Reserves Per Producing Well - Where Did It Go?

The following information shows the correlation of reserves to active wells on a yearly basis. The bottom of the graphs are years, starting in 1956 for gas and 1962 for oil. Oil and Gas are measured in cubic meters. Production figures are for the Western Canada Basin only. All figures are available on www.capp.ca, which is the Canadian Association of Petroleum Producers.

Gas Reserves per Well: 1956 to 2007

In 1956 there were only 430 producing natural gas wells in the Western Basin.

The reserves per well for that year were equal to 1.13 Billion cubic meters. This equated to a reserve life index of approximately 516 year per active well.

The current reserves per active well is 12,703,314 cubic meters. This roughly translates to a reserve life index of 6 years per active well. There were 128,614 active gas wells in 2007.

Since 1956, the reserves per natural gas well have decreased by 99%.

Since 1956, reserves per well have decrease, with the exception of 6 years (1960, 1964, 1966, 1984, 1989 and 2007).

Oil Reserves per Well: 1962 to 2007

In 1962 there were 14,487 producing oil wells in the Western Basin.

In 1962, reserves per well were 72,702 cubic meters.

Oil reserves per well grew to a high of 102,258 cubic meters in 1968 and declined every single year there after until 2007, with the exception of 1998 when it grew by 557 cubic meters per well.

Over the last 10 years, the reserves per oil well has decreased by 16.5%.

Since the highest point in 1968, reserves per oil well have decreased by 93.5%

My View:

You can probably deduce that you get less oil and gas reserves per well. In my opinion, over drilling has lead to smaller reserves per active well which has had a negative impact on the reserves life index. It's getting harder to find oil and gas and once you do, you are getting less reserves associated with your investment.

An Example of the Cost of Reserves:

Companies spend a significant amount of money to add reserves, which is their largest asset. According to the Q1 2009 Iradesso report, the juniors, 500 BOED to 10,000 BOED, have DD&A costs of $26.05 per BOE, which is a cost per BOE to add reserves to their company.

The average Junior has 2,278 BOED in production with a reserves life index of 9.7 years and their decline per year is 11.4%. This means that they have to replace 266 BOED to keep their reserves where they were last year. Since this is the case, the average DD&A cost per BOED is $95,992 and the company will spend approximately $25.5M to top up reserves.

My company has a patent pending process that will allow companies to find reserves at a low cost. Instead of spending $26.05 per BOE in DD&A, my service can add BOE's for less than $1.00 and BOED's for $877 as opposed to tens of thousands of dollars. Using the average Junior as an example, their DD&A costs for reserves top ups is $25.5M, when our service is run, this cost can usually be reduced to $21.2M (saving $4.3M) or for $79,701 per BOED in DD&A costs, which is a 17% reduction. This example used a 2% outage on reserves, but we typically see 9% missed on reserves, so this number can be significantly higher. If you would like to find out more, please feel free to contact me.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com.