The number of oil wells being “shut in” as a result of the plunging oil prices and the spread of the COVID-19 virus is growing and Oklahoma is no exception.
Royalty owners of wells managed by at least two Texas-based companies received recent notification of the moves to temporarily suspend production from existing wells. Neither firm indicated how many wells will be “shut in” and also did not detail how many royalty owners are being affected.
H.L. Brown Operating, LLC based in Midland, Texas notified royalty owners in late March that it was “in the process of shutting in wells where expenses are exceeding current revenues.”
Ken Zoller, Financial Manager said in the memo that the company was “mindful of cash flow issues resulting from low oil and gas prices coupled with production volumes on aging wells.”
“Depending on the production potential of specific wells and the current outlook for prices, we may be recommending some older wells be plugged,” he continued. “Obviously, we’ll maintain wells that are still profitable or will be at more reasonable prices..”
He said that starting n April, H.L. Brown Operating would reduce its monthly overhead charges on wells that have been shut-in which will accompany lower pumper charges where possible when the pumper isn’t required to visit the wells every day.
Another Texas firm, Lime Rock Resources based in Houston notified some Oklahoma interest owners on April 2 of similar plans. It specifically told owners that the company planned to “temporarily curtail the Norge Marchand Unit production during the current crisis created by the COVID-19 pandemic.”
“To improve the operating efficiency of the NMU, LRR has taken various steps, including curtailing and shutting in high cost/water-cut producers and releasing all workover units from the field,” wrote a landman with the company. “Those steps are expected to result in oil production being “curtailed” by about 20%.
The company indicated that as “purchaser storage” becomes full, that additional production rate reductions will be required.
The Norge Marchant Unit is located west of Chickasha in Grady County and in the SCOOP play.
The Norge Marchand Unit is located within the Northwest Chickasha Field in Grady County, Oklahoma and was discovered in 1971. The field was unitized in May 1973 and the waterflood was implemented in 1975 and fully developed by 1983. The producing formation in the Marchand producing formation is the Marchand sandstone.