The Bet

September 4, 2019

Six years ago I made a bet with a prominent Texas geologist based on 40%, over or under. We both had been thru the Austin Chalk fiasco in the early 1980's so we picked forty to represent    the percentage of total wells drilled in the Eagle Ford, unconventional shale play of S. Texas that would  reach payout of drilling, completion, leasehold, plugging and decommissioning costs over the next 10 years. The number we agreed on was $8.5 MM per well. We then established other parameters for RIB, OPEX, taxes,  agreed not to include gas, etc., then flipped a coin to decide who got to pick first. 

 

I won the toss and picked under. He was thrilled. I was trying to sell some EF acreage at the time, was privy to well costs, OPEX and whopping decline rates. So was he (he was loaded up with DI, IHS and other kinds of goodies I did not have) but he believed the price of oil would stay in the $80-$100 range. I did not. I felt like leveraged US LTO supply was going to throw the world oil market all out of whack and drive the price down. He's a scientist, I'm just a dumb 'ol roughneck; he saw technology really improving productivity, I saw rod lifting 8,000 foot wells at 15% from vertical, on pump off controls, as being a nightmare. He was right about sand loading and higher productivity (but missed how steep the ensuing decline is); I was right about oil prices (though I wish I had not been THAT right).  My BO number at the time was about 220K; I don't know what his number was...this was serious stuff and we did not show each other our hands. A bamboo fly rod is big bucks, man. We had a couple more scotches, shook hands and we'll meet in 2023 to determine who won the bet. 

 

Today my number, at $55 oil, is more like 355K BO to pay that  $8.5MM back. Realized production data from the Texas Railroad Commission is provided above by shaleprofile.com...then there is this also from the same outfit... 

 

"Declines are steep in this area. Of the 17.5 thousand horizontal oil wells that came online before last year, over 10 thousand are currently producing below 25 bo/d. Fewer than 1 thousand of those wells are still producing more than 100 bo/d."

 

So, lets face it, short of a three year, $100 spike in oil prices, or a breakthrough in nuclear frac'ing, I've already kicked his geologist ass.

 

 

 

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Mikey 2023. Bamboo is a beautiful thing; it allows one to mend in mid-cast and set the drift, before the fly lands on the water like a butterfly with sore feet.  Hot diggity dog! 

 

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