Estimating Onshore Oil Rig Production: Factors Influencing Barrel Per Day Output

Investing in an onshore oil rig can be a significant financial endeavor, with a total investment of $12 to $15 million potentially leading to substantial returns. However, the exact number of barrels produced per day (bpd) can vary widely based on several critical factors. This article aims to provide a comprehensive guide to understanding the factors that influence oil rig production and how these can impact your investment return.

Cost per Barrel

When making a total investment of $12 to $15 million for an onshore oil rig, you are covering the costs of drilling, completing the well, and setting up initial production processes. In certain regions, the average cost to drill a well can range from $5 million to $10 million. This substantial investment can result in a wide range of production rates, from 100 bpd to over 1,000 bpd, depending on the productivity of the oil field and other factors.

Production Estimates

Low Estimate: If you invest $12 million in a lower-yield area, you might produce around 100 to 200 bpd.

High Estimate: In a more productive area with a $15 million investment, production could potentially reach 500 to 1,000 bpd or even higher.

Retailing an Onshore Oil Rig: Real-World Insights

At the lease I work on, we see a diverse range of results from different wells. Depending on the engineers' recommendations, Aera Energy typically spends between $1 million to $5 million per well during the development stage. In a well-defined lease, transportation fees are often waived due to the continuous nature of the work and the presence of equipment on the lease.

Let's consider a best-case scenario for a well that receives a permit for the "hot zone." Here’s a typical progression:

Fracking: Spending the money to frack the zone in 5–8 stages. Fishing and Installation: Using a rig to fish out bridge plugs and set tubing and rods. Steaming: Spending 4–5 days steaming the well, which might yield 100 bbls a day, with 200–300 bbls of water mixed from the steam. Stabilization: Over time, the production might stabilize at 55–70 bbls a day. Steaming again could boost it back to 90 bbls a day.

While production fluctuates daily or weekly, the initial average might be fairly high but will gradually decline over time. Maintenance costs might range from $25,000 to $100,000 annually, but the significant earnings over the long term make it a worthwhile investment.

Key Factors Influencing Production

The production capacity of an onshore oil rig is influenced by several key factors:

Geological Factors

The characteristics of the oil reservoir, such as porosity and permeability, play a crucial role in determining the well's productivity. Wells with higher porosity and permeability will generally produce more oil.

Technology

Enhanced oil recovery (EOR) techniques are designed to increase the amount of oil recovered from a field. These technologies include fracking, water flooding, CO2 injection, and steam injection. For instance, the steaming process in the example above is an EOR technique that helps maintain higher production levels.

Market Conditions

The overall market conditions, including oil prices, play a significant role in shaping investment decisions and production strategies. High oil prices can lead to increased investment in exploration and production, while low prices might result in reduced spending and emphasis on cost-cutting measures.

Conclusion

Given the investment of $12 to $15 million, the production rates can range from 100 to over 1,000 barrels per day (bpd), depending on the specific circumstances of the oil field. For more accurate projections, a detailed feasibility study that considers the specific location and technology would be necessary. Understanding these factors can help investors make more informed decisions about their onshore oil rig investments.