Life expectancy of a utica wells in ohio

When we signed our lease, we were told that horizontal wells in the Utica would last for 20 to 40 years although the decline would be steep in the first few years.  But I have heard now that wells are being plugged much sooner.  Has anyone had their wells plugged that were good producers in the first couple of years?  We are in Belmont County, Ohio.

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Permalink Reply by bo boboski on April 15, 2019 at 11:13am

most Utica wells are choked back to make last for years&years, but some companies opt to run them full bore to get as much profit as possible NOW, so they peeter out a lot sooner. 

Permalink Reply by G.H. on April 16, 2019 at 5:19am

Would really be nice if there was some way to know if the wells were choked back.

Permalink Reply by bo boboski on April 16, 2019 at 7:31am

I doubt if the producers would give that info to the royalty owners. They don't even have to report that to the ODNR.

Permalink Reply by G.H. on April 17, 2019 at 2:48am

Yeah, just wishful thinking haha.

Permalink Reply by Jeffrey Beunier on May 12, 2019 at 6:25am

simply review the production profiles for the wells.  The wells are typically choked back during the initial production phase which may last 6 - 18 months.  The operators progressively open the choke over this phase as the reservoir's pressures drops - the production stays relatively flat from month to month.  When you start to see production consistently declining in your check, you will know that you are out of the initial restricted production phase and are now in the first phase of the hyperbolic decline.  

In dry gas reservoirs, the recovery rate is relatively decent as compared to a liquids reservoir.

Although the wells may last 20 years plus, typically the majority of the production will occur in the first three years.  Assuming a constant gas price, the amount of your revenue in will be materially lower after the initial restricted phase.  Most of the well I've seen decline between ~80%-95%+ in the first year that the hyperbolic decline kicks in.  Its simply a product of reservoir pressure and drainage area.

Permalink Reply by Bullfrex on April 16, 2019 at 7:49am

In my limited knowledge, the choke of a well may certainly affect the IP and subsequent early production totals, but the E&Ps know their business (for the most part), and choking is the method to ensure the highest EUR for that well....time is not the driving factor here. Managing the decline curve is as important as IP numbers and NG price.....all this IMHO.

As a royalty owner, the long term 'flat' decline is more important to me than the IP....and chaotic NG price is secondary.

Permalink Reply by K2 on April 18, 2019 at 1:55am

Thanks for the comments but I have a bit more information on the life of a well from publications from EQT and also the former Rice Energy.

Both companies have published decline curves for "typical" Utica gas wells in Ohio.  From these reports, you can derive the percentage of natural gas that has been produced from a well over time.  EQT's recovery rate is somewhat greater than Rice's but both show the dramatic decline of production in the first few years of a well.

Years of Production             % of total gas (EQT)                   % of total gas  (Rice Energy)

         1                                          33%                                            26%

         2                                          47%                                            39%

         5                                          66%                                            58%

       10                                          80%                                            71%

      EUR                                      100%                                          100%

The total amount of gas recovered in the two examples was also different possibly reflecting well lateral length differences and other factors.  Given the rapid decline of production in the first few years, the meaningful life of a well is fairly short. 

Permalink Reply by bo boboski on April 18, 2019 at 8:44am

If I was in producing well units, I like the way you think about producers draining the wells now as opposed to weening them out over many many years. $ now may well be worth more than $ over a lot of time. taxes may be higher then. On the other hand ,more $ now may be causing one to be in a higher tax bracket, causing paying more taxes. and the price of oil&gas may go way up in a few years,but who would know? It could go down. I suppose your AGE can also be a deciding factor. ,on either hand, you usually don't get to have your choice of producer or how they operate anyway.

Permalink Reply by farmgas on April 18, 2019 at 9:42am

It is sad that recovery rates are so low for the gas company, our country and royalty recipients.   OT - what will future technological advances be like to improve the extraction of gas?  Is it well/lateral spacing, fracking techniques or other completion techniques?   How many years down the road to achieve higher yields from these wells?

Permalink Reply by farmgas on April 18, 2019 at 11:33am

 

Thanks OT - It sounds like full recovery isn`t possible despite new technology.   How do gas companies decide what EUR will be for a well or many wells in a region?   How actuate are these calculations?   Are higher EUR`s primarily for investor notice?   Do investor`s go back and review actual EUR vs predictions?

Permalink Reply by farmgas on April 19, 2019 at 1:44am

Thanks OT, sounds like very good advise to me.  

Permalink Reply by Bullfrex on April 18, 2019 at 9:07am

Agreed bo,

Actual prices of NG realized from our producing well pad have ranged from $1.75 to $4.61 in the last 18 months....volatility rules.

While we can't control price or decline, a favorable decline makes me happy.....about 2-2.25% (mo. over mo.) for the last several months.

It appears as though we might be in for an extended bear market in NG pricing....and as always, subject to change anytime.

 

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