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Chesapeake Granite Wash Trust Message Board

  • ousaouparis ousaouparis Sep 9, 2013 5:43 AM Flag

    Estimate Ultimate Recovery

    The principal difference with the shale oil or gas production is the production forecast. The standard reservoir of a geological formation has nothing to do with a geological formation that must be fracked to free the oil or gas. The only common outcome is the Estimate Ultimate Recovery (EUR) over the life of the wells life. This EUR can be extremely misgiven if not understood.
    Not wanting to be too technical, from a financial point of view, there are 3 basic components in arriving at the EUR.
    1. The initial Production rate (IP) seen during the first few months, one year max, of production.
    2. The assumed declining rate of production, forecast during the following years 2.
    3. The assumed declining rate of production, forecast during the following years 3 and 4.
    4. The assumed residual declining rate for the left over projected profitable life of the well.

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    • morgantwo@bellsouth.net morgantwo Sep 27, 2013 12:11 PM Flag

      I just bought in a couple of days ago, Ousaouparis, and just wanted to be sure I understand your point as it pertains to chkr's outlook. I do see the distributions are starting to fall under the estimates listed in the corporation's governing document, but I'm thinking this can be a variable, especially in view of information we could obtain from specific data you're talking about here. Kindly expand vis-à-vis this company. Thanks.

      • 2 Replies to morgantwo
      • My point is the infinite difference between the exploitation of a standard oil or gas reservoir and that of a shale geological formation. They do not compare:
        The case of the standard reservoir, the volume of the reservoir is identified by logging and drilling. The wells locations are set at the strategic point that will fetch the most production base on the capital invested in the infrastructure. More time than not, the capital is set so that the infrastructure will, once in place, max the equipment capacity for 30% of the life of the project. Once the infrastructure is in place, the principal cost is maintenance. The equipment is chosen for it expected life, so that with time reinvesting in equipment will be minimized in order to maximize amortization.
        The shale oil or gas exploitation requires identifying the acreage and volume of the shale formation. Than the fracking pressure required by the geological formation will dictate the number and concentration of wells as well as the number of lateral stage. The profit is directly connected by the concentration and the drilling schedule. The new, I believe, terminology of IP and EUR are in play. A good IP allows for the early financing of drilling. This means less borrowing and more distribution. The EUR is ultimately where the revenues are in time. The drilling expense is continuous, assuming a $9MM per well and a 4 month drilling per well that is a $36MM/y cost per year. Maintenance must still take place, on existing infrastructure. One can see that Shale fracking project requires a totally different management.

      • morgantwo@bellsouth.net morgantwo Sep 27, 2013 12:23 PM Flag

        Correction: I got ahead of myself in expected distributions for the quarters & see not we're actually on schedule. Sorry, but would still appreciate hearing your information as it pertains to CHKR.

    • As long as the price of crude stay s above $90 the companies make money. This is a hazy guide but pretty much true.

    • Sorry, My post did not show right away!!

      • 1 Reply to ousaouparis
      • thats all right. Not sure what you point is anyway? So....what is your point? For the record, I hate to see anyone combine production rates with profitability...in the same sentence. As you are aware, price is a huge factor. well enhancements or stimulations are also a factor for some formations that plug with prouduction...(skin). Secondary production, etc.... Not that there will be any in this formation....

        By the way, what is the typical completion in these wells??

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