Energen, a small cap Permian focused company with a relatively conservative investment philosophy (they spend less cash than they generate), is up nicely today on some well results in the Wolfcamp shale, one of the many shale plays in the Permian basin. They also upped their full year guidance a bit. I'm probably not going to have time to look into this in the near future, because I'd like to listen to the Whiting call tonight. It is interesting though to see that operators are touting improving well results here, as they have been in almost all other basins.
How companies talk about well results is the source of tremendous confusion, at least for me personally. The typical thing is to talk about the initial production rate, or IP. So if a well IPs at 1,500 BOED (barrels of oil equivalent per day), its pretty clear what that means right? Not quite. The most usual thing is to talk about 24 hr IP, the average over 24 hrs. But some companies tend to talk about the 30 day average for the first month, sometimes called the IP30. This is invariable much lower than the 24 hr IP, and many would argue that it is more meaningful. Then sometimes you'll hear about the 90 day average or the 7 day average. There's a subscription website called drillinginfo.com that typically shows something they call the "prac IP" or second month average production, presumably because this tends to be more representative than the IP-30 of how promising the well is. I don't have access to this site anymore. Gas wells can be even more confusing than oil because often the well is choked, meaning that they could flow it at a higher rate if they wanted to, but have limited it intentionally for various reasons. So anyway, I'm always nervous about being sold a bunch of hype when companies are talking about IP rates.
How companies talk about well results is the source of tremendous confusion, at least for me personally. The typical thing is to talk about the initial production rate, or IP. So if a well IPs at 1,500 BOED (barrels of oil equivalent per day), its pretty clear what that means right? Not quite. The most usual thing is to talk about 24 hr IP, the average over 24 hrs. But some companies tend to talk about the 30 day average for the first month, sometimes called the IP30. This is invariable much lower than the 24 hr IP, and many would argue that it is more meaningful. Then sometimes you'll hear about the 90 day average or the 7 day average. There's a subscription website called drillinginfo.com that typically shows something they call the "prac IP" or second month average production, presumably because this tends to be more representative than the IP-30 of how promising the well is. I don't have access to this site anymore. Gas wells can be even more confusing than oil because often the well is choked, meaning that they could flow it at a higher rate if they wanted to, but have limited it intentionally for various reasons. So anyway, I'm always nervous about being sold a bunch of hype when companies are talking about IP rates.
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