Has anyone heard anything about the rate of production declining abnormally fast? It was brought to my attention that there is some concern that production might fall off in Utica wells faster than in other shales. Does anyone know if this is the case?
That appears to be the rumor. I spoke with a petroleum engineer working in PA and he stated the same thing. He said Marcellus wells drop off too, but stabilize more quickly and then decline much more slowly than the Utica wells. I don't know if there is a track record for the Utica wells that confirms any of this. If you read the Utica well production reports (filed in March) for the wells drilled early on, it did seem like the production of both oil and gas was down substantially from the stated initial production numbers. But, you can never rely on initial production numbers anyway since frac pressures are usually still fairly high and companies are trying to get a boost in their stock price. Only time will tell.
Aubrey McClendon of Chesapeake said in his latest Mad Money spot on the tube that the deep Utica wells would likely be in production for 50 or 100 years.
I'm not sure how Aubrey would know that. It sure didn't do anything for Chesapeake's stock price today (down 3.57%) so I guess not many bought into it. Let's hope he is right though, but like I said in my previous post, only time will tell.
The whole market got slammed today so not to worry!
Of course the whole market was off over 200 points, largest decline in several months. So CHK's decline wasn't isolated. Lately until today, CHK has been trending upward. As a stockholder, I'm hoping the trend resumes!
Since Utica wells are still a recent phenomena, there is insufficient data to establish valid decline rates. Despite that, 50-100 years of production seems like a s-t-r-e-t-c-h! I've read that the Buell well in Harrison County, which has been in production more than a year, is still producing over 1000 BOE/day. Initial production was reported as ~3000 BOE/day.
According to the ODNR report released earlier this year the Buell well had produced 13,000+ barrels of oil in 198 days of production. This averages about 68 barrels a day. The gas production for the same period averaged around 7700 mcf's per day, which is extremely good. Supposedly these were actual production days and did not include shut in time. How many BOE can 7700 mcf's of gas produce? If the well is still producing 1000 BOE/day where is the other 900+ BOE/day coming from? Is something being left out of these reports? I've heard they don't have a way of recording the wet gas or at least didn't at that time.
Really, any reports from the O&G companies must be taken with a grain of salt, but I cannot recall the source of the 1000 BOE/day number. (Romnesia?!?) However, I believe the conversion of mcf's to BOE's requires dividing by 6. If so, that would get close to 1000 BOE/day. This conversion theoretically makes the commodities equivalent on a BTU basis. As far as NGL's go, I haven't a clue.
Also, the 68 brls/day oil+ 7700 mcf's/day NG work out to ~$183600/month gross revenue at $90/brl oil & $3.50/mcf NG. Not bad, and likely there is an NGL component also.
My math was seriously flawed earlier. Actually, the monthly number calculates to $992,100 gross revenue. Big mistake, fortunately in the positive direction!
Valid points and I confess I too was reading it mostly as salesmanship - but at least it was pro-Utica and easier to listen to than all the negative stuff we've been hearing from the enviro extremes.
You've got that exactly right. If it was up to them all drilling and mining would be shut down. We just have to hope for the best. It's just too early to tell how these wells are going to do and hopefully nobody is spending their royalty and lease money until it's in the bank and the taxes are paid.