Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

Estimate of lifetime financial performance of one Bakken well

Since I’m an accountant, I keep an eye out for info on how one well might perform over its lifetime. Any real data for a well, let alone enough to look at averages, would be a closely guarded trade secret, so I’ll talk about public info.

Of course, if someone wanted to confidentially drop me some actual data & forecasts for real wells, I’d be happy to describe anonymous data. In the meantime…

Ms. Tessa Sandstrom, of the North Dakota Petroleum Council gave a speech reported by the Minot Daily News: Oil Boom drives on.

The article gives this info:

“It costs approximately $10 million to drill a well, according to our last economic impact survey,” she said. “Each one garners about $20 million net profit. It pays about $4.4 million in taxes, $7.6 million in royalties, $1.6 million in salaries and wages and considering that we have 8,500 wells operating, those numbers add up.”

I’ll put that into an income statement using the numbers she mentioned, with amounts in millions:

 implied revenue           $43.6
 costs:
 drill             10.0
 taxes               4.4
 royalties               7.6
 salary               1.6
—-
 total costs             23.6
 profit, estimated           $20.0

With an estimated ultimate recovery of 550,000 barrels, that analysis implies an average price of about $79 a barrel.

I realize I’m a simpleton when it comes to the economics of the oil industry, but that sure looks to me like the wells would continue to be amazing even if oil prices fall off the cliff. I tried to calculate a break even point and am not sure I believe the results, so won’t mention how it looks to me.

Ms. Sandstrom also mentioned there are 40,856 industry jobs, which includes the direct supporting admin positions.

Previously discussed economics of one well at these posts:

Single Post Navigation

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: