About Those Oil Subsidies

[lightninboy]

I guess there are oil wells being drilled by San Antonio and they are being capped until oil gets to $150 or $200 per barrel.

 

[Tex]

I guess there are oil wells being drilled by San Antonio and they are being capped until oil gets to $150 or $200 per barrel.

Well, some of you need to know a little more about how the oil industry works. When an oil company goes in and buys a lease, they have a certain amount of time (some of this is dependent on their contracts but some regulations and industry rules) in which to drill. When they do drill, they get to hold a certain part of their leases almost indefinitely without drilling in those other parts of their lease.

So really, they can hold on to a large tract of land with lots of oil or gas and little actual potential production on that land being leased.

This happens all the time.

Many people who have gas rights and want to sell them to a company for production, will stipulate that a certain amount of wells have to be drilled in order to hold the lease. More is probably done based on state law.

A big oil company wants to keep its assets working and they have incentives to tie up the oil and gas fields for their later development. When you tie up the lease land and you are an oil company, you can hold those leases without drilling on the other parts of your lease.

It is just how it works. Oil companies want to tie up their potential fields as much as they can and they do by drilling as little as possible on the field until they legally tie up those leases.

In an oil field, you have to run pipe lines and sometimes field treating equipment before you develop a field. This is one of the reasons of why they have the rules they have.

Also, there are a lot of wells that are drilled and waiting to be put on line but may not pay to put a grasshopper pumper or other equipment on it until there are enough of them or until the price goes to what they want it to be.

Once wells are drilled, it is just the hole in the ground with a bit of equipment on top like a blow out preventer. After that, most wells, but not all, are fracked where they blow holes through the pipe into the formation and then pump under high pressure sand and water to make fissures for the oil or gas to flow through. I guess the old salt dome wells didn't need this kind of thing but when the oil is tied up in the production rock or shale, this is how they get it out of it. It just allows the wells to operate for longer periods of time by giving spaces for the oil and gas to move through the parent rock into the drill pipe and up the hole. Horizontal drilling allows the whole drill pipe to follow the seam of oil or gas producing rock (it isn't always horizontal, it just follows how that formation is stacked in the ground) where you have more of a chance at a paying well by hitting more of the formation instead of just one hole tapped from the top in the form of a vertical well. I have seen vertical wells into the deep shale that did not pay but after another well was drilled through the formation "horizontally", they were paying wells. That is the benefit that horizontal drilling brought---wells that were paying wells where before they would not be paying wells because they where just vertical "hits" on the formation.

There are lots and lots of places there could be producing wells right now but the above scenario sometimes trumps the incentive to just sink all the wells you can on the property leases you are developing.

Then, when the price of oil goes up, you can do other recovery methods from your oil fields that previously were "dead". You can pump steam and pressure and chemicals to recover oil in the formation that didn't pay to do when oil was cheaper. All previously tapped oil fields still have some oil in them (maybe not the oil sands when they get through with them) that can be recovered by more expensive "wash out" methods.

$300 dollar a barrel oil would put a lot of old wells back into production for this reason.

Tex

 

[lightninboy]

That may be the way it is, but who feels sorry for the oil companies?

 

[Tex]

That may be the way it is, but who feels sorry for the oil companies?

I don't, and I don't like them lobbying Congress to get tax benefits when we have deficit spending out the koozoos along with all the PR they put on TV to mitigate the damage (BP) some of them do to get out of paying their full cost.


Why should we feel sorry for any rich person except for how hard it makes for them to get into heaven?

Have you seen John Edward's rich friends and what they did to help fool the public during his campaign? There is nothing to feel sorry for them about except how they choose to misuse their assets for themselves and their friends.


Tex

 

[Larrry]

That may be the way it is, but who feels sorry for the oil companies?

Maybe we should just tax the evil oil companies out of existence, yep that ought to do it.

 

[Tex]

That may be the way it is, but who feels sorry for the oil companies?

Maybe we should just tax the evil oil companies out of existence, yep that ought to do it.

