shakeout & what we have to look forward to, page-35

Hi Whiskey,

"Efficency" really isn't a Hz function. MAD is highly efficent and drills really cheap shallow wells and is rolling in money.

Efficiency and the ability to make real money by a E&P company is more around capital efficieny and maybe most importantly Lease Operating Expenses.

24hr IP is sexy and gets the attention. As discussed earlier lets see 30day, 90day, 360day IPs and the cumulative production curve.

But that's all well and good, the well will flow or pump what it can. Now its up to the company to manage its expenses.

How is the oil/gas/condensate/NGL brought to market?
Is oil trucked? How much does that cost? How is processing of NGLs going to be done? Is the gas flared or sold?
What about water disposal? WHO HAS HEARD GGP DISCUSS THIS?

Would you be surprised to know that for some in the Permian water disposal can be $5-$7 bbl of the LOE cost per bbl. What if you had to drill a SWD - short term capital cost for long term LOE reduction.

In the end all that matters is the Netback per bbl, how many bbls we need to produce to pay back the capital cost and then how much left over becomes the "free cash".