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 Joseph-Ohio on February 23, 2013 at 2:56am

Close enough for government work as we use to say !

Permalink Reply by Bluflame on February 23, 2013 at 3:00am

J-O,

 Since Penn State is a government entity, your comment certainly applies! A cynic would say that maybe Jerry Sandusky was complicit in prep of the spreadsheet!!!

BluFlame

Permalink Reply by Bluflame on February 23, 2013 at 7:56am

Jay,

  Your 2nd paragraph points out one of the many challenges in predicting royalty amounts. Likely at year end they do see 30%. However the road to that 30% over the course of the year is full of potholes and severe curves!

BluFlame

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on February 23, 2013 at 3:57am

I have zero interest in the Bakken, so I have no idea what you mean by that.  And I work at a law firm, so I don't give two shits what any of you people sell you mineral rights for.

Permalink Reply by LERRET on February 22, 2013 at 2:16pm

I hate to say this but those royalty calculations off highly suspect BARNETT production figures are meaningless.  Each well is different. About 80% of them are below "average" and 20% above. This skew is due to the very good wells being exceptional whereas a lot of lesser wells are not doing anything close to some type Decline curve.

 

Look at the Barnett. As soon as drilling dropped, production plunged.  Once you get wells with a 2 to 3 year history then you will know what some wells can do or will not do - Further, the type declines provided by companies are optimistic projections from the best wells.  In the Eagle Ford one company replied that they "trusted" their decline curves because they had run declines on the VERTICAL wells that were being drilled ther for years. DUH!  EACH AND EVERY WELL HAS A DIFFERENT DECLINE. And many "TIGHT" FORMATIONS whether vertical or horizontal depete up to 90% in the first year. Thereafter, they taper off to maybe 40% and eventually 10 - 20%. But if they reach that 10% decline when they are down to making 1,000 MCF per month.???? then big deal. It will cost as much to pump the well as the gross proceeds. The well pressure at that point is so low the compressor costs will eat you up.

 

You are seeing new numbers because a lot of companies "booked" optimistic reserves and the SEC is now demanding the either drill and prove up that production or take it off their books.

Permalink Reply by Bluflame on February 22, 2013 at 3:29pm

LERRET,

  I think you've misinterpreted what is going on here. The various spread sheets you are seeing on this string utilize actual initial production data from Utica wells and apply actual Barnett Shale well decline rates. The theory (not yet confirmed) is that all the shale plays have substantial and somewhat similar decline curves.To date, none of the E&P's have published actual decline curves from the Utica Shale play. The purpose of these exercises is an attempt to predict royalties from the Utica Shale. Gulfport (GPOR) in particular has drilled several prolific wells. Midstream processing facilities are just coming on stream, so most of the wells are not yet in a sales stream and paying royalties.

  The posters have made a variety of assumptions, but the assumptions can be modified on the spreadsheets to fit particular circumstances. I think these are worthy efforts.

BluFlame

Permalink Reply by Joseph-Ohio on February 22, 2013 at 3:19pm
I for one see the spreadsheet as a tool to use to approximate production/return - nothing more.
Permalink Reply by Bluflame on February 22, 2013 at 4:52pm

J-O,

 Amen. Too many assumptions for anything else.

BluFlame

Permalink Reply by Joseph-Ohio on February 23, 2013 at 1:58am

Up here in Ashtabula County most of us are still trying to find our found money.

Actually, the money we're looking for is more than found money - we would call it a return on our investment.

Permalink Reply by Roger Pyle on February 23, 2013 at 1:15am

Why would they need to use "creative accounting to project the life of the wells?"  It is what it is.  They don't get any more money from their investors if the numbers are artificially inflated, as you suggest.

I haven't read all the messages in this thread, but there seems to be a misconception about well productivity and EUR from what I did see.

A simple analogy is to think of a soda bottle.  Shake it up and uncap it.  That is an extreme example of how fracking works in a well.  At first, you get high pressures and high production, but after a few years it drops off and may produce for decades, albeit at 10% of what the first few months were.

Permalink Reply by Joseph-Ohio on February 23, 2013 at 1:34am

I would like to thank all of the posters who contributed.

The latest iteration of the spreadsheet tool is a great example of applying grey matter to a complex issue and coming up with a GREAT Estimating Tool.

I think a good way to use the spreadsheet would be in a conservative manner.  Plug in your specific acreage, a projected (or known) drilling unit size (acres), some low-ball production values and seeing what you come up with.  Maybe you won't have NGLs in your application.  Maybe you won't have Oil in your application.  Maybe you'll have it all.

Also, not considered is the fact that in the long run the value / sell price of the produced resources will inevitably rise over time.

I also see things like market manipulation / throttling back production kicking in - truly an inestimable factor.

But none-the-less the spreadsheet given to us all is still a GREAT Estimating Tool.

Thank all of you once again for sharing.

J-O

Permalink Reply by Roger Pyle on February 23, 2013 at 6:56am

How much gas was reported for the year on each unit?

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