That would be as stupid as not taxing them, Larry.

Tex

 

[Larrry]

Guess who ends up paying the tax. You know

 

[Tex]

Guess who ends up paying the tax. You know

If that is your argument, then everyone ends up paying everything which is about right.

I saw in an article here someone posted that U.S. oil firms only produce 5 percent of the oil we use. The problem with that number is that they process almost all of it so it is a pick a statistic game.

I believe there should be a tax on getting bigger. Efficiencies of scale are getting mixed up with abuse of market power. The only way to deal with that is to make getting market power not worth it by putting those corporations or individuals in a higher tax bracket because our federal courts have about as much clue about the economy as present day politicians. They are too hooked on the money.

The only way a company can make you pay a tax that is levied on them is to have enough market power to do it. So we have an oil company saying they only produce 5% of the oil but can pass on taxes to you and I?

If you are going to pay the taxes anyway, Larry, would you like to pay mine?

Tex

 

[Larrry]

Well of course everyone ends up paying, yet for some reason people seem to forget that when they want to soak the evil oil companies.
And some people wonder why companies move off shore. It seems they have flunked common sense 101

 

[Tex]

Well of course everyone ends up paying, yet for some reason people seem to forget that when they want to soak the evil oil companies.
And some people wonder why companies move off shore. It seems they have flunked common sense 101

I personally don't want to soak the oil companies but that doesn't mean I don't want them to pay taxes.

The BP disaster had huge rippling effects through the economy due to the oil mess, not just the lack of supplies. I think as a part of doing business, BP should have to pay for all those damages.

That isn't "soaking the oil companies", it is just making them pay for what they broke.

As far as increasing taxes, we will not get out of our deficit spending habits in Congress until we make everyone pay for their spending. Then the people, including the rich people, will realize that when Congress spends, it comes out of their pocket.

Right now that isn't happening. We are taking out of the pockets of our children in the form of an IOU to borrow the money---and in some ways, we wreck the economy we are going to hand them.

Everyone needs to be "soaked" without exception, until we have a balanced budget. That means oil companies, the rich, and ANYONE making money in the U.S.

We have to stop putting everything as an IOU that future generations have to pay even if we have to offend some real rich people or corporations who want to keep all their money and not pay taxes.

We also have to make our trade policy such that we don't have continual trade deficits or the kind of thing we have going on with China where they lend us money and we sell a part of our economy to them.



Tex

 

[Larrry]

The government doesn't have an income problem, they have a spending problem. Until Washington wakes up and accepts this things will not get better. Stifling productivity hurts us and overtaxation stifles productivity.

 

[Tex]

The government doesn't have an income problem, they have a spending problem. Until Washington wakes up and accepts this things will not get better. Stifling productivity hurts us and overtaxation stifles productivity.

No, Larry I will disagree with you here and it is one of the fatal problems with the republican strategy at this time.

We have problem balancing our books because the politicians don't have the guts to tax what they spend.

I would agree there is over spending and that all real wealth comes from private industry but the government does preform real duties to the democracy and the economy.

It is just that in the last 12 or so years, the government hasn't been doing its job so well because Congress and the last few presidents would rather spend more than they take in and put it on and IOU to future taxpayers to pay.

The bill is here and it is coming due. You can only put things on the credit card for so long and then you have to pay the bill.

The reason I say it isn't just a spending problem is because of the facts. We now have a greater concentration of wealth since the Great Depression. That is not good for the economy or the people in it. It is Mexico's model.

We need to get back to a better homeostasis and that does mean some rich people making the money have to help pay for the nation's bills instead of getting a free ride. We can not incentify the concentration of wealth and expect any results other than what we have today.

We should have learned that lesson after the Great Depression but we have a bunch of bozos pandering to those who are bribing them, and yes, I am speaking of some pretty rich guys here. That is how they fool everyone else to pay taxes and the bills of the nation while they accumulate wealth and make threats to politicians who try to impose the rule of law on them.

