”In the United States of America, one out of every six barrels of crude oil produced comes from a marginal oil well, and over 85 percent of the total number of U.S. oil wells are now classified as such.”
Overview
In the late 1990s, the world oil price dropped into the low teens forcing many companies to abandon marginally producing oil wells. Often times, the cost to produce the oil was greater then the revenue that was generated. Routine maintenance was not performed and over time, the wells became neglected and left to sit. From 1994 to 2006, roughly 42% of these wells were either plugged or abandoned.
Due to the current economic conditions including favorable oil prices, an opportunity exists to rehabilitate these wells and restore them to production.
With new technology and enhanced recovery procedures, it is possible to take a well with very low production and increase the daily oil output. Free flowing wells with little to no production can have a pump installed to bring the fluid to the surface.
Abandoned Wells
Many factors contribute to an abandoned oil or gas well. The most common is due to the cost of operations in relations to the oil price. Although many of these wells were abandoned, there is an opportunity to refurbish and rework wells to increase production.
For an independent oil company, a well producing as little as one barrel per day can be profitable yet is not the case for larger oil companies such as Chevron or Shell. Many of the largest oil companies have moved their operations overseas and there isn’t a great appeal for a well producing just a few hundred barrels of oil a day.
Abandoned wells may be candidates for enhanced or secondary recovery or added as part of a greater lease value.’
Low Production Wells
Low producing wells, generally called stripper or marginal wells, are wells that are nearing the end of their economic useful life. Often these are wells with productions less than 10 barrels of oil per day consistently for a year or greater. While these may or may not be profitable in their current conditions, these are often ideal candidates for well restoration and recycling.
In considering low producing wells for acquisition, other contributing factors may include an aggressive restoration program to increase production or accessing other potential hydrocarbon reservoirs from within the same well bore.
Just as abandoned wells may be candidates for enhanced or secondary recovery, these marginal wells may in fact play a larger part of a developed lease property such as a flood unit.
