Whiting Petroleum Corp. (WLL)

[Timothy Smith]

$WLL Cumulative production per well will most likely be in the 360,000 barrel range, with production reaching about 6,000 barrels in the tenth year. Given an assumed average price per barrel of $70 for the next ten years and keeping in mind that there is a roughly $15/barrel wellhead discount in the region, gross revenue comes out to about $19.8 million. After accounting for roughly 40% of the revenue which goes to pay royalties, taxes and company administrative costs, about $12 million is left to pay for the costs involved in drilling.

As far as the costs per well go, Whiting petroleum estimates the average well will cost about $7 million. We can add to that about $.5 million in acreage lease costs per well. Then there is the interest incurred on debt taken out to finance the company's drilling activity. I am assuming that about half the cost of each well is financed through long-term debt, as I already mentioned. Whiting recently sold long-term bonds at an interest rate of 6.5%, which gives us a cost of about $2 million per well in interest. The total cost of the well is therefore about $9.5 million, which is considerably less than approximately $12 million in revenue.

http://seekingalpha.com/article/3100436-economics-of-a-shale-well-whiting-petroleum