Decline Curves: Barnett vs. Haynesville

The recently released Chesapeake report included Haynesville Shale decline curve data from the initial wells. I was surprised to see a steeper curve than the Barnett Shale data. I am interested in the reasons for the steepness of the HS production decline and feel that those who are about to be first time recipients of royalty income should be aware of the affect. It does appear that though the initial years' decline is greater, the HS curve is flatter over the productive life of a well. What formation conditions and/or production methods explain the difference and does the decline percentage correlate directly to royalty income?

Decline By Year:

1- Barnett - 56% HS - 81%
2 - " - 27% " - 34%
3 - " - 18% " - 22%
4 - " - 12% " - 17%
5 - " - 8% " - 13%

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Permalink Reply by BirdDawg, plain ole' idiot on October 26, 2008 at 15:11
Skip,
I am also an amateur, But not sure of the hundreds of vertical HS wells that have been copmleted. Maybe hundreds of wells that have been drilled through the Smackover, which would have drilled hrough the HS. But that would give no info on decline curves of HS wells. No offense taken, just my opinion.
Permalink Reply by Snake Stewart on October 26, 2008 at 15:03
Good evening guy's and gals. Just out of curiosity , when Mr. Berman stated that fracture stimulation wasnt as effective because our shale was less brittle than Barnett shale and that the depth wouldnt allow said fracture to remain as open, will that open up the doors for reworking or refracturing the same wells? I have read several times in several places that refracturing wasnt really economical or effective, yet how will the wells recover the proposed % of gas when the decline would limit the amount of recoverable gas in such a short period of time?
Permalink Reply by Bobi Carr ("parker") on November 29, 2008 at 17:13
Here is the post on decline curves.
Permalink Reply by Snake Stewart on November 30, 2008 at 9:43
Is there any information available that tells us that they arent squeezing the wells to show a bigger drop/decline ? If they are using this info and or choke to help control leases, as was brought up in their meeting,why wouldnt they choke wells farther to hold in place until better prices were attained ?
Sounds like they are trying to take the steam out of the locomotive that they built.
Permalink Reply by Skip Peel - Mineral Consultant on November 30, 2008 at 10:21
SS. If I am understanding the member experts correctly, decline is lowered, not increased, on choked production. Decline curve calculations are based on "open flow". Unrestricted. And I can not see how choking back production "helps to control" leases. Any production holds the lease. Yep, in a perfect world, choking back production to wait for higher ng prices would make sense. In the real world of today, operators have to produce at, or near, max capacity to maintain sufficient cash flow to continue development. Short of a cash infusion or available credit, they have no choice.
Permalink Reply by Snake Stewart on November 30, 2008 at 13:42
I should have been more clear Skip Peel, He said "control lease prices"

Being on the outside looking in,I dont know anything about having to produce at maximum to maintain anything. All I know is they can and will do whatever they can to manipulate the situation into their favor, thats all I was saying. Have a good one.
Permalink Reply by Snake Stewart on November 30, 2008 at 14:12
Might I add if I am looking at this right, Flow rate is flow rate. When increasing choke you are restricting flow thus increasing said curve decline. Any reduction in flow, whether natural or manmade, via choke, will show a decline in production. If said reduction is due to choke, how do we know that the numbers arent skewed ?

When you look at the numbers for the Haynesville, unless its all been a bucket of lies, We have a much higher pressured formation with a higher recoverable percentage of gas due to permeability whatever you call it. Up to 6 times that of the Barnett Shale, yet the decline rate is off the charts so to speak and the recoverable gas isnt going to match the numbers one way or the other due to this decline rate. I am certainly not a reservoir engineer but something just aint right. I can balance a check book, if my wife would let me hold it, so I know my math isnt all that bad. Something just aint adding up.
Permalink Reply by Skip Peel - Mineral Consultant on November 30, 2008 at 14:32
Snake. The more choke, the less flow. The decline curve is not calculated on "choked" production. It is calculated on "open flow". The decline curve is a constant not affected by choked or not choked production. And, No, the numbers concerning decline are not lies, IMO. Don't get too caught up in conspiracy theories. Much of the data being supplied by operators is opaque to many. And skewed in some cases for proprietary reasons. But those are other elements of the Play. Especially those concerning value to mineral owners. Comparisons to Barnett Shale production and EUR (estimated ultimate recoverable) GIP (gas in place) are irrelevant. They do not impact value. Don't feel discouraged that you do not understand the concept. It is technical in nature. My motivation for beginning discussions concerning the decline curve was an attempt to connect the decline in production to the decline in royalty income. I wished for those receiving royalty income to understand the concept and to manage that income accordingly.
Permalink Reply by Les Bamburg on November 30, 2008 at 12:43
SS, the decline rates are reflective of producing wells at optimum rate. Chokes are only used to avoid reservoir and well damage and produce gas efficiently. Decline rates are primarily a function of the reservoir properties. If gas prices drop below operating cost then wells are shut in but that is not the case for the Haynesville Shale or Barnett Shale.
Permalink Reply by Snake Stewart on November 30, 2008 at 13:54
I understand what you are saying Les, but would "efficiently" also include , "when they can get a better price".We know by statements by the CEO's that the ceiling for profitability seems to be around $4. Whether or not they were being open and honest with investors is another thing.If these decline curves are strictly reflective of wells producing at optimum rate, How do we have any extended numbers for a Haynesville Well decline ? We cant. Human hands are touching this and anytime that happens there is room for error or conjecture isnt there ?

But I guess my main question is this, If you know that something is half of its value at a given point, wouldnt it be wiser to wait 2 months to sell it at its higher price ?
Permalink Reply by Skip Peel - Mineral Consultant on November 30, 2008 at 14:00
Waiting is an option. No guarantee. And two months, IMO, is an overly optimistic projection for a higher price.
Permalink Reply by Snake Stewart on November 30, 2008 at 14:21
We have a reduction in gas prices even tho the barrel is slowly rising. Roughly a little better then half price by my last calculations. Optimism doesnt cost a thing Skip because you and I both know that gas prices cant stay where they are. As long as they are there we wont see a jump in N/G.If you want to see a jacked up decline curve just look at Saudi or any of the other major oil fields.Production has peaked and is on a fast decline where demand is up. Doesnt make any sense for gas to be a buck 50 a gallon does it. Unless of course someone up there is trying to manipulate N/G prices for the betterment of their industry ?

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