Creating Reserves Reports with PHDWin Software (Part 2)
Part two of our in depth engineering training on how to generate oil and gas reserves reports on PHDWin Software by our lead petroleum engineer, Kurt Mire. This segment is perfect for students and other industry professionals looking to understand more about oil and gas evaluations and how to put theory into practice with PHDWin Software!
Training Topics Table Of Content
- Operating Expenses:
- Operating Expense (OPEX) Explanation (_)
- Fixed Vs Variable Operating Expense (_)
- Historical Operating Expense Analysis With PHDWin Example (_)
- Price Schedules:
- Product Price Schedules Explained (_)
- Setting Up Product Price Schedules On PHDWin Software Example (_)
- Price Differentials:
- Price Differentials Explained (_)
- How To Determine Price Differentials (_)
- Oil & Gas Price Differential Analysis Example (_)
- PHDWin Software Price Differential Tutorial (_)
- NGL’s & Shrinkage:
- Gas Shrinkage & NGL’s Explained (_)
- How To Calculate Gas Shrinkage (_)
- How To Calculate NGL Yield (_)
- Topic Continued In Part 3 (_)
PHDWin Software Crash Course Part 2 Study Guide
1.) Operating Expenses
Why are operating expenses important?
• Affect cashflow and reserves value (value is based on
future discounted cashflow)
• Determine economic limit (no reserves after econ
limit reached)
What are operating expenses?
• Normal ongoing costs to operate a well or field
• Can be modeled as fixed or variable ($/well/month or $/barrel)
• Does not include production or ad valorem taxes
• Includes normal ongoing well repairs (pump,
tubing, rods)
• Does not include capital expenses: drilling,
recompletions
• Pumpers, supplies, water disposal, compression,
chemicals, equip maintenance
How do we determine operating expenses?
• Analyze historical data
• Use published data from similar fields
• Estimate from experience with similar fields
• If possible, we want to estimate operating expenses on a per
well basis ($/Month)
Fixed vs Variable Expenses:
• If we model all expenses as fixed, we will get lower reserves and
value (conservative?)
• If we model all expenses as variable, we get higher reserves
and value (optimistic?)
2.) Price Schedules
Product Price Schedules:
• SEC prices (average of last 12 months)
• Flat prices, example $50/bbl.
• Future prices (NYMEX)
• Custom: 2020 $50, 2021 $55, 2022+ $60
• Monthly price schedules (PHDWin)
Price Schedules/Models In PHDWin:
• Schedule of oil & gas prices (can
include historical prices
• Model editor module
• Specify prices (without a model file)
• Model file (.mod)
3.) Price Differentials
What Are Price Differentials?
• Price differentials are the differences between the price received for the products (Oil, Gas, NGL) and the market price of the products at the time of sale.
• Differentials can be positive or negative
• Differentials can be caused by crude oil quality, gas heating values, transportation charges, and local market conditions.
Why Are Price Differentials Important?
• The price received for the products affect
cashflows, economic limits and reserves value
• Differentials are needed to model future cashflows as forecasted prices change
How Do You Determine Price Differentials?
• The best way is to compare historical revenue data (on a well or field level) to historical market prices.
• Provided by the operator. “We have a contract for WTI +$1.50”
• Estimate from published reports or industry data.
4.) NGL’s & Shrinkage
Gas Shrinkage And NGLs:
• Shrinkage is the difference between gas sales and reported production
• Due to fuel usage on the lease
• Losses, leaks
• Gas processing
Calculating Shrinkage:
Shrinkage = (1 – (sales/production)) x 100
Calculating NGL Yield:
NGL Yield = NGL (gal) / Gas Production (MCF)
Vive La Frack! 