What Constitutes an Economically Successful Utica Well?

Reviewing the recently released released 2nd Qtr production report I see that Halcon's Grenamyer well produce 5,451 bbl of oil and 64,638 Mcf over  85 days.I performed some quick calculations and this type of production would mean an approximate payout of about 5 years.

Then there was the Kibler well in Trumbull County with similar numbers.

Could this be why Halcon suspended operations?

What say you ?

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Permalink Reply by Craig Stull on September 11, 2014 at 1:13pm

Barry,

What have you been drinking, l.o.l. ?

Mike MurphyPermalink Reply by Mike Murphy on September 11, 2014 at 1:43pm

64,000 MCF  in 85 days I dont think so   maybe 640 MCF WOULD BE MORE LIKE IT  and 60 bbl a day of oil is good but that wont last the decline curve  is steep in a year the oil will be more like 30 bbl a day and gas  production will probably be cut in half   taking alot more then 5 years to payout ....maybe 10 if they are lucky

yes I say these are the reasons why HALCON,BP,SHELL,CHK and ENERVEST GOT OUT OR ARE GETTING OUT OF THE NORTHERN UTICA ....and HILLCORP wont be far behind them......seems like Pioneer and Mountaineer have already gave up too.....no new permits in trumball mahoning and the northern half of Columbiana in several months not to mention Ashtabula,Lake or Geuaga

IMHO 

Permalink Reply by Barry D on September 11, 2014 at 1:55pm

Jesse,

Yes

Permalink Reply by Barry D on September 11, 2014 at 2:06pm

Mike,

"...maybe 10 if they are lucky."

The actual length of time wasn't my point. My point was that it appeared that it would take too long to payout to be profitable.

Either way you answered my question, thanks.

Permalink Reply by Barry D on September 11, 2014 at 2:24pm

Jesse,

Great analogy.

So there may be hope in the future.

Permalink Reply by Dexter Green on September 11, 2014 at 4:10pm

Rule of thumb is a two year payout.  If it takes longer than that then it really cuts into the IRR (since the first 18-24 months are the strongest) and makes a well much less desirable.  

Permalink Reply by bo boboski on September 12, 2014 at 12:25am

Basic business practice; if you cant make a profit,dont do it!. If they only get their money invested back,then they drilled it for nothing. They need to get their $$ back in 2 years or less so that they can be making mostly profits for the remainder of the wells life.  Sounds like 100 B.O.E.a day would not be enough.

Permalink Reply by Barry D on September 12, 2014 at 1:50am

Bo,

A friend who works in TX said between 100 -200 bbls depending on gas production and cost of the well.

Mike MurphyPermalink Reply by Mike Murphy on September 12, 2014 at 2:46am

at todays prices 100boed wholed make me interested enough to keep drilling ...thats 300,000 a mounth plus gas production 

Permalink Reply by Dexter Green on September 12, 2014 at 2:52am

Unless it was a $10,000,000 well.  In which case 100 bbl/d would be a disaster.

Mike MurphyPermalink Reply by Mike Murphy on September 12, 2014 at 3:05am

chesepeaks got well cost down to around 5 million dollars and as shallow as the nothern wells are you would never spend 10 million a well ........they drilled one in wetzel county west virginia to a depth of 11,000 feet and didnt spend 10 million dollars 

Permalink Reply by Dexter Green on September 12, 2014 at 3:36am

CHK's first well in Mahoning cost $15,000,000.  HK's Kibler wells cost $24,000,000 for the two.  If it was $8,000,000 you still wouldn't drill it for 100bbl/d. 

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