Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on September 6, 2008 at 16:13

Thanks, Jim. I thought that take away capacity had much to do with it but wondered if there were other reasons. Any thoughts on the decline curve? Specifically, I wondered if the deeper depths and thus, higher formation pressures impacted the rate of decline.

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Permalink Reply by Lerret on September 7, 2008 at 5:58

A choke prevents uncontrolled production. If the gas coming out of the perforations in the pipe has a high velocity, it has an enormous vacuum effect. It could suck more than just gas, meaning it could suck water or mud into the perfs either plugging the perforations or causing hole collapse. The rocks can literally explode off the wall face. The excess water is a disposal problem.

Correct. If the decline is 60% annually, then 3 things can happen basically. First it continues to decline at a 60% rate and collapses to a fraction of production in a few years expotentially. Or, the hyperbolic decline could "turn the corner" and stabilize with the annual decline being reduced as the hole produces.. say 60% 55% 50% 48% 46% 45% - which is what everyone hopes happens or decline could be 60% 59% 58% until production is say 10,000 CFPD...or near the economic limit (the cost to produce = the value of the gas)..Two of those outcomes are bad and if it happens on a major scale, then the courts will be filled with unhappy investors and bankrupt companies.

The best decline curve analyses will include pressure data. decline should happen even on choke. And it will be years before the info is in that assures us the wells are truly economic.

I am different from most people. They want all the gas today, gimme the money, and I will worry about tomorrow later. I prefer the long term and choking and engineering a well properly will assure the maximum amount of gas is extracted. I want the benefit of royalty today alright, but I want benefit to last the generations. I am in a large field which has produced for the past 20 years, it will produce for 70 more. I like the check, unborn descendants will likely benefit from this money. It seems only fair.

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Permalink Reply by Skip Peel - Mineral Consultant on September 7, 2008 at 6:30

Thanks for the reply, Lerret. Just what I was looking for. Long term stable production should benefit all parties. Though I see much discussion of "depths" on the site, I see very little regarding the challenges of drilling and producing under the extreme formation pressures. I find the expertise of accessing and dealing with that challenge of interest.

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Permalink Reply by alleyboy on September 8, 2008 at 23:52

Thanks lerret, I'm still interested in o&g and the info was very informative.
Johnny

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Permalink Reply by Grillin' - MmmMmm on September 9, 2008 at 2:07

The Pickering Barnett Shale report is located here. I believe it has been updated www.tudorpickering.com/pdfs/TheBarnettShaleReport.pdf

Look on Figure 17, page 21.

I think Devon has a copy of their decline curve on one of their investor relations presentations as do other folks.

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Permalink Reply by Grillin' - MmmMmm on September 9, 2008 at 2:01

Lerret: good reply except I'd argue a small bit with the comment that decline should happen, even on choke. If the well is choked back, it is possible for there to be no decline for several weeks/months until the flowing pressures start to be impacted by the pipeline pressures and the reduced reservoir pressures.

I have a copy of the Barnett Shale typical decline curve that I'll try and post. There are actually several of these floating around but all of them are very similar. Dan Pickering has pulled together one and then updated it over the years as additional data has become available. Also, many companies use them in public presentations. In all cases, the Barnett shows a very steep hyperbolic decline in the first 1-2 years, with annual declines of 60-70%. Then the wells "roll over" into the long "tail" where decline rates drop to almost zero. So, a well would come on at 5000 MCF/day but then decline very very quickly and eventually level out at about 200 Mcf/day after 2-3 years. It will stay in that low rate tail portion of the curve for many many years, declining at 1-2% per year.

I would anticipate the Haynesville Shale wells to exhibit similar behavoir, BUT only after the infrastracture is available and the wells are not choked back. With the wells choked back, you will get a lower initial rate, but that rate will stay relatively constant for a while. Once the pressure has declined to where it hits pipeline pressure, then the well will start to exhibit the hyperbolic decline like the Barnett wells. But the length of time on choke will alter the overall shape. I would anticipate the lack of infrastructure to impact the wells for at least a year or more and it will be difficult to come up with a "typical" decline curve for the HS for a while...maybe a few years before folks are "confident" in the curve. But one thing is certain, the wells will decline and eventually end up on the "tail" portion of the decline curve, making a few hundred Mcf/day. So enjoy the 10-15 MMCF/day rates while they are there...you will soon see 200-400 MCF/day. But gimme that cash early!!

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Permalink Reply by Skip Peel - Mineral Consultant on September 9, 2008 at 2:23

Mmmarkkk. Thanks for the reply. I have reviewed some of the Barnett decline curve info you reference. Though many on the site may not share my level of curiosity as to the specifics of how and why, I do think you make a significant point which should be of interest to many regarding the relatively rapid fall off in production and thus, royalty income. I hope that all members fortunate to receive such income will plan accordingly.

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Permalink Reply by Les Bamburg on September 9, 2008 at 3:14

Please see the attached for examples of Barnett Shale decline curves.

Attachments:

• Decline Curves.zip, 385 KB

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Permalink Reply by Skip Peel - Mineral Consultant on September 9, 2008 at 3:31

Thanks, Les. Good information.

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Permalink Reply by SBossierGuy on September 9, 2008 at 3:38

According to a Pickering Energy Partners study, the decline curve in the Barnett Shale is as follows:

Horizontal Well:
56% decline after year 1
27% decline after year 2
18% decline after year 3
12% decline after year 4
8% decline after year 5 and every year after

Vertical Well:
63% decline after year 1
23% decline after year 2
18% decline after year 3
12% decline after year 4
8% decline after year 5 and every year after

They say the the year 5+ decline may only be 6%, but until they see a better sample they are estimating 8%.

Source: Go to Page 21 in Here

Granted, this is Barnett data, but it is actual data. This also aligns with what Les has posted, it just is in numerical form.

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Permalink Reply by Skip Peel - Mineral Consultant on September 9, 2008 at 4:09

Thanks, SBG.

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Permalink Reply by Grillin' - MmmMmm on September 9, 2008 at 4:24

Great digging folks. Remember that the Pickering study is a couple of years old and there is a lot of new data but my experience and the data I have (and can't share due to proprietary nature) indicates the general trend is the same. Can't wait to see what the Haynesville looks like. I'll also try and find some public information from the Fayetteville up in Arkansas.

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