Is it me or just my wells but my royalty checks have taken a nosedive and it seems like its producing less and less each month. The wells are w/ Callon “Ramones” well. I understand over time wells produce less but it seems drastic as my checks each month are half what they have been, declining a lot over the last few months especially?
Any ideas or thoughts here? I will likely contact them to see what their answer might be.
Ours dropped over 1500% each we haven’t received a check in almost two years!!
Hello, JedC,
No, it is not just you! We were shocked to receive our last check from Callon! What the heck? If you do call them, pls let me know what you find out! For oil to be at an all time high, we were just shocked to open our check that arrived in June! We are at 68 Block 13, A5759. We have 2 wells, one is pooled and one is not. So far, Callon is not showing us much…guess we were just spoiled with Primex.
Not super uncommon in the era of horizontal wells. When wells first start producing there is a lot of pent up pressure right near the wellbore which is why the first 8-12 months the production is so high. Wells can decline up to 70%+ in the first two years before moving into what is known as “steady state” in which there is a standard annual decline that is much less (~4%). You can see one of the wells in the screenshot below, while the decline looks drastic, lately it has only been around 4-5% MoM (month over month). The decline from highest production to last reported month is 80% which is pretty normal over the 2 years of production.
My well in Blk 58, Sec 10 came on line in Nov 2019. After 4-5 months the decline rate kicked in and production and my royalty payment dropped every month. I received a payment this year in February for December 2021 production. Since then nothing. EOG said the well was down for a “technology upgrade”, whatever that might be, and would be down for several months. Zero production or royalty income in 2022.
Thanks for this information and explanation Phil, I always understood there would be fall off in production over time but never like this, 80% in two years, yikes.
That said, over the two years we have seen the production decline however the price of oil has skyrocketed in that same time frame, one would think that would make up in royalty payment for where the production was down yet commodity price up?
Is that attached image a screen grab from a pay site or public information somewhere on the net?
Daniel
They fracked wells offset to your well in Feb 2022. Your well showing no production of note since Dec 2021 like you say. Not sure about “technology upgrade”. Might be full of frack water from offsets and need gas lift modifications, might be jacked up and full of sand.
Jed, that screen grab is from DrillingInfo (pay site…same as the ones I have here)
Ya it can be a bit of a shock but its like a shook up soda can, if you open the top it comes out quickly then dribbles. Same principle with O&G, once the rock is frac’d there is a lot of built up pressure for when you turn the well on. The first year is the pressure of the reservoir coming down and depending on the choke, etc. it can come down quickly. Different than a conventional reservoir. If there is high water production they will have to manage oil/water cuts otherwise the well drowns out which can mean a reduction of production to keep pressure up. Its a fun engineering problem.
On price, yes with prices being 2x over the last few years many owners have seen their checks flatline even with declining production but that is a double edged sword with prices already 20% off of highs.
Thanks, NMoibboy! That is more information than EOG has provided in 7 months. Although there is no obligation on their part, it seems to me EOG could at least communicate with land owners. When our royalty income goes to $0 all of a sudden we should be told why in basic terms we can understand. My several contacts with EOG “Owner Relations” have been pointless.
Thnx Phil, informative! With that, once a well like this hits its stride or stability after the initial burst & boom how long do these wells remain active or decent producers? I’m sure it can vary but is there any rule of thumb one can follow?
Horizontal wells are newer compared to the industry as a whole. If you look at the eagleford or barnett some wells are 10+ years old and still going. The first 4ish years are the most productive and where Operators make back the most money. After that point its an accounting problem of revenue vs. costs.
With oil wells you can fit pumps, etc. to increase production of the well if it doesnt flow naturally. We are also seeing an increase in refrac’s in more mature basins which can extend the life of a well even longer than its initial production estimate. For most owners the real question is how many more wells can be drilled and is there any indication of that new activity, that is what will really drive an increase in checks going forward.
Agree with Phil. New wells and new volumes drive the huge values.
“Decent” producer is in the eye of the beholder. The well should be economic to produce down below 10 bopd. Which should take a LONG time.
Like in the extreme case of the soda pop example, or of a propane tank, how much production you get is function of the pressure (and the fluid props and the permeability and the fluid saturations etc)…and when you produce for a day, there is less pressure the next day, so you produce less, ad nauseum. As you produce less and less per day your pressure drop is less and less and thus decline flattens. Huge initial local pressure drop, dual permeability system of frac/matrix, blah blah blah. In absence of any sort of outside interference, what I’m gonna call the “mathematical depletion solution” (i.e. how production varies with time) for a fracked horizontal well should follow a hyperbolic decline. I use to be smarter and be able to solve differential equations, but now I just draw lines like a 2nd grader (who knows Excel) that look like they fit the data. So here goes.
If we take the example that was shown above for your well, Ramones 267-266W 1H
Here is a possible hyperbolic solution that fits the observed data:
The X axis only extends for 10 years. At that point, in this possible future, this well makes 37 bopd. In my book, pretty good. BUT that is 3.7% of the initial rate. If you want a rule of thumb, you can eyeball the graph and say "Gee I make 30% of peak at 1 year, 17% at 2 years, 12% at 3 years, etc. That’s probably fair for a Delaware Wolfcamp well. Well should produce economic rates for something like 40 years.
Hey Ho Let’s Go
TY Phil & NMob (<~~ like that abbrv.!)
Interesting stuff for sure regardless if it means less and less oil, gas, cash flow to me.
@Phil does the chart/graph on the right not seem like a dramatic fall off the cliff move downward?
@NMob nice freehand charting!
Just for grins, post that chart on a regular scale instead of log normal so folks can see how really steep that decline is. It is eye opening in understanding!
wait, in need of definition now of “log normal” vs “regular”?
Without going into horrible math explanations, the difference is in how the Y-axis (left side) scale is displayed. “Regular” or Cartesian goes from 0 to 1000 BOPD in regular increments labeled at 100 BOPD. Log Normal is a different way of displaying the same data, but note that the scale goes from 1 to 1000 BOPD, but not in equal increments. It is a way of displaying data with a wide range using powers of 10. If one looks at the Log Normal scale and doesn’t really look at the scale, the line appears to have a shallow decline. But if you look at the Cartesian scale and actually look at the scale, you can see how rapidly the wells decline (which is normal). Another way to think about it is that the molecules of oil near to the well bore come in first and fast because the the well has been fracked and the pressure is high, plus the little beads in the frac fluid are holding the pores open and permeability is also enhanced near the well bore. Over time, the the molecules of oil have to travel from farther and farther away and the permeability is quite a bit lower because the beads don’t reach that far (plus the pressure has dropped) so the champagne bottle is fizzing out. Envision a tree root system with large roots near the well bore and tiny roots farther and farther away. Those are the fractures that the oil is trying to get through.
Same here in Hood County Texas. We are with Diversified. Ours are much lower due to prior price adjustments and cannot seem to get an answer why so much. VERY DIFFICULT to get them to contact you!!! VERY FRUSTRATING! This has not happeed with the other 4 operators we have had in past years. I will not give up!!!
This is all very new to me. I just inherited mineral rights to over 260 acres in East Texas. The will is still in probate but a oil and gas company has contacted me and want to drill two oil wells on the property. It has had gas wells on the property in the past that have not produced anything in a while . I am aware that wells produce the most in the beginning but did not realize production declined that rapidly. From what I had read it was much slower then that. I have been trying to get as much knowledge as I can so I can go into this eyes wide open. I want to know what to expect .
Just reading, and dont have info in front of me, but over just 1 mi east of Stonington ,2 wells there, we havent seen anything since 2019.
