If so, what are you guys expecting the increase in well costs to be due to the significant increase in drilling pipe costs and other steel needed to refurbish rigs? Have you started seeing the increase in prices yet? I dont own many non op sections but have recently received some paperwork on 3 properties, 2 in OK and 1 in Texas, guessing they are 6 months away from AFE’s if they do drill the wells, just curious what more experienced people are seeing/hearing about pricing on 1-2 mile laterals. Thanks Bob
Take a look at your recent AFEs and add 10-20% to your pipe cost. A greater affect on activity will a 10% drop in crude prices and growing instability in the Nat Gas market.
Not worried about the natural gas and oil prices, instability is always a factor. Was just curious about pipe/casing etc costs. You say 10-20% but from my understanding it could be up to125% increase in costs, which is a different ballgame. Guess my question is probably 2-3 months early as the pipe being used now to drill wells is already here, but will be interesting to see how much completing a well/well costs go up 4 months from now. If it does go up to125% like some are saying and oil and gas prices fall even more in the worst case scenario but very likely to happen, not sure how companies will be able to drill new wells given the economics.
There has been a great deal of speculation in this area due to supply source. The present concensus is balancing US production of OCTG with foreign supply and applicable tariffs should create a 15% increase in OCTG. This should increase well cost by 2-5%. Current prices should decrease new wells more that this issue and should decrease DUC completions.
The projections we have for our acquisitions and current properties includes minor new well activity in 2025-26. Prediction of lower demand and rising inventories will create a weak crude market. Natural gas prices will be better off than the last 2 years and could show stability if LNG exports are not a target of tariffs. General thought, weakening US economy, but not recession.
So my predictions are O&G as well as Royalty companies with weak balance sheets will be M&A targets for those attempting to establish new or greater positions. Not much of a novel prediction.