Hello all. I've heard of companies finding old oil fields with plugged well that used to be producing and reworking them to produce again. Could someone please explain how to find these sites and how the process would be to acquire?
Thank you
Oiland Mineralearner:
Depending on the State you are in, I would contact the Agency which governs oil and gas operations within the State. This Agency should have plugging records either online or at thier offices for all wells which have been plugged and abandoned. This would be a start in your process in learning the locations of these type wells.
There must be tens of thousands of wells that could use a rework. If the well is plugged and abandoned I think you would need to secure the mineral rights from the mineral owner. I would consider reopening a well a risky business. I would be looking for active wells that I could acquire mineral rights to.
I am biased to North Dakota because that is where I own minerals and know most about production in the areas. There are many mediocre wells that have declined in ND that were drilled between 2007 and 2010 with less than optimum drilling practices. The oil is still there, the poor wells have not been producing much of it. Due to the cost of refracking/stimulation of horizontal wells would only be a little cheaper than drilling a new well, I think these areas will get new wells with the best, up to date stimulation feasable eventually. I think there are many mineral owners that have become disillusioned because they got a poor well early on and have not had an up to date infil well drilled who would probably sell their mineral interest for 5 years royalty from the poor existing well. Even if the production declines faster than you calculated or the price of oil decreases more than you allowed for, as long as the well keeps producing you would eventually get your money back. Risk management.
I think there could be the possibility of hitting it big re-entering an abandoned verticle well, some of which might not have been abandoned at todays oil prices or they were a bit too water heavy and back then there was no place to dispose of salt water nearby, but I wouldn't invest my money in it.
While it's true that those who will not risk seldom gain greatly, I don't see how you would manage risk in re-entering a plugged well any better than you would betting on a spin at a roulette table. What if the reopened well never produces? What if the cost doubles and you have to go ahead to get production to at least get some of your money back?
Those old fields are not found, the oil industry and the state have not forgot they are there, you could look through the state well logs in the area you are interested in. I think there are better, easier ways to make money but if you are determined, good luck.
OilandMineralEarner,
Just what if? What if a disgruntled producer abandoned and plugged a well and before he plugged it he threw in some junk iron and old drill bits into the bottom of the wellbore. You hire a drilling company to drill and they find out they can't drill the hole because of the junk iron. You still have to pay the drilling company for their time and expense. Just a possibility???? And you still don't have any production. Oh well, maybe a tax write off.
As RW says "I think there are better, easier ways to make money but if you are determined, good luck".
Clint Liles
Thank you for the replies. So my main question is, how do you make money in this business? Drilling new wells sounds very risky, but isn't there a low risk way to enter the business and make consistent money or is it a gamble? Thank you again.
Low risk is also low pay. Low risk, you could buy stock in an oil company that has a good track record. Buying someones leased mineral acres based on production, as I mentioned above would be reasonably low risk, if a new well is ever drilled, you hit the jackpot. If you could invest in a pipeline company before they get a major pipeline contract you could do quite well. If you go out on a limb, I don't think anyone will saw it off behind you, but neither will they care if you fall. Oil and gas is a rough business, do not wager more than you can afford to lose.
Ok, thanks R W. I'm in the Real Estate business rehabbing houses for a living and I can say some will say that rehabbing is a risky business, but after you learn the ropes, there is actually no risk at all. That's why I'm asking. Thanks.
I had a man offer me his mineral rights here, it would have been a no brainer, his well drilled by Joes towing and barbeque and uh, oil drilling, resulted in low production of 45k bbl in 4 years, longbow shot away on the other side of the section line in the next spacing was a well that had produced 244k bbl oil in a year. There was good production all around also, he just had a really poor well. I recommended he keep it because I am not in the mineral buying business. I would have had no worries had I bought it, someone would drill a good well there eventually, if they haven't already. I would sooner try forex trading than the oil business.
Hi Rw, thank you for all the info. Would it be possible if you could refer me to the seller, that is if he is still interested in selling? I'm hoping to get into the oil business and would like to work with the right people. I'm willing to pay a fee for the help as I know everyone has to survive. Thank you very much.
