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GASLAND

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Re: GASLAND

Unread postby rockdoc123 » Tue 30 Nov 2010, 11:19:52

$this->bbcode_second_pass_quote('', 'H')ow did you gauge/predict well performance? IP's, decline rates, hyperbolic/exponential switchover points, well life, etc etc? Type curves or individual well decline analysis? Simulation perhaps? Analogs? GOR's? I'm surprised your estimate of the Eagleford is that low based on liquids, certainly they aren't low cost wells, and I haven't been all that impressed with the condensate volumes coming out of those wells, wouldn't have expected any breakeven point that low. PV10's used for comparison I assume?


Have used exact current well drill and complete costs assuming all planned means of cost control through synergies, zipper fracing etc. Those planned costs are easily achievable. The EUR/well is an average based on actual data. The liquid content is taken from the high liquids trend in the Eagleford as an average. Part of what drives the lower breakeven for Eagleford and Marcellus versus Horn River and Montney is proximity to market.
Note that these numbers are pretty much in line with what Credit Suise and other analysts have published.
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Re: GASLAND

Unread postby Xenophobe » Tue 30 Nov 2010, 19:34:08

$this->bbcode_second_pass_quote('rockdoc123', ' ')The EUR/well is an average based on actual data.


May I assume if you are operating from just an EUR basis (without any scheduling involved) that your numbers aren't NPV based then? More of break-even cost in, revenue out type of calculation?

$this->bbcode_second_pass_quote('rockdoc123', '
') Note that these numbers are pretty much in line with what Credit Suise and other analysts have published.


Can't say I'm familiar with any break even calculations they might have done, so I'm not familiar with their basis.
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Re: GASLAND

Unread postby rockdoc123 » Tue 30 Nov 2010, 21:16:26

$this->bbcode_second_pass_quote('', 'M')ay I assume if you are operating from just an EUR basis (without any scheduling involved) that your numbers aren't NPV based then? More of break-even cost in, revenue out type of calculation?


These are full-blown cash flow analyses based on my current companies experiences in these shales and the assumption you can sell gas from a pilot scheme prior to full field development. The timing is based on current experience plus a not too aggressive assumption regarding streamlining of operations. They are run at 10% DF. F&D for these projects is in the $14 range, discounted profit to investment somewhere in the 0.3 range.

Do a search on shale gas breakeven and you'll find some sort of analysis by one of the financial houses. There are differences but all are ballparkish close. You will likely be surprised to learn that CBM from the San Juan basin is the lowest breakeven cost around.
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Re: GASLAND

Unread postby Xenophobe » Tue 30 Nov 2010, 21:28:07

$this->bbcode_second_pass_quote('rockdoc123', ' ')You will likely be surprised to learn that CBM from the San Juan basin is the lowest breakeven cost around.


The Fruitland Coal? Not surprised at all. I'm betting the Antrim is also surprisingly low, but it wasn't on your list.
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Re: GASLAND

Unread postby Xenophobe » Tue 30 Nov 2010, 23:08:26

$this->bbcode_second_pass_quote('rockdoc123', '
')Do a search on shale gas breakeven and you'll find some sort of analysis by one of the financial houses.


Well, I certainly found some investor, forward looking type statements for shale gas, but really nothing with the kind of detail I'm interested in. Also, lots of "gee shale gas sucks" type articles cluttering up the search.

Myself, I'm still not convinced of the numbers being presented for various shale plays.No offense intended, but let me offer an example.

Slide 16 and 17 of this presentation:

http://pubs.usgs.gov/of/2010/1151/pdf/OF10-1151.pdf

references first full month of production numbers for some shales as well as EUR distributions.

Note how the mean EUR is higher than the median(slide 17), indicating a right skew on the distributions shown on the graph. That means that average EURs aren't the most likely result, but using page 17 as a reference, its more likely that those sizes (or greater) have only a 25-45% chance of happening. Only 2 EUR means are close to the 3 BCF range, so lets play around with those examples and sizes ( unlike slide 16, we don't know what they are, the specifics aren't mentioned).

Slide 16 says that only the Hainesville has the ability to top out past 100 MMCF in its first month of production, and we can probably argue that the Bossier is primarily the Texas equivalent of Haynesville, and its mean first month is right around 100 MMCF, so we'll use that. Lets attach a 3.5% decline (absolutely ridiculous but some companies use it for a tail attachment to a hyperbolic, I'm just going to assume the entire well DOESN'T decline like shales do to make a point) and run it for 40 years? Gives me a 3 BCF well, lets use $5/mcf unescalated pricing, no allowance for a BTU adjustment? Excluding all operating costs, royalties, the occasional workover, ad valorem and severance taxes, we're talking $3.5 million discounted at 10%. Now, I've front loaded the production and stripped away any RI or ORI, but what happens if the decline is just a little steeper, like 6%? $3.1 million. Not bad, but thats because the 10% discounting means whats lost later in the time is pretty irrelevant. Now lets round up some costs.

I don't trust this guys for much of anything, but its not like I trust a companies AFE claims at an investor briefing either, this guy was easy to find for a reference. He says drilling costs for some of these shales run $8-9 million? Obviously he isn't talking about New Albany, Antrim or shallow Devonian in Ohio.

http://seekingalpha.com/article/239231- ... -shale-gas

With the scenario I've outlined above, we would need $13-$15/mcf to break even on an NPV basis. While $3.5 million would work on shallow and vertical wells it sure wouldn't get you much of anywhere on some of those horizontal bad boys.

And we need to put this in context, the mean EUR I used had only a 25-45% chance of happening, so the money you make ABOVE that mean better be able to pay for the bulk of the resulting EUR distribution BELOW that mean.

Some pretty fierce stuff there Roc....hats off to the men who can do it without promoting people into it and alleviating their costs that way.
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