Well, to my surprise, Spur got approval to drill 5 wells in the Eddy county 6 and 7-19S-25E, called Trudy Federal. I looked at the application and there are a few things I didn’t understand.
Original application was for ten wells, but only five were approved. Does that mean the others will not be allowed?
There is a schedule showing first spud date of 4/26/23 and first production date of 9/06/23. Are these reasonable given all the uncertainties in drilling?
They show specific anticipated production rates. For example one of the wells is projected at 401 BBL/D, (not about 400!). How realistic are these numbers?
Any perspective would be helpful. I think this must be all good news,
I thought they applied for 9 or 10, I didn’t check, I’m sure you are right. 8 in a half-mile wide unit is a lot. They have normally been drilling 4 or 5. I would guess they do not drill all of the permits here.
They currently have 69 permitted wells (including these) and are running 2 rigs. Probably drill these tiny wells in 10 days or so spud-spud. So…you figure in a year they drill those 69 permits. So its probably a year max until they get drilled if they keep the 2 rigs. Maybe 200 days from spud to sales. So those dates are believable. I’m sure they are just guesses used for a gas capture plan or something in the permit.
I had this laying around, its from late 2021, but average Spur well based on their Yeso producers (55 wells, a mile long). Typical well about 400 bopd the first month. Makes 250-300kbo each. In theory.
Not to go too deep into the weeds, but I have a copy of a proposal filed with OCD IN January 2021. They proposed 10 wells. The ones missing from the approvals are labeled 90H and 92H. Maybe the commission nixed a couple. I wonder if they will want to see how this develops before permitting more wells. The unit is a total of 320 acres.
I have no idea if it’s allowed, but I was just wondering if you have 12 net acres from these eight wells and the projection is about right, what would the revenue be? It’s 1 1/4 interest with cost free royalty. My original assignment did have 10 wells on it. TYIA!
Ha. I don’t know what is allowed at my own house, much less here. But I’m a rebel anyhow, and simple math is too darned beautiful to spend its life in a cage. So here goes nothing.
Working on the theory that there are 320 acres in the unit. And you have 1/4 royalty in 12 of them. Then your decimal in the wells should be.
12/320 * .25 = .009375.
I think they will only drill 4-5 of those wells. So lets say 4.5 wells. With the flowstream above of about 400 bopd the first month. Over the first 120 months of production at $75 oil you might get paid something like this.
It should be noted that a number of things have to go right for that to work out for you, IMO. They biggest is that they have to drill the wells. Permits are a lot better signal of intent than a lease, but still. Lots of acreage on the Yeso trend will have no wells for a long time at the pace it is being developed. Then the wells that far to the West have to be as good as the average Spur well. And then oil needs to average $75/bo, which is less than today but higher than the average volume-weighted strip price for the future.
I don’t think $100k today for your 24NRA is fair. But its maybe two times that, once you time value $ and go with bird in hand vs one in bush. Amateur opinion.
