Rate of decline for producers
Rate of decline for producers
Perhaps I’ve missed it somewhere as I’m a newer member this year but I think it would be very helpful in the due diligence of a company to know the expected decline rate of production assuming no growth. Many feel inflation is structural for some years to come, including myself, and this data point could give us an edge with respect to the growing costs of drilling which reports suggest are substantial. Could be a very important consideration in coming months and years. Thanks for your consideration. Best regards.
Re: Rate of decline for producers
Public companies do not publish their decline rates. It is really a well-by-well stat.
Some companies put decline charts in their presentation slides for certain areas.
All wells go on decline soon after they are completed due to pressure depletion. Most horizontal wells in the shale plays come online with very high rates of production and payout quickly. However, they do decline rapidly. Most shale wells' production declines by at least 50% the first year. Most shale wells produce 50% of all the oil & gas they will ever produce within three years. However, it may take them decades to be fully depleted / sub-economic.
All public upstream companies' use the "Units-of-Production" depletion method, which can give you an idea how rapidly their proved reserves would deplete if they stopped all future drilling.
All of the upstream companies in our three model portfolios are "going concerns" which will continue to have active drilling programs. Most of them have a lot of running room and more than enough operating cash flow to fund their growth plans.
Some companies put decline charts in their presentation slides for certain areas.
All wells go on decline soon after they are completed due to pressure depletion. Most horizontal wells in the shale plays come online with very high rates of production and payout quickly. However, they do decline rapidly. Most shale wells' production declines by at least 50% the first year. Most shale wells produce 50% of all the oil & gas they will ever produce within three years. However, it may take them decades to be fully depleted / sub-economic.
All public upstream companies' use the "Units-of-Production" depletion method, which can give you an idea how rapidly their proved reserves would deplete if they stopped all future drilling.
All of the upstream companies in our three model portfolios are "going concerns" which will continue to have active drilling programs. Most of them have a lot of running room and more than enough operating cash flow to fund their growth plans.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group