LOE is generally used as a measure of the cost to operate a Lease. As with most things, the lower we can keep cost the more potential for profit. If all things were equal, this is an entirely logical argument.
But what if all things aren’t equal?
Let’s play a game called LOE doesn’t matter. Are you with me?
Good, so the only rule is Production Increase must be greater than LOE increase by at least 2X, got it?
Your thinking, “well in theory that would work but it’s not realistic”. Or, “I would have tried this approach 6 months ago but today we are getting so much pressure not to increase LOE that I can’t even try”.
Well that’s where it gets exciting, it doesn’t cost anything to try. It only increases LOE if you first increase BOE (Barrel of Oil Equivalent) value by a minimum of 2X more than LOE increase. So, you literally get the increase in revenue 2X before ever seeing a bill. And if you don’t increase, you don’t pay.
Let’s talk numbers…
Let’s say you have a declining well that’s liquid loaded. The well flows 40 MCFD by itself. With compression we prove the well can flow 135 MCFD, a 95 MCFD increase.
95 MCFD x $2.25 per mcf = 6,412.50 per month of increased revenue for a cost of approximately $2,000 = net of $4,412.50 in our example.
When I see this math, I get excited. How many times in life do we get the opportunity to increase production with no risk? And the potential to over double our revenue on the well.
But we are just getting started talking about NG, what if we can increase oil production?
What if we moved an additional 3 BBL’s per day? 3 BBL’s x $50 = an additional $150 per day and $4,500 per month.
Summary of gains in the example above.
|Additional NG Revenue||Additional Oil Revenue||LOE||Monthly Increase|
Remember the game we were playing? In this everyday example, we were over 3X AKA= we won!
Does increasing LOE still sound scary?
In a declining market, these are the opportunities smart operators target. We recently found an operator nine extra barrels per day on a single well. He said, “this one test more than covers my salary, I’ll sleep easier knowing that”.
At 7Compression, we help operators just like you Maximize Production, every day. If you’d like to work with us to optimize some of your wells, you can find us at 7Compression.com