Tex

 

[Larrry]

We have problem balancing our books because the politicians don't have the guts to tax what they spend.

I would agree there is over spending and that all real wealth comes from private industry but the government does preform real duties to the democracy and the economy.

Your first statement contradicts the second. Then you say that growth comes from the private sector yet you imply the government sector to get bigger and then stifle the private sector.

It is just that in the last 12 or so years, the government hasn't been doing its job so well because Congress and the last few presidents would rather spend more than they take in and put it on and IOU to future taxpayers to pay.

Bingo and I did notice you condemned the government spending Oh and it goes back farther than 12 years, even though it is compounding lately at astronomical rates.

The bill is here and it is coming due. You can only put things on the credit card for so long and then you have to pay the bill.

Bingo again, you nailed it again

We need to get back to a better homeostasis and that does mean some rich people making the money have to help pay for the nation's bills instead of getting a free ride.

Help pay for the governments overspending.......really

We can not incentify the concentration of wealth and expect any results other than what we have today.

So your solution is to take it out of the private sector, which coincidentaly is where you say that the economy is jump started from.???????

We should have learned that lesson after the Great Depression but we have a bunch of bozos pandering to those who are bribing them, and yes, I am speaking of some pretty rich guys here. That is how they fool everyone else to pay taxes and the bills of the nation while they accumulate wealth and make threats to politicians who try to impose the rule of law on them.

Back to what you say about the private sector firing the economy, but you still are stuck on letting the government confiscate money from the private sector that fires the economy. Sounds like a little wealth envy on your part. Take a look at the tax rates and who pays the majority of taxes yet you advocate stifling the private sector more and slowing the economy further.

I am speaking of some pretty rich guys here

And politicians bribing voters with the taxpayers money.

 

[Mike]

OPEC will need to boost output to 29.9 million barrels a day to meet average demand this year because of "roaring" growth in China, the group said in its most recent monthly report. That's 1 million barrels a day more than last month, according to data compiled by Bloomberg. The International Energy Agency said on May 19 that it saw "an urgent need" for more oil to help bring down high prices threatening economies.

 

[okfarmer]

I guess there are oil wells being drilled by San Antonio and they are being capped until oil gets to $150 or $200 per barrel.

Well, some of you need to know a little more about how the oil industry works.

You might want to try this yourself, your explanation was totally incorrect here, so I would expect it would be the case in many other states as well.

 

[hypocritexposer]

I guess there are oil wells being drilled by San Antonio and they are being capped until oil gets to $150 or $200 per barrel.

Well, some of you need to know a little more about how the oil industry works.

You might want to try this yourself, your explanation was totally incorrect here, so I would expect it would be the case in many other states as well.

Not only in OK. , but Alberta also.

 

[Tex]

We have problem balancing our books because the politicians don't have the guts to tax what they spend.

I would agree there is over spending and that all real wealth comes from private industry but the government does preform real duties to the democracy and the economy.

Your first statement contradicts the second. Then you say that growth comes from the private sector yet you imply the government sector to get bigger and then stifle the private sector.

Tex: What is there not to get? Government does provide NECESSARY and CRITICAL functions. All costs of government come from taxing or borrowing from the private sector. There is nothing contradictory about this. Just think how far we would be if private sector had to make and fund all roads, police, military, and government operations. Without the military and the rule of law, the private sector would be run over by the next guy with the biggest stick. We wouldn't have any roads unless they were toll roads that were privately built. Same with educational system, police and sheriff's departments, etc.

The question is whether we pay for these expenses as we go and as they are used or do we borrow from someone else's surplus and put an IOU on our kids for government deficits. We are selling our future for current consumption when we do not have a balanced budget.

It is just that in the last 12 or so years, the government hasn't been doing its job so well because Congress and the last few presidents would rather spend more than they take in and put it on and IOU to future taxpayers to pay.

Bingo and I did notice you condemned the government spending Oh and it goes back farther than 12 years, even though it is compounding lately at astronomical rates.

