This is a photo of Exxon grinding away in the Delaware Basin in late 2022, probably Bone Springs wells; whatever. Each one these 18,000 foot TMD HZ laterals, once completed, will likely cost $11,ooo,ooo each and, all things being the same as they are right now, will earn an undiscounted return on investment over 10 years of $22,000,000. In another words, a 2:1, or 200% ROI. You can then say that these investments will make 10% ARR of return, for 10 years, then they become a liability and have to be plugged and abandoned. There is no "principle" to recover after that, no plant or property that has appreciated over the 10 years...its all gone. The tight oil and gas biz has all kinds of new accounting tricks to make these wells appear to be better than they are economically; basically you double your money over a decade. That's about the best you can hope for.
America thinks this is sexy stuff. Big rigs in a pink and yellow sky at sunset in West Texas sunset. Drillers sitting in air conditioned drilling shacks, joy sticks in hand, being told exactly what to do by PE's sitting at a bank of computers in Houston steering these wells out to their toes. America loves this shit. This is where the BIG bucks are. Harold Hamm in a suit, with a clean white hard hat on his credenza,...America thinks stuff like this IS the American oil business.
Not Sexy
This is a photo of a typical 4,000 foot rig digging a vertical stripper well anywhere in America. There is nothing automated on this puppy. You can't "walk" it anywhere. Parents don't send their kids to college, and buy them books, to do this kind of rinky dink stuff, they want them to go to work for Exxon, or Pioneer and BE somebody. Like those "wildcatters" from Texas Tech who'd just got out of college, never seen an oil well before, and sold some Wolfcamp acreage to somebody for 4.2 billion bucks.
This stripper well stuff is not sexy.
But 85% of the over 300 stripper wells I drilled in my 50 years as an operator all made more profit than 97% of all the HZ tight oil wells drilled in the United States since 2008. As I continue to empty my office of 50 years of memories I ran across an entire ledger of these kinds of wells, below. I had a high batting average because I always hit singles and could get on base. This well, below, was a stand-up triple.
I bought this lease in an old abandoned oil field in the Gulf Coast Basin of South Texas; it produced from several, stacked, clastic sands at a depth of 2,000 vertical feet. It cost me $15,000 and a lot of curative title work to get the deal closed. I ended up buying most of the working interest from one the biggest, most famous lawyers in New Orleans. His personal office was 4 times bigger than my home. I reworked the geology, studied the well history on the lease and surrounding leases, plugged the 1.5 BOPD well and drilled this new well 660 feet away to a different, untouched pay. It cost $40K bucks. It was cheap because I used all the equipment, etc. from the old well and didn't log or core this well, I knew exactly where I was going, down to the foot, and why I wanted to get there. The well IP'd for 75 BOPD and paid out in 4 months, back when the price of oil was $14.
I put this well on rod lift one afternoon about 3 PM. In three hours it turned from completion fluid to 95% oil. I was by myself and could not believe it. I stayed on location, slept in my truck, ate a can of beanie weenies and took well samples every two hours all through the night to make sure it wasn't a fluke. I stayed on location until 3 PM the next day because I didn't want to leave it.
I stopped making entries in my ledger in 1996 and went to digital formatting. I sold the well in 2009 with a total cumulative oil volume of 68,250 barrels of oil and a total ROI of 32:1. In other words, I paid my acquisition, drilling and completion costs back 32 times. Show me a tight oil well that's ever done that, please. Show me one that is 5:1, please.
I made a number of these kind of wells in my career. I was a junk yard dog, a corner shooter, a scrapper, a used car buyer and fixer-upper. I looked for stuff other people left behind. I'd get an idea, do the research, make my sub-surface maps, go to the ranchers house and make a lease with him, get the well drilled, did all the labor to put it into the tanks by myself and with a few good hands that stayed with me forever, and then I pinched pennies for the next 50 years and managed its production.
When the tight oil phenomena is all but gone, and it will be, these sort of marginal. low-gravity, sweet stripper oil wells will be all the oil our country needs. They'll make the plastics, the goods, the real stuff that NOBODY can do without, and provide the lubricants that makes the world still function. Those ugly wind turbines need grease, baby. Can't cover the grass cows need to eat with solar panels... without oil.
Find a stripper operator somewhere and pat him or her on the back. They do it all, start to finish, with their own money, not borrowed money, or Wall Street money. Their hard hats are on the pickup floor, dented, with grime all over them, the head bands in them stinks from sweat.
"Oil is first found in the minds of men," said Wallace Pratt. And for stripper well operators in America, with big, determined hearts.