transforming nse, page-6

Anatol,

I provided the EOG Peeler Ranch figures from TXRRC in post#9996947. They are:

Peeler Ranch - lease 15251 - Operator: EOG Resources

Well 2H - API 013-34273: W2 IP24hr not supplied
Well 4H - API 013-34316: W2 IP24hr 617 bblo
Well 5H - API 013-34365: W2 IP24hr 314 bblo
Well 6H - API 013-34370: W2 IP24hr 800 bblo
Well 7H - API 013-34376: W2 IP24hr 474 bblo
Well 10H - API 013-34282: W2 IP24hr not supplied
Well 11H - API 013-34279: W2 IP24hr 388 bblo
Well 12H - API 013-34284: W2 IP24hr 491 bblo


Peeler Ranch - lease 16559 - Operator: Shale Hunter (MHR)

Well 3H - API 013-34582: W2 IP24hr 566 bblo
Well 4H - API 013-34726: W2 IP24hr not supplied


The data has been put out multiple times (the last was with that MRO slide which highlighted what I believe is the issue).

How can you come to the conclusion that the above is better than Excelsior? Excelsior is not considered Wet-gas by MRO (its in the green oil shading). It is getting closer to the transition zone though. Those numbers are IP24 hour and MRO is showing IP30 day at 788ish boepd...???

So it comes back to you think the permits are "so good". I think the permits are "ordinary". The question is really are the permits worth the amount being paid for them ($34M) and for that I need more (a lot more) than the simple gross working interest statement of producing 400 boepd.

Just accept that Atascosa county is not that good, MHR sold their best acreage to PVA which was a good fit for PVA as it had neighbouring acreage. MHR probably would have taken less just to get rid of it as it was no longer part of their future.

Again better question is why would NSE enter into the EFS - given they have no scale (remember Gary Evans own words of shale scale and what they would be disappointed in with IP24hr rates).

It will come down to IRR/EUR, cashflow and Reserves NPV. And with that statement I am being repetitive I know.


To answer your question as to what do I do about it - I attempt to see if I can't match up a type curve to what is being presented to me and do the decline curve analysis along with a NPV of well production.

For the MRO 12 month data for Excelsior only I came up with something that had IRR in the 20% range, Capex paid back in just shy of 3 years (4 yrs in PV10 being used) and overall 20 yr NPV of $2.4M per well on an EUR of about 270MmBOE (20 yrs).

I then change IP24 in the model to what I've seen for Peeler Ranch and then results are not pretty and if I were to post I would be accused of downramping blah blah. Better to wait what NSE puts out and to challenge that to be sure its achievable. Don't forget there is production history available for the MHR Peeler ranch lease.

That's me though and you have to be comfortable with the assumptions being made (just as the E&P companies do)


What you may be missing Anatol is that companies like MRO approach this with a manufacturing mindset. MRO has put in place the gas gathering (even for Excelsior in Atascosa county), oil gathering, central tank batteries to achieve economy of scale that will not be within NSE's reach.

Its not a knock on NSE but a plus for MRO (and EOG, CHK, COP..). They can aggregate the great wells with the bad, the good wells with the not so good and the average wells to come up with a highly profitable operation - especially at $4 - $6 premium to WTI that LLS receives (that is if NSE can get it there instead of Cushing). The little guys though will struggle.

Good luck with your research.