Monthly Archives: April 2013

EOG’s Horizontal Wells in the Greater Green River Basin

I’ve had a bit of a posting hiatus but I plan to continue to keep this blog updated, I’ve just been busy. This post will focus on production results from 27 horizontal wells drilled by EOG Resources (EOG) in the Greater Green River Basin (see map below) in Southwestern Wyoming. These wells were drilled between 2006 and 2010 and produce from the Frontier interval which is a natural gas zone. For reference, the Frontier interval is a similar but older age rock than the Lance interval which is the productive zone at the Pinedale and Jonah fields in the Greater Green River Basin.

Map of the Greater Green River Basin
USGS_Green-River-Basin
Source: USGS.

The average 30-day production rate from these wells is 1,430 thousand cubic feet of natural gas per day (Mcfpd) which corresponds to an average recovery of 369 million cubic feet of natural gas (MMcf) after one-year of production and 813 MMcf after three-years of production. Regarding the 27-wells, range of recoveries is wide with a maximum three-year recovery of 2.0 billion cubic feet of natural gas (Bcf) and a minimum of 145 MMcf.

So how economic were these wells? I haven’t been able to find any information regarding cost, but what I can do is take a look at natural gas prices from 2006 forward to ballpark what these wells have grossed to date.

Annual Natural Gas Wellhead Prices (2006-2012)
Natural gas-wellhead-prices
Source: EIA.

If we use $5.45 per Mcf (average price from 2006 to 2011) as the average price received per Mcf of natural gas and 813 MMcf as the average three-year recovery, we can see that these wells grossed an average of $4.4 million during their first three years of production. Without knowing well cost, we’re kind of left hanging here, but I do have a log (shown below) from an EOG well drilled in the Green River Bend field which shows depths in the 7,000′ to 8,000′ range. ┬áBased on this, I’d assume they were each drilled and completed for approximately $5 to $6 million.

Green River Bend Well Log
EOG_Green-River-Basin-Well-Log
Source: USGS.

So what’s the payback period looking like? Assuming an 85% NRI and $5.5 million well cost, I’d guess these wells would need to produce approximately 1.2 Bcf per well with approximately 3 thousand barrels of oil to break-even. These wells only declined 30% from year one to year three, so they project to have a long production life. Knowing the above, I’d guess the payback period for 2006 to 2009 generation GRB Frontier wells is five to six years or triple the length of the average Bakken well drilled today.

With that said, the purpose of this write-up is to provide data on a pure natural gas play, something I haven’t done much of on this blog to date. Even though oil is currently more economic than natural gas, natural gas is going to play a larger role in fueling the world moving forward so it makes sense to familiarize ourselves with the potential of some of these formations.

Last, I thought I’d toss in a couple scatter plots on the wells used in this analysis. As shown below, it’s pretty easy to tell how economic a natural gas well in this field will be based on the 30-day production rate.

Green River Basin Production (Frontier Zone) Year 1
EOG-Green-River-Basin-Production-Graph-Year-One

Source: Wyoming Oil and Gas Conservation Commission/The Energy Harbinger.

Green River Basin Production (Frontier Zone) Year 3
EOG-Green-River-Basin-Production-Graph-Year-Three
Source: Wyoming Oil and Gas Conservation Commission/The Energy Harbinger.

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