Hi mate The total job isn't a fixed price, but there are fixed...

Hi mate

The total job isn't a fixed price, but there are fixed price components within the contract like the rig day rate for example.

The Rocket AFE post from earlier this month shows the well " budget" which effectively is a best estimates workout with a contingency included for drilling and completion. The team have drilled enough wells to have a solid grounding for drill time ( probably the biggest variable ), but a significant loss of circulation event ( where drilling fluids are lost into the formation resulting in mud weight issues) can disrupt the drill and add a $ 1million or two to the well cost overnight. You can have some minor mechanical issues , as well as weather, like thunderstorm activity which can unexpectedly cause downtime.

In a long drill contract where the rig essentially runs for months, one would expect some small cost overruns , even if there are no" incident" announcements. These hopefully would be catered for in the contingency . I wouldn't be looking at cost savings as a point of interest, just not wanting significant cost overruns. Saving a $1 million or 2 on a US$40 million ( $26 million net to BRK) program won't make BRK.....however a $ 10-15 million project cost blowout, whilst it won't break BRK, will be a pretty big setback.

The riskiest part of the program is the drilling. Once all 4 wells are cased and cemented, we all can have a collective a sigh of relief. Completion still has it's risks but nothing like what can go wrong and therefore the potential cost blowouts that can occur during the drilling program.

In the case of BPT, they are essentially building an LNG plant at their Waitsia gas field. Their biggest issue looks to be development risk, where apparent poor workmanship/ design at the facility is causing defects and delays which have blown out the cost by over 50%. For the FMDP, building the oil battery's and connecting the gas lines is included in the well AFE's. The fact that BRK field development risk is essentially limited to building simple separators, short connection gas pipelines and oil storage tanks, ( done hundreds of thousands of times in Oklahoma over the last 100 years) the risk of issued here are small.

Cheers

Dan

Dan