Definitely new royalty owner question! I see some areas that have a lot of horizontal wells. But I also see a lot of areas where there are no horizontal wells. Why is this?? If an area does not currently have horizontal wells but does have vertical wells, is it likely they will drill horizontals in the future?
Another important factor is whether you’re in an oily or gassy area. The number of gas drilling rigs is declining because 2023 gas price is range bound “two-handle” low $2/mcf. America has too much gas and too few pipelines. Oil rigs have been increasing slightly in the Permian and decreasing slightly elsewhere. Different geologic landing zones have different gas/oil ratios which affects return on investment.
Texas beginners may be confused viewing “offset” wells because many oil wells are labeled as gas wells in RRC records & online map, but only because operator derives some sort of severance tax reduction by designating a Texas oil well as gas well, dry gas is practically an unwanted byproduct. I don’t know why some Texas wells are labeled oil & others gas, when oil is what they desire.
1 Like
I don’t know if operators still drill vertical wells in the Permian Basin. 2-mile horizontals are 8-10 times more productive than a vertical, the return on investment is far higher. Horizontal drilling existed 100 years ago, became more efficient mid-1980s & 1990s, and then horizontal drilling exploded exponentially in 2011 in the Permian Basin. 1-mile laterals were standard from 2011-2016, then 2-mile laterals became state of the art in 2016, and since 2021 publicly traded E&P companies have been drilling 20%-30% of new wells as 3-mile laterals. Big operators assemble pooled units with two or three contiguous 640 acre sections, in order to facilitate wellbore fairways 2 or 3 miles horizontal. If public-traded E&Ps still drill 1-mile laterals they avoid admitting it in earnings reports. I suspect the vertical wells you see either predate the Shale 2.0 in 2011, or represent small operators stuck with tiny blocked-in units not long enough for a horizontal. Operators swap or buy leaseholds to “block up” acreage to accommodate 2-3 mile laterals.
Profitable horizontals must access rich plays, like upper Wolfcamp in the Permian. Lack of horizontal wells may indicate absence of rich source rock, or the area was drained by numerous vertical wells.
In Texas, you can age wells using the RRC online map (be sure to click the toolbar well-info icon first). To understand a horizontal, download its completion report from the RRC website data query … completion reports reveal depth (TVD), the “take” length of the horizontal perforation zone, and also which geologic strata is tapped.
2 Likes
So vertical wells are virtually not drilled anymore. And horizontal well needs to be in really promising to justify the costs. So basically, where we see horizontal wells are an extremely good sign that there might be future development?
Its all about location, location, location. Most horizontal wells are being drilled in very tight formations meaning there is not much porosity. If there was, the vertical wells would have depleted the hydrocarbons from those formations. 30 years ago there was no technology for horizontal wells. Today we still only produce around 10% of the oil that is in place in the rocks. What technology will come around in the next 30 years that will allow us to produce more? Nobody knows at this point in time.
1 Like
Yes, when I inherited West Texas property in 2017, I looked on the RRC online map, and studied all the wells located within a 5-mile radius. These analogous wells are known as “offset” wells. If offset wells are profitable, you can expect your operator will drill a similar well in your section, assuming you’re not already drilled up. You can quickly view the well completion date, and monthly production. I like to compare horizontal wells by comparing the first six months production, and converting production to common size or oil per foot, so comparison between a 10,500’ lateral & 13.000’ lateral are apples-to-apples comparable. Some combine oil & gas into Barrels of Oil Equivalent (BOE) when comparing wells.
An excellent YouTube video provides wonderful basics for beginners. Pecan Tree Oil and Gas, Tracy Lenz Petroleum Engineer, made a 5-part video, shows how to locate property, read permits, look over offset wells in the area, proved versus probable reserves, source rock types etc and she values the property. She possesses fast software that accelerates well data analysis, whereas it can be slow work pecking meticulously through the RRC online map. I’ve learned a lot by scrolling around the RRC map of my area, opening up well drop-down panels, etc.
