for establishing a "proven" area?  I have yet to find an answer to this question. One would think there is O&G industry protocol or maybe even state or federal rules that apply. Otherwise, the process could be riddled by abuse.

BluFlame

Permalink Reply by Bluflame on October 21, 2012 at 6:22am

US,

   These areas have seen the most drilling activity. But, who determines whether a specific area is "proven" and how is the determination made? I don't mean to sound ungrateful; you are a terrific and consistent source of reliable information.

   But there must be some standard that establishes whether and how an area is "proven"?!? If you do not know the answer either, maybe someone else can enlighten both of us!

BluFlame

Permalink Reply by Dan on October 21, 2012 at 9:18am

"Proven"  Seems to me the only "proof" is drill a hole, see what and how much comes out.  For decline you got to wait and see.  Untill the well is flowing everything else is still theory, even if based on great data.  Still this only proves at the depth that is tapped.  It will be a while till there is proof at all the potential target depths.

Permalink Reply by Bluflame on October 21, 2012 at 10:00am

Dan,

  If you look on financial statements of the O&G guys, they always talk about "proven" & "unproven" reserves. I do not know how they differentiate between the two categories. Maybe "proven" is comprised of the projected future output of wells already drilled, as you suggest??? I don't know.

  Surely there is some industry person on the GMS site who can clarify these definitions.

   Decline rate is a whole different animal. We'll need to await more wells to get a reading. And then new technology may emerge to reduce decline rates. Then, there is the possibility of re-fracking....

BluFlame

Permalink Reply by Jim Litwinowicz on October 21, 2012 at 11:49am

Blu; from what I understand, proven means enough wells have been drilled, to a certain density in a given area, that proves the extent and capability of an area.  I don't know what density that requires...a well every 10 sq miles? every 20? Every 5? It probably also includes a time span showing the well(s) decline rate over time. Probably also calculates the wet/dry ratio.

Permalink Reply by Rick on October 21, 2012 at 1:31pm

Utica, I have no such map. I guess its a matter of opinion, since according to landsharks, any hole at all can turn up dry. But listen to CEO's and they often talk to  their shareholders, investors, and potential stockholders about proven acreage in a play. One is selling down, the other is selling up. I still dont believe they are drilling dry holes anywhere in the marcellus or utica areas that have producing wells nearby. Maybe on the fringes, but even then no one has named to me a dry horizontal well hole. You are welcome to find one of the many that we are told happens all the time. I'll wait with baited breath.

Permalink Reply by Rick on October 22, 2012 at 1:29am

Utica, I did say that if there is a producing well nearby... half mile or so, they wont be drilling a dry hole in the marcellus or even the utica. Werent the richland and ashland wells out on the fringe western area far from the closest producing horizontal well? Did they plug  them since they dont justify production? I havent heard them referred to as dry holes other than by you. Also, landsharks refer to gas wells as dry holes, not just oil wells. When the price of natural gas dropped to unprofitable levels.. did all the marcellus dry gas area turn into dry hole drilling situations? I think not. All i am saying is that these landsharks are using scare tactics to get people to sing low... agree? The next scare tactic to keep singing bonuses low may be "quick decline rates" which of course can be manipulated at the well head or in fuzzy production numbers.. at least for a year or so.

Permalink Reply by Erik V. on October 20, 2012 at 11:28am

There aren't many Utica wells out there that are even a year old at this point.  Petroleum engineers all over the area are trying to figure out how long they will last, so there is no way McClendon (with a BA in History) is going to do a better job than they are at guessing the longevity of these wells.  McClendon is a business man and knows how to run a company.  He's made some mistakes for sure, but all in all, has done alright for himself.  And he knows how to sell stock in his company and that is by being as upbeat as he can be with whatever that company's venture may be.  Bluflame, I think you'll do alright with your Chesapeake stock, especially if the Utica shale is a boomer.  I've been tempted to buy some myself along with Gulfport and PDC, which have been doing very well.  Obviously many of these wells are going to do very well, how many and for how long won't be known until we have some historical data.  Once again, only time will tell.

Permalink Reply by Bluflame on October 21, 2012 at 4:15am

Eric,

   Carl Icahn, for all his flaws has a pretty good (not perfect) track record of picking winners. He didn't invest big $$$ in CHK for charity. And so far, the moves he's made seem to be good. Even Aubrey seems to be "on board" with the changes that have been made. I'm a McClendon fan....if it weren't for his wildcatting tendencies, we'd still be waiting on the Utica Shale and CHK would not have a valuable asset base. 

   And Aubrey seems to be tempering his wildcatter ways. Please note the verb I've used throughout is "seem(s)". As you have stated repeatedly, "Time will tell".

BluFlame

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on October 21, 2012 at 3:55pm

We might not know the rate of production decline until the 36 inch pipelines are completed and the wells are throttled open to full flow. It could be 2014 since that was the last date I had for the 36 inch pipeline to be completed through Columbina County 90 miles south. 

It would be wise to watch the monthly royalty checks to determine the rate of change so you don't overspend until you have an idea of how rich you will eventually be.

Hopefully the wells will bottom out at respectable monthly income. Everone needs to downsize by one employer. They have been downsizing us for 20 years now, the least we can do is return the favor.   

Permalink Reply by Bluflame on October 22, 2012 at 1:31am

Ron,

  Love your "downsizing" idea!  How about this?: "Due to recent economic conditions, I am sorry to inform you that your pitiful weekly paycheck and outrageous working conditions will no longer be necessary. Take this job and shove it. I wish you the best of fortune in your future endeavors."

BluFlame

Permalink Reply by Rick on October 22, 2012 at 3:04am

Actually Matthew, I would think that after three years the royalty checks would be becoming more stable at a lower rate, not dwindling down quite fast anymore. Conventional wells have pretty steep production curves also, always have. I do believe they will keep these wells running for 50 or more years .. no problem. I have a verticle well on my property that is still producing in sellable quantities after 15 years. The well runs every day, about 4 times a day. The well tender spends probably less than two hours a month taking care of it.

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