Glad we agree, Larry.

The bill is here and it is coming due. You can only put things on the credit card for so long and then you have to pay the bill.

Bingo again, you nailed it again

We need to get back to a better homeostasis and that does mean some rich people making the money have to help pay for the nation's bills instead of getting a free ride.

Help pay for the governments overspending.......really

Yes, really. If my Congressman knew he was going to have to raise taxes to pay for your Congressman's spending instead of quietly borrowing it from the Chinese by selling a little part of our economy off to them, he would think twice about approving that over spending for your Congressman.

We can not incentify the concentration of wealth and expect any results other than what we have today.

So your solution is to take it out of the private sector, which coincidentaly is where you say that the economy is jump started from.???????

The wealth of the nation has been concentrated in the hands of the few partly because we don't have the rule of law or consequences when rules are broken. How many on Wall Street had to pay back the money the took from our economy while their actions lead us into this huge housing bubble and bust? In our own meats industry, the economic rules in the Packers and Stockyards Act have been flaunted and the federal judges have not made a large percent (I not the recent case in Oklahoma as an exception --- but it too didn't cover the costs of actual damages) of it to be paid back to those who were defrauded by not playing by the rules. In the case of Wall Street, Congress changed the rules for Wall Street so they could break us and in the case of the meat packing industry, federal judges legislated excuse after excuse from the bench. These are all structural changes that have caused the economy to go astray.

We should have learned that lesson after the Great Depression but we have a bunch of bozos pandering to those who are bribing them, and yes, I am speaking of some pretty rich guys here. That is how they fool everyone else to pay taxes and the bills of the nation while they accumulate wealth and make threats to politicians who try to impose the rule of law on them.

Back to what you say about the private sector firing the economy, but you still are stuck on letting the government confiscate money from the private sector that fires the economy. Sounds like a little wealth envy on your part. Take a look at the tax rates and who pays the majority of taxes yet you advocate stifling the private sector more and slowing the economy further.

The two examples I gave above about the financial sector and the meats sector are two great examples for your point here. One of the primary functions of government is to make sure the rules are beneficial to the economy as a whole and that they are enforced. In the two examples above, those in the industry scammed our economy, got away with it, and did not have to pay for breaking the economy.

The "rich" pay most of the income tax because they make most of the money but don't count it all for income tax purposes. They do not pay most of the SS and medicare tax. Just look at Wallmart and their Maryland State problem. They weren't paying enough for their workers to get off of social services and the state sued Wallmart. Wallmart was busy making profits for its investors by cutting on the cost of labor and concentrating the wealth of the nation into their hands. Meat packers do it the same way by hiring illegal aliens and the lowest on the totem pole--immigrants.

There are some very, very rich people on top of huge economic scams of selling our country for their profit.

I am speaking of some pretty rich guys here

And politicians bribing voters with the taxpayers money.

Every one of these big companies will ask the taxpayer for relocation money but none of the states can say, "no, and while on this subject, since you are asking to get a tax break or taxpayer incentives, just don't ship any of your products in. We will only allow products being made in our state to be sold in our state."

These companies get breaks by totally abusing the Interstate Commerce Clause and states can do nothing about it.

Yes, I think we need to tax them more if they are going to do this kind of thing. Why should consumers or taxpayers pay for Walmart or meat packer's workers because they don't pay a living wage?

These economic structural problems that are not being corrected by Congress because they are getting paid to allow companies access to demand but not pay the costs of running a government, and instead bargain for lower costs.

It is utterly ridiculous to give wealthy owners of companies and the rich subversive incentives that ruin the economy in the ways we have. These are the kind of things that need to be corrected.

 

[okfarmer]

Well, some of you need to know a little more about how the oil industry works. When an oil company goes in and buys a lease, they have a certain amount of time (some of this is dependent on their contracts but some regulations and industry rules) in which to drill. When they do drill, they get to hold a certain part of their leases almost indefinitely without drilling in those other parts of their lease.

