Hi, I received an Interim order of the Commission Increased Density for section 28 and 21 6N, 4W. In the order CPRP, LLC. They state that there is 1,922 MBO in the Woodford formation underlaying both sections, and plan one well there. The well is expected to produce 500 MBO. My understanding is that 500 MBO is equal to 500,000 barrels of oil.
This is the formula I am using in a spread sheet to account for acreage, price of oil and percent of royalties per barrel. 500,000/ (640*2) which gives me the approximate barrels per acre. Then multiply by acres owned, and price of oil per barrel, multiplied by royalty share, ( example multiply by 0.20 for a 1/5th share), then multiply by number of wells in the Woodford (1-3 wells is my projected limit).
With this formula, at 1 acre, $50 per barrel, 1/5th royalty, and one well, I get $3906.25 per acre pay out from the Woodford formation. The numbers I get seem correct, but I am wondering if anyone can point out where I may be doing something wrong.
Hi James, your numbers look correct, but just remember this would be the payout for the entire life of the well. This would spread that
$3900 out over ten, twenty or maybe thirty years. Some wells go
on for much longer.
Thank you Todd, I will certainly take the reliability of the data with a grain of salt. In particular, I am going to compare the projection to the current active well that is in the Mississippian. I will probably do a 1 to 1 comparison with the proposed new well in the Woodford. This is just so I can compare royalty offers with signing bonus, if we start getting offers. Just one question, I think the 1/640 number needs to be 1/1280, because the current and proposed new wells are in sections 21 and 28. So, I am under the assumption that royalties will be divided between owners from both sections. Please let me know if I am misunderstanding something here.
Thank you Pete R. There is already one well in the Mississippian with two more planed for that formation. I will look up what that well has produced since it`s completion about 5 years ago, and will plot that data to help me understand the actual production of the proposed individual wells. Is the data from the current producing well available to the public? If not, I will go back through all of the monthly statements I have, so I can set up another sheet for the Mississippian wells. I do understand that wells sometimes do have long lives. I will add a column to account for the projected life of the well(s)
There is currently one Mississippi well, the Indultado #1. It has produced 330,551 BO & 1.131 BCF of NG. Casillas plans one more Mississippi well, the Indultado #2. Casillas plans two Woodford wells, the Whistle Pig #1 & Whistle Pig #2. According to their testimony (mostly BS), the Woodford formation for EACH section holds approximately 1,922,000 BO & 4.805 BCF of NG. Using your numbers (1/640 X 0.20 X $50.00 X 1,922,000) you get $30,031.25 for oil. I use $2.00 for natural gas so you get another $3,003.13 for a total of $33,034.38. The Indultado was completed in July, 2017. The hearings at the Commission on the Mississippi well isn’t until next week so there are no numbers yet for anticipated reserves for the Mississippi formation under each section.
That is fun to play with… however, Casillas can throw many variables at it that can screw up the best calculations.
Frankly, I am so confused on what is being planned for 28 and 21 6N 4W, what has been a-approved, and what is in limbo, that I have given up trying to follow it all. If anyone can simplify what all Casillas has going on in this area, all of my family members would certainly appreciate it.
Is the Woodford formation above or below the Mississippian? Will the Indultado depth clause come into play for this new approved well?
It does seem like a very active section (s). I’m thankful for that. N
No BS: Casillas plans on 1 additional Mississippi well to be called the Indultado #2.
They also plan 2 Woodford wells, the Whistle Pig #1 & #2.
The Woodford formation is below the Mississippi formation.
Depending on the actual wording of the depth clause, it may or may not affect the Woodford wells. As an example: If the depth clause reads …to the base of the deepest producing formation, then a new lease would be in order because the leases expires below the base of the Mississippi.
If the depth clause reads… 100’ below the base of the deepest producing formation, then a new lease will cover all depths 100’ below the base of the Mississippi. The Whistle Pig #2 Woodford well will be in the top portion of the Woodford so the original lease is good for that well. But because the Whistle Pig #1 well is going to be for the bottom portion of the Woodford, a new lease must be taken (or pooled).
Formula for OK calculations is:
net acres/actual spacing acres x royalty x % perforations in your section.
What may start out as a planned 50/50 well does not always turn out that way, so the OCC will issue a final order that gives the splits. The OCC also issues the spacing orders. Most of the OK spacings for horizontals are 640 acres with a few larger or smaller ones showing up. These two sections are actually 640 acres each, but many sections along the top tier (1-6) and west tier (6,7,18,19,30,31) are irregular so you have to watch out for the exact acreage on those when doing the Division Order decimals on them.