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Permalink Reply by Skip Peel - Mineral Consultant on April 1, 2011 at 2:31

HMI, IMO the question is too general in nature.  Even if we knew the basic cost per well, which can vary significantly from one operator to another and from one area of the Play to another, the answer would likely be different for each of those operators.  Those with drilling carries and beneficial price hedges have cost advantages that are important to the equation.  Some wells in marginal areas of the Play may be operated to recover the initial investment with no expectation of any appreciable profit over the life of the well.  I'll have to leave this one for another member,  It's way above my pay grade.

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Permalink Reply by Les Bamburg on April 1, 2011 at 2:59

HMI, as long as a well covers variable cost an operator could continue to produce.  Variable cost for a natural gas well in Northwest Louisiana could range from $0.10 to $2.00 - 3.00 per thousand cubic feet (Mcf) of production.  The cost depends upon on the level of services (compression, gas treating, etc) and production rate.  Any secondary products such as condensate and NGL's will provide incremental revenue and lower the break-even gas price substantially.  

 

Operator's will typically have a listing that shows each well's required break-even gas price.  This can be used as a guide for making shut-in decisions.  Operators may elect to temporarily shut-in some economic wells in response to short term price drops.      

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Permalink Reply by adubu on April 2, 2011 at 9:38

Add both of above excellent statements by Skip and Les-B +There are lots of other variables in decision  to drill depending on company ---most  oil & gas operators desire a 4+ to 1 ROI from a well's EUR based on prices at time and prediction of prices in near future including desire for initial pay out to occur within one year. Some public traded stock companies drill for reserves( Get lease HBP) &  promotion to balance sheet for shareholder stock price value.  If it's a investment group ( usually a small independent)wild cat "promotion deal" then they just want the well drilled for they make their money on promotion, if it makes a good well even better. This is just IMO of what I've seen and read

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