Hi, about 2 years back we got excited about the first well after years of leasing and no production.
We were quickly disappointed with the production of that well. well info 30-015-42320
We own rights on 40 acres of a 160acre plot
Well we should division papers for another soon and this one looks VERY promising, 30-015-45446
what should we expect and can you tell from the test reports how a well will produce?
Also we regularly get buy out offers in the 200K-300K range. We recently got one for $720K
That tell me there are many many more times that in royalties in our area.
Yeah, horizontal WPX well should trump vertical well.
It might not be evident from map (below left) but they are stepping further out to the NW with Wolfcamp drilling in this area. Quite a number of wells to the SE of you. Map on bottom right is just the upper Wolfcamp wells (Wolf A, Wolf X/Y), which is where your Boxer well was landed. Plot at bottom is the average of those 51 wells. The average mile long well in the upper WC starts out about 20,000 BO the peak month and gas starts about twice that much. Then both fall off. By end of year 1 you are making 25-40% of the first month.
I didn’t look at any of the first tests for wells if you were referring to the IPs reported to the state and how that correlates to eventual well performance. Not everybody flows the wells back the same. Some fully open the choke and only report the absolutely best rate seen. Others don’t care about appearances and just report the first 24 hours which may be very heavy on frac fluid. There is usually a very good correlation between peak month oil rate and long-term oil production. Peak month oil is often the 2nd reported month to the state. So, IMO, with lags in volumes being reported it usually takes a while to get a good idea of what you have.
But I guess I would say that you should expect something close to the average of the offsets, maybe a bit less as you are moving further to the NW. Assuming you have 40 acres leased at 20% royalty…in a 320 acre unit, and realized oil price (after transport, Sev/WH taxes, etc) is $45, you should make something like $140k from this well in the first year if you get the volumes on that plot below. Maybe $50k-ish the 2nd year. Then steadily declining.
A good bit less than $720k. Again, assuming you have 40 acres leased at 20% = 64nra, that is $11.25k/nra. That sort of price would require something like 3 more wells in the S/2 of Sec 32 in the next 5 years to work out (assuming some sort of discount rate for future cash flows). Will that happen? A lot may depend on how this first well does. Joy of the oil business. Good luck. Go Irish.
Wow! thanks for the info.
We are expecting 16 or so wells over the next 5+ years.
We are getting 1/8 of the 20% royalty, assuming you factored that since 40 acres of a 320acre plot is 1/8
Assuming they do drill 15 more wells with similar production, even the larger of the offers pale in comparison to the potential production of these rights.
Yep, 2.5% revenue from a well was what I was doing. And yes, if you get 16 wells in your 320 acres in the next 5 years your acreage is worth a lot more than you are being offered.
Just curious, why are you expecting 16 or so wells over the next 5+ years in this 320 acres? If we ignore the geology and go with straight math, based on the size of the Delaware and the # of rigs running, that is a very low probability event. In the absence of any other information.
Right now WPX is running 4 rigs. They are all in Loving County, in the core of the Delaware.
This was an estimate from a Landman we worked with a few leases ago. We have maintained contact with him over the years and we will from time to time ask for advice or opinions on leasing value etc.
Assuming they do drill 15 more wells with similar production, even the larger of the offers pale in comparison to the potential production of these rights.