I am an interest owner in a property that Marathon Oil has in production. I started getting RPs from them on an oil well they completed on this property about nine months ago. During this period, even though the spot price of crude oil has jumped by around 13%, the checks--because of diminished production--have decreased by 42%. I have contacted their office on two occasions, and each time I was told "someone who is familiar with this issue will get back to you." Of course, no one has gotten back to me. This is a real head scratcher. Can anyone tell me what's going on with this apparent anomaly?
Rapid and steep decline is common across the entire Eagle Ford trend. Expect anywhere from a 50% to 80% production decline in the first year.
This type of performance is common on unconventional reservoirs of this type regardless of the operator.
The Eagle Ford Forum (www.eaglefordforum.com) has a few pretty good discussion threads on this topic (I.e. decline). There is a search function on that site that allows one to "google" a topic and find the discussions(s).
Hope this helps
What is an "unconventional reservoir," and do all EF wells--regardless of their location-- fall into this category?
"Unconventional" reservoirs (aka "shales") fall into the category of formation that need special measures to be economically productive - in most cases long horizontal wellbores combined with fracture stimulation effort.
In general, all EF wells fall into this category.
I have another question concerning the price of oil used as the multiplier of the monthly production. It always seems to be around $10/brl. less than the spot price listed in the daily commodities markets. Can anyone tell me why?
Oil price (or condensate if it be that commodity) is all based on the specific contracts that each operator has with the oil gatherers they are selling to.
Note that transport and related fees may be deducted if you don't have a "cost free" lease.
The formula will be something like "S Tx light crude minus $1.00 plus 50% of adjustment" or something like that. Complicated to say the least.
James M. Schroeder said:
I have another question concerning the price of oil used as the multiplier of the monthly production. It always seems to be around $10/brl. less than the spot price listed in the daily commodities markets. Can anyone tell me why?
If you are paying transportation costs and other post production charges, $10 is very good. I have seen as much as $23 differential on my North Dakota oil.
As Rock Man noted, what your oil sells for is determined by a contract and sometimes the price may move significantly before there is a new contract and you receive the old price, this should swing in your favor sometimes.
James M. Schroeder said:
I have another question concerning the price of oil used as the multiplier of the monthly production. It always seems to be around $10/brl. less than the spot price listed in the daily commodities markets. Can anyone tell me why?