PFIE and oil wells

I’ve been thinking about PFIE, the market size and oil wells. There are over 1 million wells in the US. I think last year 20,000 new wells were drilled. Shale wells only last a few years. I read that 70% of the oil from a shale well is extracted in the first year. It would seem then that the shale well would be depleted after 3 years. So this means that if you drill 20,000 new wells then the wells from 3 years ago would stop being used. Extraction from shale only really started less than 10 years ago and if they are drilling 20,000 shale wells per year then less than 20% are being produced from shale. So this would mean that most of the wells are not shale wells. How long will these other wells last? I guess a lot longer. Then if most of the wells in the US are non shale wells then this would be good for Profire because the available potential market is very large (mostly conventional wells and not shale) and will be sensitive to neither declines in shale production nor declines in oil prices. This would match with what PFIE management said on their last conference call: changes in oil prices have not historically affected their sales revenues. If PFIE had huge market share then they would be really depended on the creation of new shale wells. The math (above) suggests that this is not the case.

Chris

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I read that 70% of the oil from a shale well is extracted in the first year. It would seem then that the shale well would be depleted after 3 years.

The wells may decline to “stripper” status(below 20 barrels a day) in three to five years but then are expected to continue to produce for decades after that. There are conventional gas wells that have been producing for 60, 70 years. (Not typical)

B

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The wells may decline to “stripper” status(below 20 barrels a day) in three to five years but then are expected to continue to produce for decades after that. - B

I’ve been pondering the question of whether or not horizontal frac wells will eventually revert to “stripper” wells. I’ve spent a bit o’ time researching the topic, but have yet to find definitive answers (prolly because there’s not been sufficient historical experience as of yet).

Stripper wells are important contributors to domestic oil production, even though more than 70% produce less than 10 barrels/day. Stripper wells don’t produce much, but there are a heckuva lotta them. The costs of “lifting” those incremental barrels of oil are the primary considerations. All those “nodding donkeys” that appear throughout oil-producing regions need electricity to pump the oil that (slowly) accumulates within the well. The power costs to lift oil 1,000 feet are a lot lower than the costs to lift oil 5,000 feet.

Now we got ourselves horizontal frac wells that may be drilled many thousands of feet vertically, then long distances horizontally. These wells draw oil from rather impermeable rock formations that are rendered temporarily permeable by blasting the formation with high pressure solutions comprised of water, proppants, surfactants and whatnot, to release the oil in the vicinity of the fractures allowing it to flow to the underlying pipe. It comes as no surprise that yields drop rapidly, often within just one year. Fractures don’t remain open for long, given the pressures of thousands of feet of overlying rock. The bottom line is that frac wells aren’t the same as vertical wells drilled in permeable formations.

I’ve never been comfortable with the long-term economics of frac wells, given these significant differences. We’ll know more in coming years.

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Stripper wells are important contributors to domestic oil production, even though more than 70% produce less than 10 barrels/day. Stripper wells don’t produce much, but there are a heckuva lotta them. The costs of “lifting” those incremental barrels of oil are the primary considerations. All those “nodding donkeys” that appear throughout oil-producing regions need electricity to pump the oil that (slowly) accumulates within the well. The power costs to lift oil 1,000 feet are a lot lower than the costs to lift oil 5,000 feet.

Do stripper wells require burner management systems? Isn’t the safety issue reduced because they produce so little oil (less to burn and explode)? Wondering is stripper wells (because you say there are so many of them) offer a good value proposition from Profire products. Also, would impending regulations apply to these stripper wells…will they be required to install systems…

Chris

Do stripper wells require burner management systems? - Chris

Not typically…and you already guessed the answer why: stripper wells are used to pump out the remnants of a once-productive oil or gas field. In a new field, the oil and gas are typically found under pressure and far larger quantities of methane are released early on. The gas emissions must be controlled during drilling and until such time that permanent facilities are established. Once a field has been developed, all manner of controls/equipment are in place. High production oil fields typically collect the gas for its economic value. As mentioned in previous threads, one may find heater-treaters or glycol dehydrators at established fields. These installations almost always have some sort of burner management system (usually installed by the manufacturer as part of a complete package).