Now that I have more time, lets start here... in OK which I am familiar with, A. There is a set alloted time as to which active drilling must be underway, or the rights to the lease revert back to the mineral owner, or they must re-lease under a new contract. In other words, you can't just sit on it. B. We have 640 acre spacings in general. It would be the mineral owners that would suffer if you start reducing spacings. If a section can be produced off of a 160 acre spacing vs 640 acres, you have just cut out the mineral owners of the other 3 quarter sections completely- how is this a good idea? If they do drill, all parties held by the lease are paid for production. I SERIOUSLY doubt this is much different in Texas. And lets say that I am wrong, this is an issue for the citizens of Texas to resolve through their state government, which they have the freedom to vote in place

So really, they can hold on to a large tract of land with lots of oil or gas and little actual potential production on that land being leased.

You need help! If you understood anything about the cost of drilling, you would understand no company is going to go through that expense and purposely try to drill for poor production so that they can hold a lease for possible future increase in oil prices.

They may not hit a good well on one attempt, but still produce it. This is completely different from what you are trying to assert here.

This happens all the time.

Many people who have gas rights and want to sell them to a company for production, will stipulate that a certain amount of wells have to be drilled in order to hold the lease. More is probably done based on state law.

A big oil company wants to keep its assets working and they have incentives to tie up the oil and gas fields for their later development. When you tie up the lease land and you are an oil company, you can hold those leases without drilling on the other parts of your lease.

Again calling BS

It is just how it works. Oil companies want to tie up their potential fields as much as they can and they do by drilling as little as possible on the field until they legally tie up those leases.

In an oil field, you have to run pipe lines and sometimes field treating equipment before you develop a field. This is one of the reasons of why they have the rules they have.

This is exactly my point, they have to run a pipeline for every well they drill, whether it is productive or a dud. There is serious cost's involved with this. We have 2 quarters at an intersection. All four quarters have been drilled. They hit a good well on the first try, which is the reason for the other 3. So they had production costs of leasing all 4 sections, land owner damages, pad work, rocking the county roads, pipe line land damages, installing a pipeline, all the costs associated with drilling, and then becasue all the other wells were duds (ALL 3), they had costs of caping the well and land reclaimation. Oh, and since there was no production, the land reverted back at the end of the lease time frame. That is a LOT of expense, with NO return (last figures I heard was that each dry well costs around $1 million, and that was years ago). And they didn't hold the lease. A second and third company have come through and are re-leasing and putting in horizontal wells in a different layer. An most importantly, they can't hold the lease no matter what. Why, you might ask? Because it is in a different production layer. I know of multiple sections that are held in one layer by one company and a second is coming in and placing horizontal wells in a deeper layer.

Also, there are a lot of wells that are drilled and waiting to be put on line but may not pay to put a grasshopper pumper or other equipment on it until there are enough of them or until the price goes to what they want it to be.

Ever heard of justifying expense. I worked for many companies that I had to justify any expense before it could be made. If the cost was not offset by appropriate revenue- it was not authorized. I had no idea the companies were so evil and using Oil Industry practices! :shock:

Once wells are drilled, it is just the hole in the ground with a bit of equipment on top like a blow out preventer. After that, most wells, but not all, are fracked where they blow holes through the pipe into the formation and then pump under high pressure sand and water to make fissures for the oil or gas to flow through. I guess the old salt dome wells didn't need this kind of thing but when the oil is tied up in the production rock or shale, this is how they get it out of it. It just allows the wells to operate for longer periods of time by giving spaces for the oil and gas to move through the parent rock into the drill pipe and up the hole. Horizontal drilling allows the whole drill pipe to follow the seam of oil or gas producing rock (it isn't always horizontal, it just follows how that formation is stacked in the ground) where you have more of a chance at a paying well by hitting more of the formation instead of just one hole tapped from the top in the form of a vertical well. I have seen vertical wells into the deep shale that did not pay but after another well was drilled through the formation "horizontally", they were paying wells. That is the benefit that horizontal drilling brought---wells that were paying wells where before they would not be paying wells because they where just vertical "hits" on the formation.

