Here's a repost from my February 15, 2006 RB post......
Howdyyyyy Pardners….I’ve spoken with some of my counterparts in the oil and gas industry that are currently working in KY and TN. Here is some info regarding the typical oil well operations.
Even though we have not heard any recent drilling info from the company, my discussions with my oil n gas buddies from 20 years ago when I was involved with drilling up an area in Warren County near Richardsville (we hit 15 out of 16 there on a small farm) indicate two more wells were successfully drilled and two more locations identified and being surveyed and permitted with drilling to commence next week. It would be nice to get official word from PBLS management
A typical Knox Formation 1500 foot well in ADAIR County will cost you $50,000 to drill, complete, install pumping unit, electrification, piping and tankage. This is average for a lease with multiple wells on 5 acre spacing.
A typical well will produce over its 10 year life 25,000 barrels of recoverable oil. The oil is high quality and is 40+ API degree, Brent and Saudi oil is around 35 API degree rated. The higher the API degree number the better.
Typical oil production rates are 50% of the estimated lifetime production in the first 18 months, then the balance over the remaining life, or 8.5 years.
Typical monthly costs to operate a well (includes pumper costs, electricity, normal maintenance and pulling costs, is $500 per well per month or $6,000 per year. So a lease with 10 wells spaced over the surface area on 5 acre spacing would have a yearly operating cost of $60,000.
There is a waiting period to hire a drilling rig so there is a queue, if you order a drilling rig to be built for you there is a waiting list of 12-24 months.
Several companies have approached local drilling companies in regards to buying them out.
Tennessee wells have recently been drilled 700 –2,000 feet deep with successful oil finds with initial production rates of 140-250 Barrels per day. The geology in Tennessee is more complex than Kentucky and one expects more dry holes, Kentucky drilling success rate is about 60%. I wonder when we start drilling up our leaseholds in Tennessee?
PEBBLERS….Ponder this information and play with the numbers, especially true to compare with the “Production Lending” oil &gas lesson I posted on PNEW’s adelphia.net site.
[Cowboy singing…] “we’re in the money, we’re in the money…..”
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