Inexperience.....lack of relationships....crew availability, fracture materials availability.....variables are many. to explain the production cost differentials...you've got to analyse every case individually....
Many of the juniors are in on a gold rush without ownership of the fundamentals, that does not mean they wont get it, but a good example is NOG whose business plan outsourced the experience to folks like Slausen, known as skilled operators....at some point they may elect to take these factors in house or they may remain as they are. They met the 1st challenge for a lease holder creatively.... and now they know more about the process of shale oil mining are clearer to them, so they can make better decisions about how to proceed with future wells.
Oil & gas from Shale is mining...if your DD is done properly your planning on mining multiple layers deep from single pads...and stranded products like flared gas will be put to use at the well head, using low cost highly efficient micro turbines to further cost efficiencies.
There are So many ways to bring costs down, but the lead times to secure the state of the art, and readily skilled manpower, and more, make it a waiting game for some companies... Which explains all the high cost rhetoric we see championed by some bears, is built around....
Early wells are drilled to get Held by Production stamps on leases. Results including costs...are on holiday during these times.
These are mad scramble attempts to lock in Leases, they are not drilling for efficiency, they are drilling for the rights to stay in the game...This is a Current factor for many operators, knowing where any particular operator is on this trajectory tells you where your company is....in any current quarter... that is all.
Many very high cost producers fall into this camp...MHR may be one of them....if you do not produce, you lose your rights to catch on as a sustaining operation. Once you've produced and your leases are held by production, another whole different phase of operations begins.
So, early high Costs do not mean as much as most think, awareness about the holistic picture is required to make a qualified judgment. |