If they are not producing, they are not producing no matter what they have on top or to the side or infront of, or behind. And that is where terms on duration of lease are binding for non-production. Also, something that does not make sense in any business is wasting capital. This is different from investing. Investing would be purchasing the mineral rights. Leasing them with no intent to drill in the NEAR future is wasting capital. This just doesn't seem to be a savy business model. Have you ever figured up what kind of positive income it takes to counter a negative one. It is not apples to apples. I can promise you this. When a company gives away a service or makes a bad investment, it generally takes a 1000% income to make even- because you have to recover initial loss, plus pay for costs associated with producing new income.

There are lots and lots of places there could be producing wells right now but the above scenario sometimes trumps the incentive to just sink all the wells you can on the property leases you are developing.

Then, when the price of oil goes up, you can do other recovery methods from your oil fields that previously were "dead". You can pump steam and pressure and chemicals to recover oil in the formation that didn't pay to do when oil was cheaper. All previously tapped oil fields still have some oil in them (maybe not the oil sands when they get through with them) that can be recovered by more expensive "wash out" methods.

$300 dollar a barrel oil would put a lot of old wells back into production for this reason.

Tex

You need a real education.

 

[Tex]

Well, some of you need to know a little more about how the oil industry works. When an oil company goes in and buys a lease, they have a certain amount of time (some of this is dependent on their contracts but some regulations and industry rules) in which to drill. When they do drill, they get to hold a certain part of their leases almost indefinitely without drilling in those other parts of their lease.

Now that I have more time, lets start here... in OK which I am familiar with, A. There is a set alloted time as to which active drilling must be underway, or the rights to the lease revert back to the mineral owner, or they must re-lease under a new contract. In other words, you can't just sit on it. B. We have 640 acre spacings in general. It would be the mineral owners that would suffer if you start reducing spacings. If a section can be produced off of a 160 acre spacing vs 640 acres, you have just cut out the mineral owners of the other 3 quarter sections completely- how is this a good idea? If they do drill, all parties held by the lease are paid for production. I SERIOUSLY doubt this is much different in Texas. And lets say that I am wrong, this is an issue for the citizens of Texas to resolve through their state government, which they have the freedom to vote in place

So really, they can hold on to a large tract of land with lots of oil or gas and little actual potential production on that land being leased.

You need help! If you understood anything about the cost of drilling, you would understand no company is going to go through that expense and purposely try to drill for poor production so that they can hold a lease for possible future increase in oil prices.

Tex: Here is where you made your mistake: I never said they would purposefully drill for poor production. I was just relating the point that one (producing) well on a 640 acre tract could hold the rest of the 640 acres even if they didn't drill on the rest of the 640 acres. Usually they will try to hit with EVERY well, but will go down the lease corners to tie up the rest of the land in the section.

They may not hit a good well on one attempt, but still produce it. This is completely different from what you are trying to assert here.

This happens all the time.

Many people who have gas rights and want to sell them to a company for production, will stipulate that a certain amount of wells have to be drilled in order to hold the lease. More is probably done based on state law.

A big oil company wants to keep its assets working and they have incentives to tie up the oil and gas fields for their later development. When you tie up the lease land and you are an oil company, you can hold those leases without drilling on the other parts of your lease.

Again calling BS

Tex: This isn't BS. This is how an oil company will tie up the blocks on their leases to get around the no production clause. They have to have production, and the the production doesn't even have to be paying production (I used this term because some of the vertical wells in the shale plays were producers that held the lease but did not cover the expenses of that vertical well). If you want to see an example of people who are in the lease area actually bargaining for wells in their block and putting it in their agreements,just go through and read it on many of the lease blogs. You even just admitted as much on your 640 acre tracts, which is exactly what I was talking about.

It is just how it works. Oil companies want to tie up their potential fields as much as they can and they do by drilling as little as possible on the field until they legally tie up those leases.

