Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on April 20, 2020 at 13:35

I suspect this is the last of the great crew changes.  Any young person considering a career choice would be gambling to choose O&G.  If you believe that a current graduate has at least a thirty year career time line, it would be foolish to go all in on any O&G company, even the super-majors.  Too many other careers with longer futures are available now.

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Permalink Reply by awharris on April 21, 2020 at 7:56

My daughter is entering UT for Petroleum Engineering in a few months.  By the time she graduates, O&G is likely to be back and being a contrarian may work out very well for those that remain.  If there were really no opportunity in the oil business over the long term, we're all screwed anyway.  

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Permalink Reply by Aaron Moak on April 21, 2020 at 8:24

Milkmen and newspapermen felt we would be screwed without them, along with Stan The Record Man and B Dalton Books. Consumer trends, technology, and the marketability of non renewables this third decade of the 21st century are on Skip’s side of the argument. Also, this Congress and this presidency will be the last friends to carbons. By the way, since when were geologists, petroleum engineers, and petroleum leasing agents holding steady jobs for a lifetime? Only corporate climbers with additional MBAs were able to hang on, and many of them did not. I worked on Poydras St in the late seventies to the mid eighties, not in the biz but knew many whose lives were upturned. That was four decades ago, the so called salad days.

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Permalink Reply by Skip Peel - Mineral Consultant on April 21, 2020 at 13:46

I guess we might be screwed if we did nothing but watch the O&G industry decline to a shadow of itself.  Luckily there are plentiful opportunities to invest in and incentivize new technologies including renewable energy but so much more.  Louisiana is ideally suited to mass timber/cross laminated timber production, hemp, truck farm agriculture and other opportunities that are a fit for our current work force.  NW LA natural gas could have a lengthy economic future if managed properly.  It's not now. 

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Permalink Reply by Aaron Moak on April 26, 2020 at 8:24

https://truthout.org/articles/dont-bail-out-oil-and-gas-use-the-mon...

How many orphans do you have around there? Pa is considering clean up a way to employ laid off workers. Does not make sense to bail out failed fracking companies

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Permalink Reply by Skip Peel - Mineral Consultant on April 26, 2020 at 8:46

4,295.  Constantly changing ....and growing.  Poor use of the term, "fracking".  Fracking has nothing to do with 99+% of the orphan wells that need to be properly plugged and abandoned.  The "fracking companies" didn't create them and are ill equipped to address them.  There are however many small independent stripper well operators that are a very good fit.  Many have less than ten employees and own their equipment.  They drill, operate, service and plug and abandon their own wells.  They have the proper equipment and skill set.  If they can make a reasonable profit on P&A jobs, they might stay in business another ten or so years.  The trick besides adequate compensation is to get them started in the very fields and areas where they operate so that their cost of business is low and there is no overnight travel involved.  1305 of those 4,295 orphans are in Caddo, Bossier and Webster parishes.  If a crew could plug 1 orphan a week on average, in addition to operating their own wells, 3 or 4 crews could take care of that inventory in 8 or 9 years depending on how fast new orphans are added to the P&A list.

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Permalink Reply by Aaron Moak on April 26, 2020 at 10:12

Thanks for the information and your reply. Certainly, the heavily leveraged and mismanaged fracturing companies are ill equipped to remedy and not responsible for all of the environmental mess. However, it makes no sense to provide stimulus or backstops to them. If anything, the assistance should use industry workers to clean the messy legacy of the “oil patch.” Fracturing can live or die on its own. 

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Permalink Reply by dbob on April 26, 2020 at 16:09

Skip,

I like your approach (common sense isn't always common).  

But I will add my 2 cents.  My general understanding is that if a company wants to take over an orphan well in Louisiana and either plug it, or try to bring it back online (absent a contract with the state to do so), in addition to whatever land issues and lease issues trying to rehabilitate an old well and bringing it back to sales, the act of claiming one well from the orphan well means that an operator gets all the other wells that were orphaned by that operator, and what ever liability might be present with those.  Obviously, in Louisiana, that would include the risk of legacy lawsuits.  Maybe I'm wrong on this, but would love some comments.  Anyway, this was done, as I understand it, to keep a company from orphaning a bunch of wells, going out of business, then quickly reincorporating as something different, and keeping only the viable wells and/or avoiding potential liability from bad operating practice.  That said, and if I have the basic understanding right, the system presently in place limits the potential for any company to realistically claim and operate otherwise viable orphan wells. 

If I have the basic understanding right, I would suggest a "plug 2, take 1" approach that let operators in good standing acquire the rights to a potentially viable orphan well by plugging 2 orphan wells that are equivalently deeper or complex (e.g. you couldn't claim a deeper orphan of potentially high value by plugging 2 caddo pine island wells).  Plugging would be to modern standards at the acquiring companies expense.  Maybe the right approach is plug 3 get 1, with no liability on the 3 plugged wells (assuming completed in accord with modern industry standards and state requirements) and only acquiring the potential liability for the 1 potential well that might be able to be brought back.  Something like that would get some (but probably not the most complex) orphan wells off the books, return some viable but otherwise orphaned wells to service, get the state off the hook, and get a little revenue flowing to a lot of people.  Obviously not a huge economic impact (because otherwise they would not be orphaned) but a lot of potential environmental issues resolved and not on the taxpayer dime.  A program of this nature would work even better when prices start to recover, as the field of potentially viable wells, and the returns from developing them would increase.

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Permalink Reply by Aaron Moak on April 26, 2020 at 23:51

There could very well come a time when clean up will not be dictated by making a polluting industry viable, and controlled by despoiling profiteers. This present administration and current Capitol Hill will be the last group of folks to allow the oil “business” to clean up (pun intended). 

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Permalink Reply by Skip Peel - Mineral Consultant on April 27, 2020 at 1:48

dbob, interesting concept and possibly doable in some instances.  My comments did not consider this because I think the majority, if not 100%, of the wells that I am familiar with, the parishes I used as an example, would have no value to take over.  And the existing small operators that I envision participating in a plugging for profit program would not want them.  I am talking old wells many with materials from the tens, teens, twenties and thirties of the 1900s.  The casings are in bad shape and are not candidates for reworking.  They are also the wells most likely to cause aquifer contamination as they are quite shallow and close in proximity to those water zones.  If any of the wells might have some marginal commercial value, they would be "strippers" and most small operators are not interested in stripper wells unless there are a large number in close proximity.  The Caddo Pine Island Field in north Caddo Parish fits that description and contains over 1000 of the orphans.  There, a small operator would rather drill a new well in their operated fields than rework a really old one.

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Permalink Reply by dbob on April 27, 2020 at 16:51

In any event, plugging some orphan wells, and giving some ability to incentive to bring the ones with potential value back online, is in everyone's interest.  Just not sure how that would work with some of the current law/regulation/practice.  Something has to change to make it a win\win\win or at least less of a win\lose\lose for operators, the state, and the public interest.  And make progress to get the number down or keep them from growing into a downturn.  

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Permalink Reply by Skip Peel - Mineral Consultant on April 28, 2020 at 1:37

The reason we have so many orphan wells is that we have so few oil reserves remaining.  Many of the fields with large numbers of orphans are depleted.  The definition of an orphan is producing less than 10 barrels a day.  Most of the wells with which I am familiar produce less than a barrel a day and those are the recently drilled ones replacing plugged older wells.  Generally speaking orphans have little or no economic value.  Stripper operators in Caddo Parish have to operate hundreds of wells (averaging a half a barrel a day) on tight budgets to have a profitable business and prolonged depressed prices will put many on the edge of solvency.

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