Completion reports show landing zone depth, length of the perforated take section, & rock formations. Formations are sometimes labeled Type I, Type 2, Type 3. Type 1 is profitable now at current prices e.g. Wolfcamp. Type 2 is marginally profitable, Type 3 might be unprofitable today at $70/bbl but might become profitable at $100/bbl.
Its a lot of work learning details, but I’ve enjoyed the process, fortunately I’m retired and have time.
5 Likes
I’m retired too Roy. And I’m enjoying the heck out of this! But it’s all sort of like going to a foreign country and then trying to learn the language! But I am learning and making progress in understanding and documenting my inherited mineral holdings. Luckily I’m pretty good at data organization and analysis. I’m still pretty much in the organizational phase right now, but I am finding wells that are drilled on property that I’m getting no royalties from! So that’s progress and maybe that will pay off!
1 Like
Mineral Rights Podcast is worthwhile, they’re up to 205 episodes.
2 Likes
Thanks for the shout-out, @Roy!
Side note, there are still plenty of vertical wells being drilled these days, but only ~3% of the rigs are drilling them. If you include directional, it’s closer to 10%. There’s over 650 rigs running so that’s still more than a handful of wells. Baker Hughes has it broken out by trajectory for the US https://rigcount.bakerhughes.com/na-rig-count
1 Like
Oil companies don’t get to decide if a well is an oil well or gas well in Texas. The designation of oil or gas well is determined by the Texas Administrative Code Title 16,Part 1, Chapter 3, Rule 3.79. Here is what it states:
- Gas well–Any well: (A) which produces natural gas not associated or blended with crude petroleum oil at the time of production; (B) which produces more than 100,000 cubic feet of natural gas to each barrel of crude petroleum oil from the same producing horizon; or (C) which produces natural gas from a formation or producing horizon productive of gas only encountered in a wellbore through which crude petroleum oil also is produced through the inside of another string of casing or tubing. A well which produces hydrocarbon liquids, a part of which is formed by a condensation from a gas phase and a part of which is crude petroleum oil, shall be classified as a gas well unless there is produced one barrel or more of crude petroleum oil per 100,000 cubic feet of natural gas; and that the term “crude petroleum oil” shall not be construed to mean any liquid hydrocarbon mixture or portion thereof which is not in the liquid phase in the reservoir, removed from the reservoir in such liquid phase, and obtained at the surface as such.
@tracy_lenz . . . I have been watching your videos, and they have been absolutely fantastic! I have learned so much. Of course, at my age, I forget, almost half of it within a day!! Hahaha!! But seriously, thank you so much for doing these. Now I’m waiting on some big lease to come so I can put some of it to use!! And I won’t forget Pecan Tree!!
1 Like
A lot of vertical wells were drilled in structural or stratigraphic traps. These are areas of limited reservoir potential and if you’re off of it you get a dry hole. These are your sand stone and carbonate reservoirs. Think of a river channel or a reef. Horizontals are drilled into the tight sandstone, carbonate or shale reservoirs where porosity still exists but permeability is very low so the oil can not migrate to the well bore. Vertical wells are still drilled every day but mainly on the Eastern shelf of the Permian or in East Texas. When a vertical hits the ROI for the operator can be much better than a horizontal. If a HZ reservoir has too much permeability, think of putting a straw with too many holes in the side and trying to suck up the water.
3 Likes
Thank you so much!!! I love hearing that!
I’ll be making more soon, but we have been working on launching a new product so trying to get that out first 
.
1 Like
This really helps me conceptually understand these two types of wells @fwfrog91! Thank you for the lesson! So basically, you really need to begin to understand the geology of the immediate area. Clearly, the geologists in this business have to really be “Certified Smart Guys and Gals”.
Thanks for the legal cite. I think clauses A & B refer to wells that produce predominately gas. As to (C), I have no idea what the law is trying to communicate. .
@TripleF outside of the basin shale farming, geological interpretations are key and make or break a prospect.
This topic was automatically closed after 90 days. New replies are no longer allowed.