In an oil field, you have to run pipe lines and sometimes field treating equipment before you develop a field. This is one of the reasons of why they have the rules they have.

This is exactly my point, they have to run a pipeline for every well they drill, whether it is productive or a dud. There is serious cost's involved with this. We have 2 quarters at an intersection. All four quarters have been drilled. They hit a good well on the first try, which is the reason for the other 3. So they had production costs of leasing all 4 sections, land owner damages, pad work, rocking the county roads, pipe line land damages, installing a pipeline, all the costs associated with drilling, and then becasue all the other wells were duds (ALL 3), they had costs of caping the well and land reclaimation. Oh, and since there was no production, the land reverted back at the end of the lease time frame. That is a LOT of expense, with NO return (last figures I heard was that each dry well costs around $1 million, and that was years ago). And they didn't hold the lease. A second and third company have come through and are re-leasing and putting in horizontal wells in a different layer. An most importantly, they can't hold the lease no matter what. Why, you might ask? Because it is in a different production layer. I know of multiple sections that are held in one layer by one company and a second is coming in and placing horizontal wells in a deeper layer.

Also, there are a lot of wells that are drilled and waiting to be put on line but may not pay to put a grasshopper pumper or other equipment on it until there are enough of them or until the price goes to what they want it to be.

Ever heard of justifying expense. I worked for many companies that I had to justify any expense before it could be made. If the cost was not offset by appropriate revenue- it was not authorized. I had no idea the companies were so evil and using Oil Industry practices! :shock:

Once wells are drilled, it is just the hole in the ground with a bit of equipment on top like a blow out preventer. After that, most wells, but not all, are fracked where they blow holes through the pipe into the formation and then pump under high pressure sand and water to make fissures for the oil or gas to flow through. I guess the old salt dome wells didn't need this kind of thing but when the oil is tied up in the production rock or shale, this is how they get it out of it. It just allows the wells to operate for longer periods of time by giving spaces for the oil and gas to move through the parent rock into the drill pipe and up the hole. Horizontal drilling allows the whole drill pipe to follow the seam of oil or gas producing rock (it isn't always horizontal, it just follows how that formation is stacked in the ground) where you have more of a chance at a paying well by hitting more of the formation instead of just one hole tapped from the top in the form of a vertical well. I have seen vertical wells into the deep shale that did not pay but after another well was drilled through the formation "horizontally", they were paying wells. That is the benefit that horizontal drilling brought---wells that were paying wells where before they would not be paying wells because they where just vertical "hits" on the formation.

If they are not producing, they are not producing no matter what they have on top or to the side or infront of, or behind. And that is where terms on duration of lease are binding for non-production. Also, something that does not make sense in any business is wasting capital. This is different from investing. Investing would be purchasing the mineral rights. Leasing them with no intent to drill in the NEAR future is wasting capital. This just doesn't seem to be a savy business model. Have you ever figured up what kind of positive income it takes to counter a negative one. It is not apples to apples. I can promise you this. When a company gives away a service or makes a bad investment, it generally takes a 1000% income to make even- because you have to recover initial loss, plus pay for costs associated with producing new income.

There are lots and lots of places there could be producing wells right now but the above scenario sometimes trumps the incentive to just sink all the wells you can on the property leases you are developing.

Then, when the price of oil goes up, you can do other recovery methods from your oil fields that previously were "dead". You can pump steam and pressure and chemicals to recover oil in the formation that didn't pay to do when oil was cheaper. All previously tapped oil fields still have some oil in them (maybe not the oil sands when they get through with them) that can be recovered by more expensive "wash out" methods.

$300 dollar a barrel oil would put a lot of old wells back into production for this reason.

Tex

You need a real education.

I don't think you have refuted anything I have said. As you stated, they can hold a 640 acre tract with ONE WELL on it while they continue to drill in the other sections in the lease block to tie up those blocks with one producing well in the block and the others are there for future development. If the price of gas and oil goes up, then the value of drilling in those other blocks goes up. One bad vertical well (producing but not paying all the costs of making that well) in a horizontal play will hold the block.

