Michael,
I see that you have retracted your "absolutely YES" position in a dialogue with Keith Utz at a subsequent post on this thread, so I need not further address that.
However, for those that may not be involved in the business we must ensure that one thing is clearly understood with respect to "tie-in economics". That is, the cost of drilling, completing and testing a well is of ABSOLUTELY NO IMPORTANCE TO THE DECISION OF WHETHER OR NOT A WELL GETS TIED IN FOR PRODUCTION, IRRESPECTIVE OF IF THE WELL IS DEEP, SHALLOW, OR OTHERWISE.
In your example, the $4 million is of no consequence. It's spent. Gone. Kapute. Water under the bridge. The only thing of interest is whether or not the value of the hydrocarbon in that small reservoir (that may deplete within a year) exceeds the cost of tie-in ($2 million in your example) plus operating costs and royalties, etc.
On the other hand, an expected $4 million drill, case, complete, equip and test cost is a very important factor in the decision as to whether or not any additional wells are to be drilled.
Later,
grayhairs |
