RE:RE:RE:RE:YGR Decline RatePennydredful does make good points on decline rates.
Decline rates were not as much of an issue as low intial well results for some wells in 2021 until they got the drilling program turned around in like Sept of 2021.
A company has to manage the type of land that they have. When oil prices are high, higer declining wells should be high graded and drilled. And the lower intial production wells should be drilled in 70-90 band.
If you have a well that produces 70% of the total oil it will produce in five years being in year 1...you need to catch this great year 1 production in a high priced commodity environment.
If intial 30 day rates come on at 300 barrels at 130 cad a barrel, even with high decline rates it wont matter too much on well being paid back.
Wells coming on low at 80 barrels on first 30 days are more of an issue then decline rates on something that comes in high.
The production of YGR top ten oil producing wells is much lower then IPO or BNE or OBE.
YGR production profile has flatten abit. Production can grow quite quickly from 10k level if they can drill some good wells in a row that come on high.
YGR is drilling in ferrier which seems to be best stuff, production should be coming.
General market environment concerns me more then YGR spefic things like financials or production rates. I think YGR is fine as a company. Still very optimistic on it.
TheRexmember wrote: High decline rates are never a good thing.
The higher the decline rate the less economic a project is. The more a company has to spend just to maintain production and the main reason this company fell out of favour for two years and debt got out of control when prices plunged. It was also why production type curves were lowered almost 25% and attracted a large short position to the company- Nuttall even called them out on it at least twice by saying he didn't believe the reserve numbers.
You probably noticed comments in the last two updates about optimization programs and trying to flatten decline rates. management has got the message and they are trying to address it. Some of it is just a reflection of the land position we have - though I would not be surprised if they could tweak the completion programs to get more out of each well.
At higher oil and gas prices the workover programs have a faster payback too.
they do a great job on cost containment and obviously have total faith from their bankers - if not the decline rates would have killed this company two years ago. It is also why they moved to a flat, continuous drilling program- it moderates the decline rate as older wells dominate production over time.
The company would ideally get production up to 14-15,000 boe ish to stabilize the business at a higher cash flow number. We should be there next year.