Stripper wells for depleted oil fields suffer few gas emission problems. Here’s a photo of a typical stripper well:

http://www.delsjourney.com/images/news/news_01-06-24/1-2134-…

There are also stripper wells for gas fields. For this application to make any economic sense at all, the gas is collected rather than burned. It makes no sense to spend money to pump low volumes of gas only to burn that gas on-site.

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In a stripper well, might it not make sense to heat the oil to make it flow?

Denny Schlesinger

In a stripper well, might it not make sense to heat the oil to make it flow?

I’d say once you lift the oil from hundreds to thousands of feet you have pretty much established that it’s flowing.

In a stripper well, might it not make sense to heat the oil to make it flow? - Denny Schlesinger

Yes, indeedy, warmer oil will flow more freely. The problem (and a formidable economic and physical science problem it is indeed) is how would one heat that oil underground? Makes no economic sense. That’s why it isn’t done.

Although it’s worth mentioning that oil pumped from thousands of feet below ground surface is already warm due to the pressures involved. Deep underwater oil reservoirs can be quite warm indeed.

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Deep underwater oil reservoirs can be quite warm indeed

The best part of Bakken is around 220F.

while it’s not with the expense on stripper wells, some heavy oil is indeed heated underground by steam injection

http://en.wikipedia.org/wiki/Steam_injection_(oil_industry)

But it cools off when it gets into the above ground pipes, specially in Winter. Maybe the pipes need some heating.

Denny Schlesinger

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But it cools off when it gets into the above ground pipes, specially in Winter. Maybe the pipes need some heating.

Exactly Denny, the oil will cool down and return to the temperature of the surrounding air. Look at this picture and realize that it is condensed.

http://www.profireenergy.com/our-industry/

Andy

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Look at this picture and realize that it is condensed.

That’s not a stripper well picture.

B

PS Pipelines are buried and are not exposed to the outside air, not much of them anyway, in which case there is such a things as insulation and electrical heat tape.

http://www.heatingelementsplus.com/heat-tape-c-11.html?gclid…

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I suppose I could have provided a better link to make my point. Along the bottom of the 1st diagram click on heat trace controls.

http://www.chromalox.com/industries/industries-served-detail…

And correct me if I’m wrong, but does it not appear that maybe these guys should be listed as competitors.

B

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Pipelines are buried and are not exposed to the outside air, not much of them anyway, in which case there is such a things as insulation and electrical heat tape.

You must have a big roll of electrical tape? Do you tape the bears too? :>)

https://www.google.com/search?biw=1024&bih=599&q=ala…

Andy

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And correct me if I’m wrong, but does it not appear that maybe these guys should be listed as competitors.

I would say that they do not compete. It looks like chromalox is into heating elements that are controlled by electricity and PFIE is in the space of keeping gas elements lit and controlling the temperature of gas elements.

Andy

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I believe it’s safe to say

Sorry about that all drugged up, no where to go. :<)

Safe to say pro-fire isn’t selling into that market either.

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I would say that they do not compete. It looks like chromalox is into heating elements that are controlled by electricity and PFIE is in the space of keeping gas elements lit and controlling the temperature of gas elements.

So you are saying PFIE claims an addressable market of a Millionish wells and yet someone who clearly sells into that market filling the same need (providing heat in a controlled manner)doesn’t compete with them.

Presumably then electric cars don’t compete with ICE powered cars as well?

B

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B,

So you are saying PFIE claims an addressable market of a Millionish wells and yet someone who clearly sells into that market filling the same need (providing heat in a controlled manner)doesn’t compete with them.

What I am thinking is that if there is electricity then most likely the company would go with chromalox. Because it would be easier to control the temperature with electricity than gas. So Pfie would not count on market share for any place that had electricity. Where Pfie would shine is where there isn’t any electricity and the companies need to control that flame when it goes out. So while Pfie obviously would like all of the market, I do not think they would be able to compete with chromalox when electricity is present because electricity is safer and easier to use than gas. That’s just my thoughts. I could be wrong.

Andy

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