Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on March 6, 2022 at 13:28

Todd, I am not sufficiently familiar with AC decline rates so I'm posting the monthly production reports to date.  Maybe we can get an opinion from Rock Man.

LEASE\UNIT\WELL PRODUCTION

RPT DATE	LUW CODE				OPENING STK	OIL PROD(BBL)	GAS PROD(MCF)	DISPOSITION	CLOSING STK	PARISH
01/01/2022	052260				653	2553	10989	2842	364	VERNON
12/01/2021	052260				352	2994	11932	2693	653	VERNON
11/01/2021	052260				501	3076	12908	3225	352	VERNON
10/01/2021	052260				667	3395	15065	3561	501	VERNON
09/01/2021	052260				1323	3983	16533	4640	666	VERNON
08/01/2021	052260				814	5188	21942	4679	1323	VERNON
07/01/2021	052260				827	4741	19527	4754	814	VERNON
06/01/2021	052260				909	5224	21292	5306	827	VERNON
05/01/2021	052260				1402	5989	24184	6482	909	VERNON
04/01/2021	052260				1470	6485	25729	6553	1402	VERNON
03/01/2021	052260				519	7969	32542	7018	1470	VERNON
02/01/2021	052260				1169	8354	32515	9004	519	VERNON
01/01/2021	052260				633	11011	42253	10475	1169	VERNON
12/01/2020	052260				2142	14574	55589	16083	633	VERNON
11/01/2020	052260				1770	18400	65792	18028	2142	VERNON
10/01/2020	052260				798	20944	68413	19972	1770	VERNON
09/01/2020	052260				0	2312	8070	1514	798	VERNON

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Permalink Reply by Dion Warr, CPL on March 6, 2022 at 18:10

Skip:

From prior experience in the AC, this charts like a good (not great) older AC well - quick decline on oil with gradual increase of GOR and (although not tracked in SONRIS) the water fraction builds to fill the production void.

Marginal wells tended to have lower IP - if a bit of a higher IP the decline curve would be steep.

Would definitely want to hear from Rock Man given his access to well data.

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Permalink Reply by Todd Smith on March 7, 2022 at 3:06

Thank you -  mainly curious if the decline was due to government restrictions, economic concerns or just because the well is not the best and maybe this is normal?

thanks

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Permalink Reply by Skip Peel - Mineral Consultant on March 7, 2022 at 3:10

Not sure what government restrictions or economic concerns would be but my first reaction is to agree with Dion.  The decline looks normal for a less than great AC well.

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Permalink Reply by Rock Man on March 7, 2022 at 18:04

Definitely no government restrictions or similar production restraints in play here - Dion is dead on as to this being typical decline profile.

One needs to remember that these "unconventional" reservoirs produce like a large balloon losing air when you open it up - rate is very high at first but rate quickly declines over time as the pressure within the balloon decreases due to its losing air.

Frac stimulation in these unconventional horizontals both rubble-izes the matrix reservoir to release oil and gas plus also over pressures the formation (via the pumping / injection of all the frac fluid). This helps contribute to the higher rates once wells are opened up - but once this pressure is produced / drawn down, you get a much lower rate of fluid influx due to lower pressures pushing oil and gas into the wellbore.

The Austin Chalk in this part of the world has another factor that comes into play - formation water

• Natural fractures in the Austin Chalk tend to be very water rich and can produce huge volumes of water over time. This water cannot be avoided.

In looking at this specific well, one needs to look beyond the O&G production volumes as noted above in this discussion.

Look at the IP test and periodic production tests posted in SONRIS.

• IP was 1824 BO, 5400 MCF & 11,928 BW per day (9/2020). Huge water volume / only a 13.3% oil cut as to total fluid.

Subsequent production tests were:

• 11/2020: 615 BO, 2333 MCF & 8525 BW per day (6.7% oil cut)
• 4/2021: 301 BO, 1191 MCF & 8500 BW per day (3.4% oil cut)
• 11/2021: 190 BO, 750 MCF & 4200 BW per day (4.3% oil cut)

Moving lots of fluid with very little oil. And high SWD costs (hopefully water going into a disposal well located near this well location).

Total production for this well as of Dec 2021 is 124,631 BO & 474,286 MCF.

• Although no water production numbers are cited, I would estimate that over 1.5 million BW has been produced so far from this well.

Attached are two PDF's from ENVERUS - one shows the production thru Dec 2021 (on log scale) while the other shows a theoretical EUR projection for oil using the production decline profile so far.

Only about 71,500 BO left to produce in this well over a theoretical 30 year remaining well life (this well life is very optimistic - high water volumes and economics will probably kill this well in about 10 years if not less).

As a royalty owner, one will get some really good early monthly paychecks, but these will start decreasing immediately (assuming constant O&G prices) with an 80-90% decline over the first two year period.

After this initial screaming decline, production / royalty checks will flatten out at a rate equivalent to 5-10% of the initial check totals.

Attachments:

• Oil EUR.pdf, 108 KB
• Production Chart.pdf, 53 KB

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Permalink Reply by Todd Smith on March 8, 2022 at 0:38

This is great information! Not what I wanted to hear ( haha ) but very good insight. Thankyou for taking the time to explain this.

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Permalink Reply by Rock Man on March 8, 2022 at 7:02

You are very welcome.

Even with this scenario, royalties for 120,000+ BO plus half a BCF of gas over around 2 years is not a bad bit of mailbox money in today's price environment

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