Utica well

 

I'm in southwest PA and the company that I recently leased with is now planning to put a Utica well on my land ( fine with me ! ).  I find it interesting they are going right for the Utica and not a Marcellus which may indicate the area I am in has more wet gas/oils etc. 

 

I'm well aware that the Utica is a new phase in the gas boom ( we're hardly into the marcellus really ) and so long term projections will be sparse.  It does seem though that with the utica being thicker that the steep curves in production that I've read about will not be the case for the Utica layer.  And then of course they can come back and get the marcellus layer so rapid decline may not apply correct?

 

My questions though are:

 

1.)  I believe it takes about 4 to 6 wks to drill each well so if they put in 3 wells to start ( just guessing ) then in about 3 months or so they can frac.  How long is the fracking process for each well and assuming market conditions are favorable when would one likely see royalties from the start of operations? ( drill pad prep in spring ). 

 

2.)  Once wells are drilled are most put into production ASAP or have they been shut in?  I have not heard of wells being shut in despite low gas prices.

 

3.)  What is a reasonable royalty to expect on 80 acres ( since all of it will be in the unit with the well almost squarely on the land ).  Unit size is about 900 acres where I am at it seems.  I realize gas prices and volume are variables when guessing royalties.  I would settle for a range, high/low.  I came up with about 10k to 40k per month as a range for at least two years, does this sound reasonable given what other utica wells are producing?  I based my calculations off some other marcellus wells not utica as I really do not have one to reference as of yet.  ( I did hear of one in harrison county, OH that is really doing great and it is a utica well I believe. )

 

Thanks

 

 

 

 

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Permalink Reply by mlb on November 26, 2011 at 2:04pm

Oops by the way my royalty is 15% net.  Thanks.

Permalink Reply by Craig Stull on November 26, 2011 at 4:16pm

MLB, I went to meeting last month and was told the average royalties per one hudred acres in the marcellus in P.A. IS 171,000  per year. Good luck!!  

MLB, What county are you in ?

Permalink Reply by mlb on November 26, 2011 at 4:33pm

Thanks.  I have heard some really wild numbers being tossed around.  Your figures seem in the range I had thought.  Every well will have variations so an average is nice.  I wouldn't even be attempting to figure it out but once I learned of the pad I felt it wise to learn some more about production time frames and royalties.   I spent lots of time with the leasing part of it but did not expect any drilling near/on me quite so soon.

Thanks again for your information.

Permalink Reply by BrianH on November 26, 2011 at 4:50pm

Try to rap your head around these numbers.

The Buell 10-11-5 8H
in Harrison County, Ohio was drilled to a lateral length of 6,418 feet and
achieved a peak rate of 9.5 million cubic feet (mmcf) per day of natural gas
and 1,425 barrels (bbls) per day of natural gas liquids and oil (liquids), or
3,010 barrels of oil equivalent (boe) per day;

At todays prices that's 125k+ liquid revenue a day plus 30K gas / royalty at the going rate of 20% that's close to 30k a day... stagering. so even in a large unit with 10% that more then 4X your projections..

it's saturday night and my math may be a little weak.

good luck

Permalink Reply by mlb on January 13, 2012 at 1:32pm

I was wondering is this for one well?  I know I posted my question some time ago.  I believe they are planning 6 wells on my place but may initially only drill 1 due to trying to hold many other places by production and thereby needing to move the drilling rig around.

If I am correct, one well may produce say 5 million cubic ft but if they drill 3 or up to 6 wells then you would multiply ( give or take) say 5 mill x 3 or 5 x 6 to get 15 to 30 million ( mmcf ) per day is that correct?

And if you are attempting to figure out royalties ( which can be like figuring out where a hurricane might it, you at least have a range and would plug in anywhere from 5 to 30mmcf depending on how many wells are drilled correct?

Thanks, just curious if I have this down. 

Permalink Reply by BrianH on January 14, 2012 at 12:18am

that's a single well.. you're a lucky man.. with six wells you may need to hire someone to count your money. Good luck

Permalink Reply by mlb on January 14, 2012 at 11:23am

Thanks, I thought it was for one well.   The numbers I gave you were just random so who knows how things will work out.  As for 6 wells, that is what I saw on the map they gave me but who knows when/how long it will take to get them drilled.  I'd be okay with one but if they sink 3 so much the better. They seem to indicate that due to lack of rigs that they will be only doing one and moving on and then coming back.  But I have read that many more rigs will be arriving so its hard to say.

Also, maybe its better to have them stagger these ( wells ) out over time for tax reasons etc.   We will have to see.  I find it all interesting.  The money, yeah no one can deny it's nice but I am all for the drilling and have enjoyed ( at times ) working through the lease process, learning how they drill and this forum.  Thanks again and hope all goes well with your ventures.

Permalink Reply by Robin Hood on November 27, 2011 at 2:39am

I did the calculation based on a 640acre unit. Using a nearby's well test results It resulted in 10K a month for eighty acres. 

Permalink Reply by mlb on November 27, 2011 at 2:57am

Thanks again.  I think the unit I will be in will be more like 900 to 1000 acres so that will cut the royalty down.  It seems as though it should be the same.  If you have more acres yes your % of acreage decreases but they should be able to extract a larger volume of gas over this large area correct?

 

Assume you have 100 acres in a 640 acre unit vs 100 acres in a 1000 acre unit.  1/6 vs 1/10 ownership.  But wouldn't the 640 acre unit produce about 40% less volume?    And if so then  wouldn't be a wash unless there is something I don't know about the ability to capture gas in a larger unit.  Just wondering, math seems simple.   Even if they had the same production amounts the overall volume that one could extract in 1000 acres will be larger than 640 acres so it does not  seem relevant and a source of error when trying to figure royalties if you think smaller is better.  Again if I have missed a point please enlighten me.

 

 

Also, I noticed this with royalty calculators.  If the unit was 160 acres and you had all 160 you would receive extremely high returns but this seems flawed to me as they simply cannot get the same amount of gas out of 160 acre unit as they can a 640 acre unit.  So the same 160 acres in a 640 acre unit should be pretty comparable.  If I am wrong please explain.

 

 

 

Also, I am interested in time tables for the process.  From the time a pad is made till it is drilled and fraced how long is that process?  6 to 8 months seem about right?  And then when would one expect to see royalties, soon after the fracing is done?  Is a year to 18 months reasonable if one is not shut in lets assume?

 

thanks

Permalink Reply by Dick Bonnet on November 28, 2011 at 9:04am

The answer to your questions has many variables. The fracking process can last as little as 24 hour and as long as days. Since the frack goes on 24/7 they get it done asap (those trucks are EXPENSIVE and there are a lot of them). Usually, once the frack is done they will flare the gas and collect the liquids to get a sense of the volumes and then shut in the well untill the downstream infrastructure is in place ie gathering pipelines, compressor stations to move gas to interstate pipelines or fractionating plants to remove liquids. Depending on all those factors you could have royalties in a month or a year. Good luck

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