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| Re: Frack sand traffic (1329144) | |||
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Re: Frack sand traffic |
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Posted by Dave on Sat Dec 20 12:08:24 2014, in response to Re: Frack sand traffic, posted by JAzumah on Sat Dec 20 11:32:03 2014. It's not calculated that way. What's measured is Barrels per Day (BPD) and the cost to drill the well and extract the oil.A typical well cost about $10 million to drill. Over time a lot of oil is extracted in the early years and this rate declines over time. Typical initial production rate on a newly drilled Bakken well is 580 BPD but some wells are much higher. With a discount rate of 15%, the median well has a profitability index of 1.02 (after federal income tax) if $66 per barrel is used. (A profitability index of 1.0 indicates a break even situation at the discount rate that was used in the model). This means that at $66 per barrel, half the wells are uneconomic. If oil prices settle out at this price it can be expected that the number of wells drilled should be reduced by about half. If the current oil price of $55 per barrel is used, the initial production rate has to be increased to 800 BPD in order to break even. According to the J.D. Hughes data, 25% of the wells have an initial production rate of 1000 BPD or more. Accordingly, if oil prices settle out at the current price, the number of wells drilled will be about a quarter of the present number. |
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