Coping with Low Prices | Russell T. Rudy Energy LLC
A recent article by John Kemp which was published in “Rigzone” included his tips for operators trying to maintain oil production now that they are faced with reduced prices and capital budgets.
The least efficient rigs and crews can be sidelined and only the most proficient used for future projects. Since there will not be as much capital to pursue opportunities, operators can shift resources that would be used for exploration and focus on development, particularly infill wells, which have a higher probability of success. Within these development areas, they can concentrate on the “sweet spots” in the field, rather than drilling on the periphery.
Falling demand presents an opportunity for negotiating lower rates for drilling rigs and completion services. Suppliers of other equipment and services can also be incented to reduce prices in order to continue operating in what is a challenging environment for everyone.
By refocusing and renegotiating, Kemp feels that even in today’s environment, the number of wells and the production from them, might not drop as dramatically as some predict. He also feels that there will be opportunities for deferring and rescheduling some costs. For example, two thirds of the cost of horizontal wells can be attributable to completion and stimulation, and most production comes in the first 12 months of production. One option would be to drill wells now, but defer completion until prices recover.
This has already been inadvertently done with some wells which had been drilled but were waiting for completion crews and equipment. In these cases completion could now be intentionally deferred until prices return to more favorable levels.
To read the article in its entirety, please go to www.rigzone.com/news/article.asp?hpf=1&a_id=136944&utm .
