Insight
Everything is accelerating in the Permian, including decline rates
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
Initial production rates, 24-hour test volumes, and cumulative 90-day flow back: it seems like tight oil producers have been overly focused on short-term well metrics. What about the longer-term performance of wells though? How exposed are investors to terminal decline rates for Wolfcamp wells? Until now, this issue has largely been unstudied. Other unconventional plays have been less reliant on artificial lift and the relative immaturity of the Wolfcamp didn't present a need to study aging wells in earnest. Because of this, operators and investors have routinely used proxy values to model tight oil terminal decline rates. We challenge that practice in this report though and find that commonly used proxies are nothing more than convenient substitutes. The true values are far different and need to be fully understood by anyone keeping tabs on the Permian A&D market.
Table of contents
- Focus on more than just early production
- Investigating the proxy value
- Data on mature horizontal Wolfcamp wells suggest terminal declines could exceed 10%
- Understanding the gap: why historical declines are a bad analogue
- A macro view of accelerated terminal declines
- The risk to individual companies deserves more attention
- Takeaways
Tables and charts
This report includes the following images and tables:
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Distribution of decline rates for mature Midland County wells after five years of productionAverage annual decline profile of Bakken/Three Forks tight oil wells spud since 2008EUR estimates for Midland Basin Wolfcamp Deep Basin wells under varying terminal decline rates
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Annual average decline profile of Midland Wolfcamp Deep Basin tight oil wellsDistribution of Midland Wolfcamp Deep Basin declines after five years of productionBase case Permian oil forecast vs 12% and 14% terminal decline ratesProduction delta between base case and terminal decline scenariosImpact of more aggressive terminal declines on remaining NPVChange in company cash flow under aggressive terminal decline scenario
What's included
This report contains:
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