Interpreting Flow Rates?

[King EU]

Hey, could any of you guys explain to me how to interpret the flow rates that the oil/gas exploration companies release in their announcements or point me towards somewhere where I can learn about it? A lot of guys on ASF seem to be quite proficient in knowing when its a good or bad result and it’s just one of the things that’s troubling me cos I feel like I’m flying blind when they come out.

Thanks.

 

[King EU]

Anyone?

 

[Trader Paul]

Hey, could any of you guys explain to me how to interpret the flow rates that the oil/gas exploration companies release in their announcements or point me towards somewhere where I can learn about it? A lot of guys on ASF seem to be quite proficient in knowing when its a good or bad result and it’s just one of the things that’s troubling me cos I feel like I’m flying blind when they come out.

Thanks.

Hi King EU,

From: http://www.glossary.oilfield.slb.com/MainIndex.cfm?

Mscf/d
[Production Testing] ID: 11232

Abbreviation for a thousand standard cubic feet per day, a common measure for volume of gas. Standard conditions are normally set at 60oF and 14.7 psia.

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million standard cubic feet
[Production Testing] ID: 11229

A common measure for gas volume. Standard conditions are normally set at 60oF and 14.7 psia, abbreviated MMscf.

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barrels of oil per day
[Production Testing] ID: 11362

A common unit of measurement for the daily volume of crude oil produced by a well or from a field. The volume of a barrel is equivalent to 42 US gallons, abbreviated BOPD.

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barrels of liquid per day
[Production Testing] ID: 11360

A volume of fluid that refers to the daily total production of oil and water from a well. The volume of a barrel is equivalent to 42 US gallons, abbreviated BLPD.

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BWPD
[Production Testing] ID: 11368

Abbreviation for barrels of water per day, a common unit of measurement for the daily volume of produced water. The volume of a barrel is equivalent to 42 US gallons.

Alternate Form: barrels of water per day

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BOPD
[Production Testing] ID: 11361

Abbreviation for barrels of oil per day, a common unit of measurement for volume of crude oil. The volume of a barrel is equivalent to 42 US gallons.

Alternate Form: barrels of oil per day

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gas show
[Drilling] ID: 1405

Gas that rises to the surface, usually detected because it reduces the density of the drilling mud. Gas detectors, which the mud logger monitors, measure combustible gases (methane, ethane, butane and others). The mud logger reports total gas, individual gas components, or both, on the mud log. In extreme cases, gas visibly bubbles out of the mud as it returns to the surface. Because the mud does not circulate to the surface for a considerable time, sometimes lagging several hours after a formation is drilled, a gas show may be representative of what happened in the wellbore hours (or many feet) prior to the current total depth of the well.

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..... and a bit more light reading for you, King EU .....

http://www.dailyoilbulletin.com/common/glossary/O-glossary.asp

http://en.wikipedia.org/wiki/Oil_well


have a great day

paul



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[Naked shorts]

Hey, could any of you guys explain to me how to interpret the flow rates that the oil/gas exploration companies release in their announcements or point me towards somewhere where I can learn about it? A lot of guys on ASF seem to be quite proficient in knowing when its a good or bad result and it’s just one of the things that’s troubling me cos I feel like I’m flying blind when they come out.

Thanks.

bit out of my area of expertise, but wouldn't the difference between market expectations and actual flow rates be the variable that determines if the results will make the stock go up or down?

similar to how news affects markets overall
http://www.forexfactory.com/calendar.php

 

[Slipperz]

bit out of my area of expertise, but wouldn't the difference between market expectations and actual flow rates be the variable that determines if the results will make the stock go up or down?

similar to how news affects markets overall
http://www.forexfactory.com/calendar.php

Usually if the flow rates are economic that is a catalyst for a price rise HOWEVER the market is full of speculators who can drive the shareprice up on anticipation of a good result sometimes to an overinflated level and then they head for the exits when the news is released with their profit leaving the loyal shareholder somewhat bemused.

Initial production rates <IP> are usually given per day by the barrel and are a fair indication of the reservoir quality, if there is oil and gas the gas production is rated on an energy equivalence to a barrel of oil giving a total of BOEPD or barrels of oil equivalent per day.

Not a whole heap of vertical wells going into the traditional reservoirs these days with perhaps the exception of offshore drills and in the US there is a lot of horizontal drilling and hydraulic fracturing of wells to extract resource from previously uneconomic areas.

Once you have your IP ( anywhere from 1500 to 3000 bopd is a good result) the well decline rate is also important to overall profitability. The higher Ip's also make for attractive economics as the well costs are recouped by the drilling operator faster. Do the maths 3000 x $90 barrel is 270 grand a day and wells cost around 4-5 million depending on the type of drilling services required.

Many operators will run wells on a restricted choke aka not utilising all the pressure available in the well bore to maintain reservoir pressure and help to extend a higher production rate for longer with less decline but lower IP's.

Operators usually announce Ip's and 30 and 90 day flow rates so you can gauge the profitability of each well and compare it to others in the same area or field. The more wells that are successful in a field the more it becomes "derisked' the more certainty regarding reserves is apportioned to the company and the shareprice will appreciate quite rapidly. See AUT for a recent example of this.

In the US some states allow drillers to keep IP's confidential for 90 days aka 'tight holes' so they can they acquire the rights to more acreage in the vicinity whilst others such as the texas railroad Commission require continuous legal disclosure so with a bit of research you can figure out whos got good production figures and where.

Once the well has settled into production at around 250 BOPD eventually it will probably go onto a hydraulic lift ....the pumps you see plugging away 24/7 and it's money for jam for the operator.

Finally we have our EUR's or estimated ultimate recovery which is quite simply how much oil the operator is expecting to pump over the life of the well. Anything over 200K is pretty tidy ( say 18 odd million less 5 million for the well)while up to 450-500k is some serious coin. This is how you get your long term "full field evaluation" fully derisked aka the holy grail of the speculatative investor which is your EUR times however many wells the operator is legally allowed to drill on the acreages it owns the rights to drill on. The states decide the well spacings depending on their geologic advice be it one well per 160, 320 or 640 acres.

It can be a bit nerve racking being in the sector but at times it's exhilarating as well when the companys drilling success become your own!

Not for everybodys risk profile but if you back a winner there's some serious money to be made.

Good luck I hope this helps!