Now Producing... a few questions about long term projections

Texas Mineral Rights Reeves County, TX
1

We've been leasing our land for the past 10 years or so since inheriting it, but we're new to the actual production process. We've got some production getting started and I have a question about what to expect long term. We're in 50 T8S Sections 35, 36, 37, 38. We have 1 vertical well and 5 horizontal wells on the books. Our family owns a portion of the sections. 2 of the horizontal wells are completed and have data in the production queries on the Texas Railroad Commission over the past few months. The other ones are in the process of being drilled but are permitted.

The barrels of oil per month looks pretty good (13,000 for one, 16,000-19,000 for the other). What I don't have a feel for is how long this could run at these levels. I've read about horizontal drilling resulting in "20-40 years of production", but then I read about Delaware Basin wells having EUR of 500-600 MBOE. At that rate it would seem the well would reach its ultimate results after 2 years. Is that a correct correlation?

At that point does the Operator just move on to another section and we're done? Or do they then use that same drillpad and drill another horizontal well at another depth? Or do they slide over and drill another horizontal well? I've read about some much larger numbers of potential oil per section in the Delaware Basin (~100 million barrels per section) so it seems odd that a section would tap out at a couple wells producing 500-600 MBOE.

Also, is it safe to assume that if two of the wells are producing at these levels then the other wells that they're in the process of drilling will likely also produce at these levels? Or could one well turn up these type of BOPD results and then another well just 300 feet away turn up nothing??

THANKS!

2

Keep in mind that this entire Permian area is still in the development stage. Most wells have been drilled in the last 2-3 years so the empirical data is at best, inconclusive about the life of a well. Our horizontal well that has been producing both wet and dry is only 18 months old. To predict what the future might bring is at this point in time only speculation. Our well is producing now at about 20% of the first month and that is not uncommon at all. As time marches on just over the past 18 months, operators have learned quite a bit about the Permian and procedures are changing with each and every well which are creating higher numbers on the initial production. As to predicting if a well in a given area “guarantees” a new well might be as prolific as one already producing, there is no such thing as a “guarantee” when it comes to the development of the Permian. Just be glad for what you have and don’t spend that money until it is in the bank. This is a long term play and long term could be generations. At least, that is what we are hoping for.