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Economic limit of field production in Texas

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  • Kaiser, Mark J.
  • Yu, Yunke

Abstract

When the revenue generated from an oil and gas field is less than the cost of operations, the field is no longer considered an asset and production ceases. Capital investment may be made in an attempt to increase production or the field may be divested or abandoned. At some point in time all fields will terminate production at their economic limit. The purpose of this paper is to quantify the economic limit of field production in Texas. We classify 16,045 fields that terminated production between 1993 and 2008 by product type, location, and year of termination, and compute average production and adjusted gross revenue statistics near the end of the field's life cycle. We demonstrate that the revenue thresholds of offshore oil and gas fields is greater than the economic limits of fields located in bays-estuaries and on land and gas fields turn marginal sooner than oil fields. During the last year of production, average oil field revenue varied from $65,000 on land and bays-estuaries to $181,000 offshore; gas field revenue thresholds ranged from $384,000 (land) to $584,000 (bays-estuaries) to $637,000 (offshore).

Suggested Citation

  • Kaiser, Mark J. & Yu, Yunke, 2010. "Economic limit of field production in Texas," Applied Energy, Elsevier, vol. 87(10), pages 3235-3254, October.
    • Handle: RePEc:eee:appene:v:87:y:2010:i:10:p:3235-3254
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    References listed on IDEAS

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    1. Kaiser, Mark J., 2010. "Economic limit of field production in Louisiana," Energy, Elsevier, vol. 35(8), pages 3399-3416.
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    Cited by:

    1. Ewing, Bradley T. & Malik, Farooq, 2017. "Modelling asymmetric volatility in oil prices under structural breaks," Energy Economics, Elsevier, vol. 63(C), pages 227-233.
    2. Kaiser, Mark J., 2012. "Profitability assessment of Haynesville shale gas wells," Energy, Elsevier, vol. 38(1), pages 315-330.
    3. Kaiser, Mark J., 2012. "Modeling the horizontal well severance tax exemption in Louisiana," Energy, Elsevier, vol. 40(1), pages 410-427.
    4. 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.
    5. 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).
    6. 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.
    7. 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).
    8. 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.
    9. 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.
    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.

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    1. 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.
    2. 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).
    3. 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.
    4. 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.
    5. Ewing, Bradley T. & Malik, Farooq, 2017. "Modelling asymmetric volatility in oil prices under structural breaks," Energy Economics, Elsevier, vol. 63(C), pages 227-233.
    6. 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.
    7. Kaiser, Mark J., 2012. "Profitability assessment of Haynesville shale gas wells," Energy, Elsevier, vol. 38(1), pages 315-330.
    8. 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.
    9. 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.
    10. 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).
    11. Kaiser, Mark J., 2012. "Modeling the horizontal well severance tax exemption in Louisiana," Energy, Elsevier, vol. 40(1), pages 410-427.

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