Rex J. Anderson Well Production Numbers

Rex just released the 5 day sales rates for the J. anderson wells.

It states in part:

The five-well J. Anderson pad, located in Guernsey County, Ohio, was placed into sales from its resting period at an average five-day sales rate per well (excluding downtime) of 1,886 Boe/d (40% NGLs, 40% gas, 20% condensate) assuming full ethane recovery and an average natural gas shrink of 12%. The five wells produced with an average casing pressure of 3,293 psi during the five-day sales period on an average 18/64 inch choke. The five-well pad was drilled to an average total measured depth of approximately 12,873 feet with an average lateral length of approximately 4,250 feet and was completed in an average of 28 stages, utilizing the company's 150' "Super Frac" design. Based on composition analysis, the gas being produced averaged 1,257 BTU.

 

 The full release is here:

J. Anderson results

 

Looks good for SE Guernsey.

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Permalink Reply by Mike Fulper on December 8, 2013 at 6:15am

Were gonna do a " Fulper Foundation"..

FOR THE BETTERMENT of moles and tree frogs..

these "foundations" are ALLOWED to keep 80% tax free for "operating cost "

you only pay 20% tax....!!

Still too much...

First of all.. INCOME TAX.. is gonna be dropped soon anyway...

about the same thing with all of the "phoney" tree farms people use...

got to take advantage of all the loop holes..

Permalink Reply by Philip Brutz on December 8, 2013 at 4:40am

If the well only pays out $40/day-acre, it is still more than the $10,300 an acre offer to buy my mineral rights.

Permalink Reply by Trapper on December 8, 2013 at 5:19am

These mineral buyers are paying pennies on the dollar. Long after the pennies are spent , the lucky buyers will still be raking in what could have been the duped landowner's millions!

Permalink Reply by Philip Brutz on December 8, 2013 at 5:22am

Just look at the coal rights that were sold for pennies.

Permalink Reply by evan on December 8, 2013 at 5:52am

Philip , let me run this by you. It may help me in the end.  If I remember right you have 80 acres. If you were placed in a unit and only half of your land was in the unit. Would you consider maybe selling some mineral rights then ? And say there's a good chance that your other acreage wouldn't ever be included in that unit and the way your land runs its a slim chance that another company could pick it up.  Alot of people don't consider this scenario but it's bound to happen to Alot of people, maybe even me..

Permalink Reply by Philip Brutz on December 8, 2013 at 6:17am

Everyone has their own situation to consider.  Selling mineral rights may be a good idea for some people.  In my case I don't need the money right now.  I would rather wait and have it in my retirement. I also don't ever want give up control of my land.  Just look at the landowners in Belmont having to deal with long wall coal mining. If I end up make less by not selling my mineral rights it will still be the best decision for me and my  heirs. 

Permalink Reply by Philip Thackray on December 8, 2013 at 6:42am

Evan,

I'm lucky, these 80 acres are entirely in an XTO unit that is in production.

I'm assuming that you would have to sell all of your acres up front because once the scenario you described happened you could not sell the non-unitized property because as you describe it, it would never be leased.

I see a lot of units that have partial properties in them.  For most of them the non-unitized property would be picked up in adjacent future leases.  However, I have seen units as you described - the non-unitized property unlikely to ever be leased.

I know what I have said may not help much.

If you know a bit about your area, you can use the sample calculation I present below.  Do the spread sheet thing and calculate a NPV for the property you think might be leased.  Compare that to you any mineral rights offers you have.  All the mineral rights offers I have seen are extreme low ball numbers.

Phil

Permalink Reply by Philip Thackray on December 8, 2013 at 6:24am

Here are the numbers for the Rex Anderson unit:

Commodity prices:

C1 (methane) - $4.00 / 1000 cubic feet

C2-4 (ethane, Propane, butanes) from Range presentation $3.00 for 5.6 gallons = $0.535 / gallon.  42 x $0.535 = $22.5 / barrel.

C5+ (Condensate) from Range presentation 82% of West Texas Intermediate (WTI) - 0.82 x 97.65 = $80 / barrel

So the production numbers presented are the average output of five wells on a 500 acre unit.  It is the average of five days production of all wells divided by 5 to yield per well five day average and again by 5 to yield a daily rate.  The numbers represent the daily rate of a single well which can be seen as draining 100 acres.  All five wells are basically the same so we only need analyze one.

C1 4,473 Mcf x $4.00/Mcf = $17,892.00

C2-4  740 barrels x $22.5/barrel = $16,650.00

C5+ 378 barrels x $80 = $30,240.00

Total = $64,782,00/day - 100 acres and = $647.82/day-acre.

To the owner (20% royalty) with deductions of about 18% we get:

$647.82/day-acre x 0.2 x 0.82 = $106.24 / day-acre.

See Range Corporate presentation page 40 for a typical decline curve.  ( I can't post the page from this computer).  Put the decline curve and the format of these calculations in a spread sheet and you can see the cash flow out into the future.  From that you can get total accumulations and Net Present Value etc.

Phil

 

Permalink Reply by bo boboski on December 8, 2013 at 6:34am

If we use these calc.s on a well that claims 1900BOE/d and is 81% LIGUID.  wouldn't the royalties be higher, with oil @$96.  and Condensate @ $80. ?  More liquids/less nat/gas should pay more,or do they figure this in when they post the BOE?

Permalink Reply by Philip Thackray on December 8, 2013 at 6:59am

Bo,

The more liquid the more money.  An exact computation however requires the exact composition.

Boe and Mcfe are based on BTU content.  6000 cubic feet of gas equals the btu content of one barrel of oil.  All other liquids are treated like oil for this calculation.

Wikipedia lists the equivalence at 5800 cubic feet but all the calculations I have seen use 6000.

Phil

Permalink Reply by Philip Brutz on December 8, 2013 at 6:36am

Philip,

Thank you for your calculations.

Permalink Reply by David Cain on December 8, 2013 at 1:33pm

I went back to some of the old Gulfport announcements and a choke size of 32/64 seemed to be pretty common.  These Rex wells are at 18/64.  I am guessing that this could have a couple of impacts on the wells.  First, if the chokes were opened more the production could be higher.  Two, since these wells are being choked so tightly, I would think the decline curves might not be as steep or could be pushed out further into the future.  Is this just a more conservative position on Rex's part?  

And a bigger question could be whether or not you are comparing apples to apples when different producers announce their numbers.  Some producers might want initial results to appear lower so they can attempt to gather up more acreage in the area at a lower rate.  Other producers (like Anterro) could announce high numbers leading into an IPO to drive up interest/share price.  I am not saying that the production numbers are outright lies, but I do think they can be gamed to some degree.  I think it will take several years to really figure out which wells are the most productive over the long haul.

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