Hi everyone,
Just need to vent I guess. My sibs and I have a total of 13 working wells in Williams County and 3 extra that have not produced as of yet or are on confidential lists. Our monthly checks keep going down even though the price per barrel on our last check was higher than ever [47.90] and check was the lowest ever. Do any of you know the reason wells are drilled so unevenly? One month there are 3,500 barrels and the next month 1,800 on one well.
We participated in our first well in 2011 and non-participated in the other 15. It has taken 5 years for our first non-participation well to get down to 1,000,000. left for the well to collect before we get larger checks.
Since I want to retire this coming year, was expecting to have a reasonable check monthly from the oil company! Anyway, thanks for listening and take care everyone.
Pat Maloney
I understand your frustration as I have wells there also. From a geologist's point of view, I can explain part of the situation. Horizontal wells have enormous potential over a very long time frame. The wells come on line at very high rates and then decline rapidly over the next couple of years. After that, they are thought to have potential at those low rates for decades. What is happening is that the frac job fractures the shale horizons in a way similar to a tree root system. Think very large roots close to the well bore, then medium slight farther away and a vast array of very tiny roots that extend for hundreds of feet. That early large production rate is from the large fractures close to the well bore. By years 3-4, the medium size fractures contribute. Takes a while for the molecules to travel the longer distance. Then over time, the molecules travel from those tiny highways over much longer distances. This gives what is called an inverted hockey stick profile. The blade is the first few years and the long handle are the many decades.
Another issue is that companies are constantly trying to figure out the best way to drain the field area. Faster is not often better. They want to make money just as much as we do, but they want to make it over a long time (as do we), so they are constantly trying to figure out the choke sizes on the well and what is the optimum size. Think of the spigot on your garden hose. If you want a gentle stream, you don't turn it on very high. Another good analogy is if you are sucking too fast out of your really cold milkshake. If you suck too quickly, the straw collapses and you don't get any fluids. If you suck at a low constant pressure than that chocolate shake comes right in, but at a low rate.
Your monthly checks are also not aligned perfectly with oil and gas prices. The check for June might be for production in May or April. If oil is high today, but low back in May, then your check reflects that. Same for gas, but it can be delayed by two months or more in timing.
On the DUC's or Drilled and UnCompleted. Many companies did not complete wells due to either the weather cycle since ND gets REALLY cold in the winter, the pipelines were not finished year and the price was low. Minerals owners would like to have better prices for our product, so it is okay for them to bring the wells on line slowly to balanced all those factors.
Hope that gives you a bit of understanding about what is going on. It is normal
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Have you received actual payout statements or did they just tell you that well is a million dollars from payout?
Hi R W,
I keep track of our quarterly payout statements and the last one the end of March had 1,000,000. left. I had to call the bookkeeper to find out where to find it on this "hard to understand" assets and liabilities columns. The figure is on the last page at the right bottom. What has frustrated me is that we were told it usually takes 3 yrs for a well to recover its costs which includes the pooled percentage we had to pay as well; it has taken us about 5 yrs. The well apparently cost 13,000,000. to drill initially.
How are you doing with your wells? Did you participate or go with non participation...you told me at one time but I forgot. M Barnes's explanation was good.
Pat Maloney
Pat, sadly I wasn't in a position to participate in several wells. I have since participated in one and it's going fine. My operator for the non-consent wells is not sending me payout reports. We may have to audit some wells, thankfully we have a trained Forensic CPA in the family. That same operator has drilled more wells and NOT sent me AFE's for them after I participated in the first well. I personally don't mind getting a chance to look at the well's production before I decide if I want to participate or not, they are only hurting themselves. So far, for the well I did participate in, I have received an additional bill, a tiny amount for salt water disposal.
My non-consent wells have actually not been at the top of my things to do list because I have been concentrating on our lawsuit against Diamond Resources which has now been settled by them having to secure releases of lease from Continental Resources and Burlington Resources for our mineral acres.
I wanted the leases voided, to get back to square one. I believe they cheated themselves by not wanting the leases voided and providing instead a back dated release, to save their good name, such as it is.
Because there was a valid lease when the wells were drilled and we never received AFE's, I don't believe we owe them for the drilling of those wells. It will be nice not to have to participate in those wells and yet be owners.
RW,
Wow...what a mess...I am hearing about lots of folks here in ND that are having big problems with their leases in one way or another. Continental is in some trouble and several companies have left the area entirely. Our company, Oasis, is still vigorously moving forward; now in McKenzie county next to Williams where we have our wells. I keep track of their earnings as well and they are a moderate player in the Baaken. We initially were told not to lease as our percentage ownership would be better with non-participation; however, it is taking a LONG time and I am 73 yrs old.
Hope all goes well with you and I don't think you owe them for the drilling either.
Pat
Pat, it's all just part and parcel of when companies break the law. Usually the companies get away with it or it's settled by letting the mineral owner keep a little more of their own money.