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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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 1, 2013 at 3:59am

I'm having a hard time understanding how the unit would be 99 acres when the area of the given unit is 172 acres.  The math is off.

Permalink Reply by Joseph-Ohio on March 1, 2013 at 5:22am

If the given unit is 172 acres ( given where? - not on the most currently referenced spreadsheet anywhere I can find ), perhaps there is a 2nd well taking care of the missing 73 acres

Or, it's not in production as yet but will be.

Where are you coming up with 172 acres as given drill unit size Marcus ?

If the drill unit being considered is 99 acres the spreadsheet is correct.

If the drill unit being considered is 172 acres the spreadsheet is incorrect.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 1, 2013 at 5:54am

The spreadsheet makes two claims that contradict one another.  You cannot have a 6,500' lateral on a 99 acre unit unless there are no setback laws.  The total area of a unit with that size lateral is 7,500,000 sq. ft.  It's easy math. Length times width gets you area. 6,500' lateral + 1,000' (setbacks on both surface location and bottom hole) x 1,000' (setbacks on both sides of well bore)= 7,500,000 sq. ft.  That equals ~172 acres. 

Permalink Reply by LERRET on March 1, 2013 at 7:05am

I don't want to bust anyone's bubble but trying to run a decline on a parcel of property instead of running it on the individual well will always lead to a math "issue".

These "type decline curves" are completely worthless. The individual well performance is the only thing with meaning and the only way to estimate the VOLUME (to heck with $) the well will produce, is to run the decline on the well. And if you don't have a year or two evidence, you are pizzling in the wind with scenarios that may or may not be meaningful.

I realize why folks do this but I am trying to point out that the state created drilling unit doesn't tell me anything about where the gas is actually coming from and the actual density which will optimize production. 

As I have said before, one well may or may not uniformly drain an area near the borehole. 90% of the production might come from a 20' section of a 4,000 ft. lateral. It may be draining gas from 2000' away while not getting any contribution from rocks 30' away.

What decline curves do tell you is something about the petrophysics of the rocks.  In the "old days" a decline curve factor would never exceed 1. Today, such hyperbolic n factors (the amount of bend in the decline curve if you wil) may be 2 or more and those may be suspect.

Companies have applied hyperbolic declines have had to use very high numbers. Other engineers will tell you to apply power law equations but those over-estimate reserves because half your reserves are out past year 20.  The value of a buck 60 years in the future is barely a penny.

Permalink Reply by Joseph-Ohio on March 1, 2013 at 7:10am

I think Marcus was just trying to be technically correct.

Permalink Reply by Joseph-Ohio on March 1, 2013 at 7:38am

The spreadsheets I've seen here are valuable.

You need to know your acreage and the % that your acreage is of the total drill unit acreage being considered.  Also adjust the other yellow shaded variables to suit your circumstance and an estimate of royalty income value over time is generated for you.

An estimate is only an estimate.

An estimate to me is an educated guess at best.

Permalink Reply by Joseph-Ohio on March 1, 2013 at 7:16am

Again, I'm thinking Marcus is striving to be technically correct BUT, I'm also thinking the setback game you refer to is not a game at all.

It can cost a landowner money.

If your property is 1050 feet wide and you drop a well 525 feet from your line you don't have to split your royalty with anyone on either side of your width.

If they change the setback rule to 750' from property lines you will then have to share royalty proportionally to either neighbor on either side of your width now falling within your drilling unit (which was privately held by you prior).

It means money.

Permalink Reply by Joseph-Ohio on March 1, 2013 at 10:47am

This next post / reply is presented only as I understand things.  I  may have something wrong here but anyway, regarding the change from 500' setback to 750' setback rule being discussed in Columbus currently, some of my concerns are as follows:

It seems to me that where the landowner stands to really get clipped would be in the case of a deep vertical only well - without laterals - perhaps into a Rose Run reservoir.

In the hypothetical 1050' wide example property discussed above and if the setback rule would remain unchanged at 500' from property lines, the landowner would keep his slice of the royalty to himself - however if the setback rule were to change to 750' for a deep vertical the landowner would have to share royalty income with his neighbor or neighbors.

It gets really quite complicated in the cases involving horizontal laterals as there must also be some optimal fracture width to deal with along with the 500' or 750' setback distance.  I don't have a clue what that optimal fracture width is. 

Anybody care to comment to try and clear things up ? 

Permalink Reply by Joseph-Ohio on March 1, 2013 at 11:04am

I can agree to that without any difficulty.

Our legislators need to be thinking along those lines and from what I've read about the current legislation they're discussing I don't think they are.

That's the worry.

Permalink Reply by Joseph-Ohio on March 1, 2013 at 11:46am

You know another peculiarity is the fact (I've read) that in most all horizontal wells the laterals run southwest to northeast (generally) due to the way the Utica strata and it's fissures / natural faults lie.

Don't know how to coincide that with property lines and royalty payments.

Very complicated.

Permalink Reply by Area Man on March 1, 2013 at 2:38pm

Joseph-

in response to your drilling direction comment (below, but can't reply to that one).  The direction of the wellbores are chosen based on stress, especially with respect to hydraulic fracturing.  You don't want to spend a bunch of time, energy and money creating fractures in the rock only to have them close right back up on you.  So, we drill in a certain orientation that makes the drilling a little more difficult, but the fracs easier to propagate and keep open.  Hope that helps some!

Cheers,

-AreaMan

Permalink Reply by Joseph-Ohio on March 1, 2013 at 2:44pm

Yes sir Mr. AreaMan. 

It certainly does help me as I try to understand these varied and complicated issues.

Thanks !

J-O

 

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