What’s it cost to run an oil well for a year?

I’ve been wondering about that. Million Dollar Way quotes some comments from a Google Discussion Group that gives some info: Monthly Costs For Maintaining An Active Well…

Most companies estimate production costs at $6,000 to $8,000 per month per well…or $70,000 to $100,000 per year.

Keep in mind that a majority of wells require a week or more of maintenance each year with a workover rig with support equipment and crew at $10,000 plus per day.

You also have significant power costs in addition to general lease operations. A 6-8 well pad could easily require $750,000 to $1 million per year to keep everything in top condition to maximize production without any major operational downhole problems.

Since I’m an accountant, I’ll convert that background into a specific calculation adding in a few of my assumptions.

  • Production costs – 6K to 8K per month – 72K to 96K per year
  • Workover rig for maintenance – 5 to 8 days with cost of $11k to I’ll assume $14K per day – 55K to 88K to 112K
  • Electricity – cited as significant – I’ll make a wild guess of 5K a year
  • Royalty – function of production and price
  • Lease operation – allocated to wells; full absorption accounting is way beyond scope of these brief comments.

So here is a low, medium, and high estimate of the cost for one well.

  • 132K = 72k + 55K + 5K
  • 165K = 72K + 88K + 5K
  • 213K = 96K +112K + 5K

As a starting point for a multi-pad site, you could multiply that by the numbers of wells on the pad. There are probably some efficiencies from servicing and maintaining multi-pad sites but I don’t have the foggiest idea how much.

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