My own family has this situation which has been going on for 30 or so years, so yes, it does happen.

This is done all the time.

Whatever your particular circumstances are, it does not mean that oil and gas companies will not punch one well in a block to hold it while they punch one well in another block until they get the whole lease with one well in each block. Many of these blocks of 640 acres can hold many more wells and I have seen some where (this depends on the particular circumstances of the formation and the price etc.) there could be one well every 20 acres but they wait until they get the whole block drilled by drilling in each of the 640 tracts. They can then develop the rest of the field as they see fit because they have already tied up the whole block.

Ever heard of justifying expense. I worked for many companies that I had to justify any expense before it could be made. If the cost was not offset by appropriate revenue- it was not authorized. I had no idea the companies were so evil and using Oil Industry practices! :shock: [/b

okfarmer, I never said this was a bad idea, I just stated that one might have to wait until the price goes up before continuing to pump or do any other kind of secondary production tactics. Every decision that is made in this business should be made with the eye on making a profit. I never said oil companies were evil or shouldn't make decisions that make them money. You must be getting me confused with someone else or some other propaganda you wish to fight.


If you know so much about the oil industry, okfarmer, why aren't we oil and gas independent and why do we have to import oil from Mexico, Canada, Venezuela, and Saudi Arabia?

I will give you a hint--- we have hit the cheap and easy oil here already.

 

[okfarmer]

I don't think you have refuted anything I have said. As you stated, they can hold a 640 acre tract with ONE WELL on it while they continue to drill in the other sections in the lease block to tie up those blocks with one producing well in the block and the others are there for future development. If the price of gas and oil goes up, then the value of drilling in those other blocks goes up. One bad vertical well (producing but not paying all the costs of making that well) in a horizontal play will hold the block.

Good gosh son, what do you want? A two acre spacing? Decreased spacing has been fought by mineral owners for a reason. You need to look at it from both sides. What lateral distance does one well draw from? If you have 80 acre spacings, it means that your neighbor will be paid for your production percentage and you may not get JACK, if someone doesn't drill on you, or if they do and hit a bad hole. A section is not a large tract of land.

My own family has this situation which has been going on for 30 or so years, so yes, it does happen.

This is done all the time.

Oil being produced? Yes it is.

Whatever your particular circumstances are, it does not mean that oil and gas companies will not punch one well in a block to hold it while they punch one well in another block until they get the whole lease with one well in each block. Many of these blocks of 640 acres can hold many more wells and I have seen some where (this depends on the particular circumstances of the formation and the price etc.) there could be one well every 20 acres but they wait until they get the whole block drilled by drilling in each of the 640 tracts. They can then develop the rest of the field as they see fit because they have already tied up the whole block.

Your argument does not justify the price of oil. Have you not heard of a second well ruining the first? I have.

Ever heard of justifying expense. I worked for many companies that I had to justify any expense before it could be made. If the cost was not offset by appropriate revenue- it was not authorized. I had no idea the companies were so evil and using Oil Industry practices! :shock: [/b

okfarmer, I never said this was a bad idea, I just stated that one might have to wait until the price goes up before continuing to pump or do any other kind of secondary production tactics. Every decision that is made in this business should be made with the eye on making a profit. I never said oil companies were evil or shouldn't make decisions that make them money. You must be getting me confused with someone else or some other propaganda you wish to fight.

Oh you have plenty of propaganda... You are trying to blame the cost of fuel on inappropriate reasons.


If you know so much about the oil industry, okfarmer, why aren't we oil and gas independent and why do we have to import oil from Mexico, Canada, Venezuela, and Saudi Arabia?

Who said we HAD to import? Ever heard of politics, EPA bull, and taxation?

I will give you a hint--- we have hit the cheap and easy oil here already.

I won't hint, I'll just tell you----- it's called the Gulf Coast, Obama, and illegal, immoral and assinine policies designed to raise the price of fuel.