Fantastic to see the well is still increasing it's flow rate and really great to see the fluid breakdown for oil and NGL's.
BRK have now exceeded the predicted base case production and most importantly, have a high liquids composition which translates to a higher production revenue as a BOE of oil and NGL sells at a higher price than a BOE of gas.
We can't estimate what the IP number may get to just by saying there has been a 110 BEOPD increase in production in ~11 days which equates to ~10 BEOPD increase which means in another 30 days the well will increase production by another 300 BOEPD. From the graph I posted a few days ago you can see the daily production fluctuates as the production builds. The rate of increase in production typically decreases over time , then stops increasing which becomes the IP24 number when it hits max flows , and then starts to decrease after a period of plateau production. The company have a predicted plot they use to compare to the actual flows and they good news again is that it is tracking ABOVE their prediction.
Now we have more information as to the richness of the wet gas which is really important to getting a picture of the value of the gas and constituent NGL components.
The first announcement a few weeks back had the flow at 1238 BOEPD made up of 85% liquids ( 1052 BOEPD oil and NGL) and 15% gas ( 186 BOEPD or ~1.1mmcfgpd)... we didn't have an oil / NGL breakdown so we couldn't arrive at how much NGL was in the gas stream.
Now , todays announcement gives us 1348 BOEPD with 1123 BOEPD liquids (83.3% liquids) made up of 808 barrels oil and 315 barrels NGLs. The gas flow is 225 BOEPD or ~1.35 MMCFGPD and that makes it very easy now to get actual figures for all three hydrocarbon streams for gross revenue calculations.
Gaily gross revenue for the Jewell on a 100% basis is at current prices disregarding local price differentials is
Oil at US$75 WTI x 808 BO = ~US$60,600
Gas at HH US$5.8 x 1350MCF = ~US$7800
NGL's at ~US$35-40 x 315 BNGL = US 11025- 12600
giving US$79425- US$81,000 per day!
What is apparent is the value of the NGl's produced by the gas stream is greater then the value of the gas itself. This is a very important factor in the economic value add to the company .
Calculating the NGL to gas ratio is also straight forward as after processing the raw gas stream, BRK are producing ~1.35 MMCFG and 315 barrels NGL, which works out as 229 barrels NGL produced with every 1 million cubic feet of processed gas. That is a very rich gas stream indeed!. This is important, as this ratio won't change much going forward, and the company can now calibrate it's NGL reserves as it knows what the raw gas flow to the gas plant was to give that ratio once the gas was processed, so it knows what the NGL content of the raw gas is .
We can see as the production continued to increase, the gas composition of the flow also slightly increased (now ~16.7% vs ~15% 11 days ago ) and will continue to do so as modelled while the well continues to produce..
We know from the Jewell type curve posted many a time, BRK predicted the well will become more gaseous over time as a percentage of total production as the rate of decline of the oil will be steeper than that of the gas. Because NGL's are a product of the gas stream, the NGL decline corresponds to the gas decline which will also mean NGL production will decline at a lesser rate than oil.
So from todays announcement we can see that production rate continues to increase and it looks potentially that most of the increase will come from the gas stream, which we can now clearly see is very rich in NGL's that will command a much higher price then the gas itself. This bodes very well for the future revenue profile as the oil flow declines .
The fact that the well is now producing slightly over the base rate 800 Barrels oil a day and potentially still increasing, and total liquids production still increasing with still ~75% of the frack water to flow back again bodes well for a good plateau of flush production during a time of increasing commodity prices before the inevitable decline commences. The current US$81,000 gross or AUD110,000 a day which incredibly impressive may still climb before it plateaus. Considering the production cost to produce the well is ~US$4-5 per BOE, or ~US$7000 per day, the well is netting ~US$74,000 a day. Not bad buy an Aussie operation headquartered and run by a 2 man executive team in a small office in Perth.
It is difficult to predict where the well may hit max flow, but the high NGL content in the gas basically means a 30% increase in the processed flow gas rate to 1.76 MMCFGPD ( 293BOEPD) will be accompanied buy a NGL flow of 1.76 x 229 = 404 BNGPLG.
So if oil production doesn't increase and gas flow increases by 30% then we can get to 808+293+404 =1505 BOEPD.... ( someone else can do the daily calculation for production revenue if prices match the ones used earlier)
This has been and continues to be an incredible start to the BRK operated DSU drilling program. It looks like John Schummer ( petroleum engineer) has completely nailed his predictions on the head which in itself lends to a complete confidence in the team going forward .
Another great day to be a Brookie ( even if the market can't see it right now)
Cheers
Dan
Expand
(20min delay)