Depletion "Type Curves" from company websites show a dramatic drop in production after one year

The "Type Curves" from many of the company presentations seem to indicate that the gas/NGL output from horozontal wells will fall by ~75% within one year, and oil by ~50%.   Page 36 from the Antero presentation is one example.  Am I intrepeting this accurately?  Any comments will be appreciated.

 

http://www.anteroresources.com/wp-content/uploads/Company%20Website...

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Permalink Reply by TM on February 23, 2013 at 7:34am

Those are pretty big production units in size and you only own 5 acres. Seems right considering it is dry gas only that is being produced. Your percentage of the production pie is very small compared to someone who owns say 100 or more acres in the units. 

Permalink Reply by LERRET on February 26, 2013 at 6:20am

This reduced your effective net royalty to less than one-eighth. As the wells deplete the percent will get higher and higher. I wonder at what point they will start billing the landowners... I wouldn't put it past a lot of them.

I noticed Chesapeake is selling out a bunch of property in OK and the "up front" money is 91% of the actual total price agreed.  The buy in is by Chinese buyers. From BPs experience, that might not be enough to cover the adjustment necessary once they determine what CHK actually owned. They have often claimed more acres than they controlled - usually due to bad title work. 

Permalink Reply by Roger Pyle on February 24, 2013 at 6:49am

The EIA uses an average first-30-days to calculate decline rate percentages.  This is a big difference between that and starting with the intital 24-hour (IP) rate.  A rough calculation, using the Antero data, would start with 10.85 MCF/b instead of 13.9 MCF/d, and a percentage decline of 63% vs. 71%.

Permalink Reply by Roger Pyle on February 24, 2013 at 8:24am

Initial well production (IP) rates and monthly decline rates of the new wells are estimated using recent historical data for the wells producing in each of the three key basins. The IP rate is an estimate of the average daily flow rate over the first 30 days the well is flowing. 

Page 6 of the following report:

http://www.eia.gov/forecasts/steo/special/pdf/2013_sp_02.pdf

Permalink Reply by Bluflame on February 24, 2013 at 10:30am

Jay,

  We're going to make ourselves crazy with all these spreadsheets! Interesting that the Antero Marcellus decline rate for Stutzman yields lower EUR's than the earlier Barnett decline rate. I do think the Barnett decline rate was flawed, while the Antero data is more accurate (for data). I'm cautiously optimistic the Utica wells will do better on the decline rate due to very high wellhead pressures, at least with GPOR wells.

  Also, I modified your Stutzman spreadsheet for GPOR's Harrison County Ryser 1-25H well (assuming the same 100 acre parcel). The unit acreage of the two wells is roughly similar. This well has a significant condensate (oil) component, but much lower NG. The results, predictably are much better than the Stutzman well with no oil component.

BluFlame

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Permalink Reply by Bluflame on February 24, 2013 at 10:43am

Thanks, Dennis. Jay & I will forward you our therapy bills!!!

BluFlame

Permalink Reply by Joseph-Ohio on February 24, 2013 at 12:06pm
Bluflame, Jay,
 
The last iteration that I thanked all involved for settled the hash for me.
 
The new work afterward (although very interesting) is too 'well specific' for my purposes (right now).
 
However, thanks once again for the insight.
 
Blufllame, I thought I sent you a friend request earlier but, I guess it didn't happen - so I sent it again - check your inbox.
 
J-O
Permalink Reply by Bluflame on February 24, 2013 at 12:16pm

J-O,

  No friend request in my inbox as of 6:15PM.

BluFlame

Permalink Reply by Joseph-Ohio on February 24, 2013 at 12:23pm

Had to be operator error on my end the 1st time.

It should be there by now.

J-O

Permalink Reply by Bluflame on February 24, 2013 at 5:21pm

J-O,

  You can easily change the input data on the spreadsheet (highlighted in yellow) and plug in any well production you see fit. You can also modify the drilling unit acreage and the number of acres you have in the unit. It's really a pretty powerful tool full of "what if" possibilities.

BluFlame

Permalink Reply by Joseph-Ohio on February 24, 2013 at 5:44pm

Yes Bluflame; I was doing that with the earlier spreadsheets which I found very adequate for my purposes (for now).

Thanks again for the heads up.

J-O

Permalink Reply by Bluflame on February 24, 2013 at 5:12pm

   The Stutzman well is the anomaly among all the wells GPOR has reported. It's the only one without an oil component. The remainder of the wells (reported to date) would display estimated production numbers on our spreadsheet in the Ryser well range.

  We can only hope our "assumptions" turn out to be factual!

   

BluFlame

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