Greg
Oiland Minerallearner:
I would refer to rw's first post and heed the advice to not take on the "risk factor" involved in this venture. Unless you have a surplus of cash set aside to gamble on, your odds might be better to go the Vegas route. I worked for a State Agency (Oil and Gas Division) for 30 years and during that time, I've seen individuals acquire old well bores in hopes of recovering some great production that was not obtained in the past. In most cases, the cost factor for workover rigs, tubing and needed downhole equipment, was extremely expensive and many were left with the reponsibilities of plugging these acquired well bores since they took possession along with these responsibilities. Some who elected not to spend the money on plugging, was out the expensive of expensive downhole tests called "integrity tests" whereas pressure was applied downhole to prove no holes in the tubing exits downhole. Again, do some extensive research and understand what you are getting into in a legal perspective with the State where these wells are located.
Sorry, I will not point this mineral owner out. After all, the guy came here for help and I was helping him, I don't feel it would be ethical to point him out. I don't know if he is still willing to sell or not and I do not approve of unsolicited offers. I can't stop you from going through the last 1,000 posts I have made to look for him. I also wouldn't be surprised if someone has already drilled a new well in that spacing making him reluctant to sell. I pointed out what I think is clearly a less risky way that with a lot of work, becoming intimate with the geology, decline factors, considering the economics of the oil market, you could learn to find these disgruntled owners and evaluate what they have and make a slightly better offer than they are probably already receiving by mass mailings.
You already have experience with buying and selling, you could try your hand at block busting, leasing an interest in someone elses drill spacing, in an effort to flip the lease to the operator at a profit and retain a royalty interest, but be cautious because you may have to participate in the well if you can't come to terms with the operator. I frequently tell people with mineral rights about wells drilled on their minerals that they didn't know they had and the company is now trying to lease them, with production known and the risk pretty much gone and still offering people peanuts for their lease. I would consider such to be prime oil business opportunities.
You could buy their AFE to participate in an already drilled well on which you can see the production. It would take a good bit of study and some searching but opportunities are out there and I would rather put money into a new well that I could see the production on rather than a well that someone walked away from because it wasn't worth the effort.
Remember that records are kept along with core samples, the oil industry does not forget what is there, if they don't want to reopen a well, with their experience, you might consider if it would be a good idea for you to do so.
OilandMineralearner said:
Hi Rw, thank you for all the info. Would it be possible if you could refer me to the seller, that is if he is still interested in selling? I'm hoping to get into the oil business and would like to work with the right people. I'm willing to pay a fee for the help as I know everyone has to survive. Thank you very much.
Greg
The main thing that buying a plugged or non-producing well makes no sense unless the lease allows them to tie up the land despite non-production through delay rentals. The lease has expired otherwise, and you would have to negotiate a new lease.
The main thing to look at in buying old production is whether there are new pay zones underneath the well that can be drilled.
I have had the same idea regarding orphan wells, but also need some advice. I own several overrides, and working interests purchased at auctions, one a 50% stake in a producing well, so know a bit about AFE's, costs, etc. I am planning on paying the $25,000 Oklahoma bonding fee for an operators license. I had the chance, but did not buy 4 orphaned wells recently for almost free. They had been penetrated at 10,000 feet, much lower than nearby wells, and those offset wells were very sucessful. I would have run a pulsed neutron log, and recompleted the well at the shallower depth. The reason I did not was the wells were located on barges in a bayou, and the plugging costs, should the wells not produce, were upwards of $100K. How does one find a good consultant that knows about typical costs for neutron logging, re-perforations, recompletions, plugging, etc? Accurate costs of those are vital in order to judge which wells to buy. I own an engineering business, but have no direct experience with well recompletions.
Brandon,
I like your comment on marginal or ophaned well.. I have been to leases that looked like they havent been touch since the late 50's early 60's.. I have looked at the some of the equipment and some of these leases had real good money spent on them back then.. I have a wi in a well that was not producing at all and is now at 16 bopd.. These are the gems I am looking for.. Neglected retired wells that granpa's kids dont have the money to put into or have no interest in..
Brandon D Pointer said:
First off, if its its plugged(P/A) then in the eyes of the state regulatory agency the well is done forever. You can drill an new offset well if you so choose.
You need to concentrate on marginal producing or orphaned wells. The operator is who you need to contact about acquisition if its producing and if its just abandoned, lease the surface and minerals and file for a change of operator. Talk to land owners when you can about the wells, they are a wealth of information about what been done on their property and in their area.
All the low hanging fruit has been picked( i picked a ton in the early 2000's) and now equipped 1bbld wells are selling for upwards of 100K. Just remember if you operate it you are responsible for it when its played out, ie: plugging cost!!!!!
Most of the other comment on this thread are spot on also. I used my State agency's(OCCC website) database, IHS, Oil-Law Records, Land Boss to determine viable projects but word of mouth always seemed to lead me to the hidden gems....and a few turkeys