Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on March 4, 2014 at 15:33

Keep in mind that each formation under production can have differing unit boundaries. In the same section could exist a 40 acre Nacatosh Unit, an 80 acre Pettit Unit, a 320 Hosston (Travis Peak) then additional deeper formations.  The deeper the more gas prone and the larger the unit footprint owing to perceived drainage.  None impacts the others.  The problem would come with vertical and horizontal wells in the same formation.  In LA the formation where that happens most often these days is the Cotton Valley.

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Permalink Reply by dominator on March 6, 2014 at 9:37

do you think this "scientific experiment" that Exco is using will most likely be isolated to just their company? that is, going from 8 to 6?  if a landowner was selling working interest, could or would this affect the sales potential/ value of the property? and if so, in what way?

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Permalink Reply by tc on March 6, 2014 at 10:21

If and at this time it still is a big "if" all the Haynesville acreage can only support 100 acre spacing and not the currently modeled 80 acre spacing then P3 EURs for the Haynesville are overstated.  When Exco decreased the number of wells per section from 8 to 6 they didn't increase the EURs on those six wells enough to offset the loss of those 2 wells.  For the old sections where they drilled 8 wells they took an impairment charge based on losing a total of 92 BCF from their prior proved reserves.  Since they have drilled 35 sections using 8 wells, it averages around 2.6 BCF decrease for each section.  Some of this is guessing on my part as I don't have access to Exco's detailed reserve report.

Permalink Reply by dominator on March 7, 2014 at 10:29

thanks TC, I have some working interest in 3 sections and am wondering if the "PUD'S" I have created can be sold on an open market, like maybe to a private equity group, And if the 6 well approach will be adapted by other com0panies? any advice?

Permalink Reply by Dion Warr, CPL on March 7, 2014 at 17:25

Group:

I am not sure that a linear proportionate decrease in wells translates into a linear proportionate decrease in EUR. Estimated reserves in place have not changed significantly, and estimated economically recoverable reserves becomes a function of the minimal amount of wells possible to recover the maximum amount of technically recoverable reserves per well. If wells are communicating at smaller well spacings, the the cost to drill the next well per unit is not justified by that well's modeled EUR. The drilling of more wells then just becomes a diminishing return, not a decrease of EUR on a per well basis. In other words, if the estimated technical recoverable reserves is 52 BCF (assumed to be accurate) per section which could be at least 90%+ recoverable and drained by six wells, 6 wells would effective draw down approximately 8 BCF. The seventh well drilled would then draw down no more than 4 BCF, which would represent a significantly reduced ROI than wells 1 - 6. The seventh well would not create another 8 BCF just because it was drilled - that well would not be able to overcome the finite reserves in place or reduced reservoir pressures due to drawdown from the adjacent wells.

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