The Longer the Better Club
The Exxon aquisition of Pioneer is done and now its time to make a plan. Exxon paid $64 large for this big block of acreage in Saudi...
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"Diamondback expects that its average cost to drill, complete and equip a well in 2024 will be US$625 per lateral foot, while Endeavor’s will be about 25% higher at roughly US$775 per foot. By 2025, it expects costs for the combined company to be down to around that pre-deal level of US$625 per foot." WoodMac
As we have previously speculated, and seen via AFE's, mid length laterals in the Midland Basin are now costing $12MM...before M&A led leasehold costs per drilling location, which FANG paid $3.5MM each for in its deal with Endeavor.
Remember, the difference in breakeven costs and WTI as quoted on the NYMEX is called net back, or profit per BO. At $80, after all costs,
we believe that to be $38. Divide $38 into $14.5MM well costs and find Midland Basin wells that make 381,000 BO in less than 5 years.
You won't find many.
This graphic ought to knock your socks off.
Unless you've operated and paid OPEX you have no idea how difficult it is to make money with wells that make this much water. WOR ratios in the Delaware are now approaching 75% (WoodMac). A Wolfcamp A well that makes 24,350 BOPM after IP also then makes 73,050 BW the same month and likely costs $2.50 per BW
to get rid of, including disposal fees, particularly if you are in a SRA.
That equates to $7.50 per BO, OPEX, just for water. With electricity, chemicals, surface and downhole maintenance OPEX is $12-14 per BO, before G&A, interest expense on debt, severance and property taxes.
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The materials provided on this site are for informational and educational purposes only and are not intended to provide tax, legal, or investment advice. I may make data related mistakes occasionally; if you use my opinions about oil reserves or shale well economics for financial purposes, to buy or sell stocks, your nuts. Don't do that. If I have used a photograph incorrectly it was for educational purposes and I have done my best of to give credit where credit is due. My stories are all true, slightly embellished, perhaps, but true; I don't change names to protect the guilty. I am as accurate as possible about history and historical facts; I work very hard at that.All rights are reserved, whatever that means. Don't blame me, I didn't do it.
Mike Shellman
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