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Economic limit of field production in Louisiana

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  • Kaiser, Mark J.

Abstract

When the operating cost of a well is equal to its income from production, the well is no longer considered an asset and is said to have reached its economic limit. The purpose of this paper is to quantify the economic limit of hydrocarbon field production in Louisiana. We classify 690 fields that terminated production between 1977 and 2007 by product type, location, and year of termination and compute production and adjusted gross revenue near the end of their life cycle. During the last year of production, average oil field revenues varied from $35,000 in North Louisiana to $101,000 in South Louisiana to $227,000 in state waters; gas field revenue thresholds ranged from $57,000 (North Louisiana) to $402,000 (South Louisiana) to $936,000 (offshore). Economic limit statistics are summarized and correlations with price and field size are reviewed. The limitations of the analysis and constraints on interpretation are discussed.

Suggested Citation

  • Kaiser, Mark J., 2010. "Economic limit of field production in Louisiana," Energy, Elsevier, vol. 35(8), pages 3399-3416.
    • Handle: RePEc:eee:energy:v:35:y:2010:i:8:p:3399-3416
    DOI: 10.1016/j.energy.2010.04.032
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    1. Kaiser, Mark J., 2006. "Hydrocarbon production cost functions in the Gulf of Mexico," Energy, Elsevier, vol. 31(12), pages 1726-1747.
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    Cited by:

    1. Keqiang Guo & Baosheng Zhang & Kjell Aleklett & Mikael Höök, 2016. "Production Patterns of Eagle Ford Shale Gas: Decline Curve Analysis Using 1084 Wells," Sustainability, MDPI, vol. 8(10), pages 1-13, September.
    2. Pastor, Daniel J. & Ewing, Bradley T., 2022. "Exploding DUCs? Identifying periods of mild explosivity in the time series behavior of drilled but uncompleted wells," Energy, Elsevier, vol. 254(PB).
    3. Ewing, Bradley T. & Malik, Farooq, 2017. "Modelling asymmetric volatility in oil prices under structural breaks," Energy Economics, Elsevier, vol. 63(C), pages 227-233.
    4. Kaiser, Mark J., 2012. "Profitability assessment of Haynesville shale gas wells," Energy, Elsevier, vol. 38(1), pages 315-330.
    5. Kaiser, Mark J., 2012. "Modeling the horizontal well severance tax exemption in Louisiana," Energy, Elsevier, vol. 40(1), pages 410-427.
    6. Kaiser, Mark J., 2011. "Economic limit of Outer Continental Shelf Gulf of Mexico structure production," Applied Energy, Elsevier, vol. 88(7), pages 2490-2508, July.
    7. Ewing, Bradley T. & Thompson, Mark A., 2016. "The role of reserves and production in the market capitalization of oil and gas companies," Energy Policy, Elsevier, vol. 98(C), pages 576-581.
    8. Apergis, Nicholas & Ewing, Bradley T. & Payne, James E., 2016. "A time series analysis of oil production, rig count and crude oil price: Evidence from six U.S. oil producing regions," Energy, Elsevier, vol. 97(C), pages 339-349.
    9. Apergis, Nicholas & Ewing, Bradley T. & Payne, James E., 2021. "The asymmetric relationship of oil prices and production on drilling rig trajectory," Resources Policy, Elsevier, vol. 71(C).
    10. Zhao, Xu & Luo, Dongkun & Xia, Liangyu, 2012. "Modelling optimal production rate with contract effects for international oil development projects," Energy, Elsevier, vol. 45(1), pages 662-668.
    11. Yuan, Jiehui & Luo, Dongkun & Feng, Lianyong, 2015. "A review of the technical and economic evaluation techniques for shale gas development," Applied Energy, Elsevier, vol. 148(C), pages 49-65.
    12. Kaiser, Mark J. & Yu, Yunke, 2010. "Economic limit of field production in Texas," Applied Energy, Elsevier, vol. 87(10), pages 3235-3254, October.

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