Chesapeake releases production rates for two wells.

I just received a Google alert that said Chesapeake has posted on their company website that two wells ( shaw and Burdgett) are producing an average of 700 barrels each day.

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Permalink Reply by Bryan on March 3, 2012 at 2:41am

HAHA .......me toooooo....

Permalink Reply by mlb on March 3, 2012 at 6:56am

just curious, is the 9.5MMscfg stand for million square feet of gas? or is the 9,500 Mcfg stand for that and why is it divided by 6Mcf. Lastly, when you enter data into a royalty calculator I believe they ask for the MMscfg right?  But it obviously does all the needed calculations.

I'm not totally up on the natural gas measurements but would like to be!

Thanks for any help here.

Permalink Reply by Sylvester Deal on March 3, 2012 at 11:09am

MLB,

scf = standard cubic foot, usually defined at 60F and 14.7psia ( average atmospheric pressure at sea level)

Natural gas measurement nomenclature predates the metric system prefix like kilo = thousand, mega = million.

The old timers used Roman numerals, although not accurately.

M = thousand

MM = million;  this represents 1000 x 1000, a non-standard use, the Romans would call this two thousand

This use of M for one thousand carries into the financial side for measurement values and occasionally for dollar values.

The conversion of 6Mscf/Barrel oil is a convenience used to convert oil and gas  volumes into equivalent volume for financial reports.  If you compare posted prices, the price ratio gives ($100/BO)/($2.5/Mscfg) = 40Mscf/BO

Gas was priced by the Mscf until about 1970 and now the BTU/scf is used to convert Mscf to dekatherm (a metric prefix applied to a non-metric measure).  This gives a price boost for high BTU gas but a gas plant can extract the high BTU gases for even higher for even higher value.

SD

Permalink Reply by mlb on March 4, 2012 at 4:17am

Thanks, that helped me some.  But just so I have this straight.  Lets say my well is producing at 5MMscf per day ( most wells produce in the millions correct or is it thousands 5Mscf ) I think royalty calculators ask for MMscf per day.

So if what I have is accurate ( or if not maybe give me a real example if my math is off ), then to calculate royalties do you divide the 5MMscf by 6Mscf x the unit size x your ownership interest, divided by your royalty?

Thanks, me and a local landowner with a well that is shut in were trying to compute how much a local well was making in dollar value each day given a gas price of $2.50.  We know the well is producing at 6.4MMscf per day. 

Ultimately, we came up with something close to about $80 dollars an acre.

My friend wanted to know the difference between the MMscf and the Mscf.  I see now that one is millions and one is thousands from you example.  So when computing how much a well is making were not sure which figures to be using. 

Thanks for any additional help!

Permalink Reply by Sylvester Deal on March 4, 2012 at 4:53pm

MLB,

The 6Mscf doesn't have anything to do royalty figuring.  It's used  in financial reporting to convert oil to equivalent gas volumes (Mscfe) or gas to equivalent oil volumes (Boe).

Royalty calculation:

Gas volume (Mscf) * gas price($/Mscf) * (your acreage/unit acreage) * royalty interest (decimal).

If gas rate is needed in Mscf and it is available in MMscf, multipy by 1000.  If gas rate is needed in MMscf and it is available in Mscf, divide by 1000.

The royalty calculation is an estimate because it assumes each lease in the unit has the same royalty rate.  A division of interest for a well will be developed that accounts for different parcel sizes and royalty rates, if existing, and set a net revenue interest for each party in the well.

For your example:

rate: 6.4 MMscf = 6,400 Mscf

price:  $2.50/Mscf

revenue:  6,400 Mscf/day * $2.5/Mscf =  $16,000/day

Multiply the daily revenue by your acreage ratio in the unit and royalty rate to get net dollars to your interest.

Good Luck.

SD

Permalink Reply by Kathleen on February 26, 2012 at 7:19am

This was really interesting.  Did anyone else go to the Q&E part.  It makes you wonder if we all sold out to fast.  I know they want everything to sound rosey but they love this Utica shale in Ohio.  They are saying to them it's 100% proven.  It's the oil area west of here that is not proven yet.

Another thing I wanted to bring up but wasn't sure where to put it (people below are figuring royalities) is at this time I have not seen any units in this area over I think the highest is in the 150 acre range.  The difference from 640 to say 200 acres is huge when calculating royalties.

I don't know how long it would take say Chesapeake to get up to 640 acre units so why are we all running the number of 640? 

I hope I'm in the start of a unit of say 200 acres than it's drilled over time to the 640.  This would keep us in a high pay out since we would keep getting in on a new leg.  Is this wrong thinking?

 

 

Permalink Reply by Billy Park Whyde on February 26, 2012 at 8:09am

 With the cost of moving a rig I think they will be looking for the  640 acre unit size  or larger as the longer the lateral the cheaper it is to do while they are on site. 

  Here is a question though any guesses as to what the efficiency is in fracking  per foot of formation between a vertical well and a horizontal well. 

  A hypothetical here if a vertical well was fracked in a formation of say 100' thickness what would the it yield in comparison to a horizontal frack of 100' in the same formation?

Permalink Reply by Bluflame on February 27, 2012 at 6:31am

Kathleen,  

 I'm curious about this also. Referencing the ODNR website, If you scroll through all the HZ wells CHK has drilled so far in the Utica Shale none are on more than 200 acres and many considerably less. That is counter-intuitive to expectations of 640 or even 1280 acre units. Could it be that the acreage will increase as they expand the number of wells/pad???  I don't believe any of the CHK Utica wells currently have more than one lateral.

  Seems to me like larger units would be to their advantage to HBP more acreage. Finally, I also don't understand the process for "proving" reserves. CHK did say that the Utica wet gas region is now all "proven". Any explanations???

BluFlame

   

Permalink Reply by Kathleen on February 27, 2012 at 7:00am

I see what you see on the ODNR site.  I want to look at the Eagle Ford area to see how they did it there or some other areas.  I wonder if they date each leg to know how they moved forward on each pad.  I know so far this area is new but to me they are moving the rigs without doing the big unit.

From what I can remember of the QA part they just kept saying this wet gas is proven and would move on to mention either the oil areas or just something different.  I have no idea how they know.

They did say they are doubling or more the rig count in the wet gas area so maybe in time when they have enough rigs they will keep it on site and just keep drilling more legs.? 

I do think I will look at the other shale areas to see if I can find out how and when they did multi legs per well.

If you didn't read the QA and you have time it's pretty interesting to the point they almost convienced me to buy a few shares of their stock. :0)

Permalink Reply by Bluflame on February 27, 2012 at 7:20am

Kathleen,

  They said in their 2011 earnings statement (Pg 23) that they will increase the Utica rig count from 6 currently to 20 by year-end 2012. That's huge and I'm confident most if not all will be in the wet gas zone. Unfortunately, the additional rigs are probably coming at the expense of our Marcellus Shale friends.

  I am also a CHK believer. They have a track record of doing what they say they are going to do. Frankly, they are a victim of their own success!

BluFlame

Permalink Reply by oildude on February 29, 2012 at 12:59pm

Has anyone found out how many acres these wells are?

Permalink Reply by Bluflame on March 7, 2012 at 8:29am

DBD,

   I see what you mean. The Bucey well for instance seems to have 4 laterals. The acreage of each ranges from 128 to 166. I wonder why CHK don't just create a unit of 640 or 1280 acres. Looks like depths are all over the lot also as you've noted. Could it be they are attempting to pinpoint a sweetspot?

BluFlame

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