Berea Horizontal Oil Economics Compared to ND Bakken Horizontal Oil

Ran some comparisons on economics from the ND Bakken Oil Play versus our Horizontal Berea Oil Play

 

Both Plays are Sourced from Devonian Shales within in the Oil Windows

 

Bakken average well Cost (8.3 to 10.0 million dollars) Avg. $9,150.000.00   9.15 million

Average EUR 665,000 bbl

Producing Life 45 years

Average Pay Out 3 years

based on the data below the average of Bakken wells were much less productive than shown above


Berea Average well cost (600 to 700 thousand dollars) Avg. $650,000.00  650 thousand

Average EUR 40,000 bbl

Producing Life 25 years (per unnamed source may be an average economic cut off)

Average Pay Out (7-10 months) 8.5 month average (verbal unnamed sources)

Average Pay Out doubled to account for any "Spin" 17 months

 

You can drill 14 Berea Horizontals for the cost of 1 Bakken well and enjoy a payback time which is less than half of that in the Bakken.

The EUR's are also recovered in 25 versus 45 years which equates to 1.8 times faster recovery in the Berea.

 

If there was no "Spin" in the payback time reported from the unnamed sources, then the Berea provides more than a 4 to 1 advantage over payback times in the Bakken.

With the time value of money the Berea Horizontal wells should be "Significantly" more economic on a dollar for dollar basis.

One "Significant" additional benefit is that the transportation costs to the refinery should be very low due to short transport distances of 10 - 50 miles in most cases.

 

 

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Permalink Reply by IP on August 21, 2013 at 6:28am

Just putting the numbers together but most operators in the appalachian basin would think these numbers are economic but at the same time they do not plow 9+Million into a well looking for a payback.

 

Here is a clip from an article on the Bakken with the 45 Year Life

Permalink Reply by IP on February 15, 2014 at 5:28am

Some initial production rates from a couple of wells by one of the Berea Operators

 

300-325 BOD Peak Flow Rate Estimated

110 BOD Average 30 days to sales

  71 BOD Average 90 days to sales

 

Well costs are up to about 800K due to higher drilling rig costs and using longer laterals with more frac. stages.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on February 15, 2014 at 6:14am

So day 1 to day 90 it's about a 79% decline.  That's steep.

Permalink Reply by IP on February 16, 2014 at 7:01am

The rates below are for two different wells with differing periods of production

 

Well #1 30 day Sales in excess of 3300 BO

Well #2 90 day Sales in excess of 6400 BO 

 

Well #1- 300-325 BOD IP Estimated Peak Flow Rate constrained output

Well #1- 110 BOD for first 30 days average to sales looks like a 66% decline in 1 month the trouble is the production is constrained so no true value for the decline rate can be assigned, the use of it should make for an ultra-conservative estimate.

 

Well #2- 285 BOD & 41mcfd gas based on initial testing

Well #2- 71 BOD for first 90 days average to sales

 

Fairly easy to see the flush production on the front end

 

This is from the only operator that has put numbers from a decent well on paper.

 

Too early to determine curves at this point but making the assumption that well #2 had a similar decline percentage the first month it looks like the curve is beginning to flatten out.

 

Well #2 Estimated End of first month 96 BOD based on 66% first month decline

Well #2 Estimated End of second month 64 BOD     BASED ON MY BEST GUESS

Well #2 Average Daily Production at End of third month 71 BOD 

 

The Unknowns are how many problems has the operator had to deal with, with the weather we have had over the last 3-1/2 months and how has that limited the their output.

 

From some old literature on the "Berea Vertical Wells" in the same general area - KGS website.

"Production of oil from the Berea began about 1912. The wells are not large but are long lived. Starting at eight to 10 barrels they drop off to four or five at the end of the first month and hold up well thereafter."

This Area had already Produced Over 1.6 Million BO back in 1939

 

 

Permalink Reply by IP on February 16, 2014 at 7:56am

One Additional data point for Well #2

 

Production was reported at 175 BOD at somewhere close to a month into production

 

Initial Production @ 285 BOD, approx 30 days 175 BOD, 90 days 71 BOD

 

 

Permalink Reply by Tim Tarr on August 22, 2013 at 3:28am

IP,

    Thanks for that Birthday gift.

   These Appalachian basin O&G sands are going to be the "big" payday. The Marcellus and/or Utica will have funded all the necessary data and Infrastructure. I read some time back that the Appalachian basin was one of the least explored in the U.S. I think it was in an 80s' "ish" USGS report I looked at.

Those Upper Devonian Rights will far exceed Marcellus in that "Vanmeter Fairway".

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on August 22, 2013 at 6:06am

1.) Bakken wells will not be productive for 45 years

2.) Where did 40,000bbl EUR come from?  You mention 25 bo/d IP (in your other posts) but that doesn't equal 40,000 bbl after 20 years.  It wouldn't equal that over 70 years.  So where is the EUR coming from?

Permalink Reply by IP on August 22, 2013 at 8:04am

1)  I have no dog in this fight so take it up with the Oil Drum they published the charts or post some data to back up your argument. The data I show is obviously optimistic for the Bakken but keeps my comparison very conservative.

2) Investor presentation included with the sec documents for one of the publicly traded company's      doing some of the drilling in the Berea, they published the EUR's.

The completion reports for many of the old verticals had 25 bbl day IP and some of the recent horizontals show up to testing 27. You will not get any better data on the horizontals until the production data is old enough that the state publishes it on the website after a 1 or 2 year period. None of the operators are going to report their flush production until they have to, they are all looking for more acreage.

Also You had better check your math only takes 4.38 years to make 40,000 bbl at 25bbl day. and only takes about 7,000 bbl to pay out. (see if you do not have a decimal point out of place.)

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on August 22, 2013 at 5:36pm

1.) The Oil Drum shows a chart that pretty much disproves the idea of 45 year life span.  Once the wells decline below a certain amount of bbl/d the LOE is too high to keep running the well.  

2.) It does not take 4.38 years to achieve 40,000 bbl EUR.  Look, you're obviously not in the industry (and that is not a criticism, so don't take it that way) so you don't know how to model these things out.  There is a decline and it is immediate.  That's how wells work.  I modeled this out with 25 bbl/d IP and used a generous decline of 2% per month in year one, which is staggeringly low, 5% per month in year two and 15% each year thereafter.  EUR still only comes to 34,000+ bbl over 20 years.  

And no, 7,000 bbl does not pay for the well.  That is inaccurate.  Unless of course the operator isn't paying a royalty to the landowner.  Or an override to the driller.  Or an override to the anyone else involved.  

I'm not saying that these wells can't be economical, but the scenario I ran shows a 2-1 return over 20 years, which isn't bad but certainly isn't the safest way to make a living.  Frankly if you gave me $650,000 (the average cost of the well) and I couldn't turn it into at least double that over 20 years of simply investing in the stock market then I'd perform seppuku on myself out of shame.

Permalink Reply by kdj on August 22, 2013 at 1:39pm

Berea! That;s funny! When I was a cable tool water well driller, I looked into drilling myself a Berea well, probably 6 weeks mostly by myself, I couldn't really afford the time nor the casing. Someone told me to get someone else to drill it, so I got Chesapeake!

Permalink Reply by pg guy on February 17, 2014 at 2:26am

Please excuse my ignorance, but in what state and county are these Berea wells located?  Thanks.....

Permalink Reply by IRONFARMER on February 17, 2014 at 4:18am

These wells are mostly along the Big Sandy River Valley in Lawrence & Boyd in  Ky and adjacent Wayne County WV. The Horizontal's seem to be making a fair bit of previously uneconomic acreage viable.

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