How does an oil and gas operator determine production rates for a particular lease?

An oil and gas operator determines production rates for a particular lease by taking into account the specific geological characteristics of the lease. Geologic characteristics, such as porosity, permeability and formation thickness, can give an operator an idea of how much oil and gas the formation may contain. Additionally, the operator may consult with local experts to gain insight into the oil and gas production potential of the lease. The operator must also consider how much capital is available for the initial stages of development. Companies typically invest in leases that are more attractive and stand to yield higher returns. Knowing the amount of capital available can help an operator determine which leases to invest in and the production rates that can be achieved with those investments. Once the geological characteristics and capital availability have been taken into consideration, the operator must determine the projected production rate by analyzing the large and small-scale factors that influence the rate of production. These factors may include the number of drilling sites, the amount of time and capital needed to bring a well online, and the cost of maintaining production over time. The final step in determining the production rate of an oil and gas lease is to identify any state or local regulations that may further limit a company’s ability to produce oil and gas. In Washington, the Department of Natural Resources has regulations regarding the maximum production rate for any given lease. By taking all of these factors into account, an oil and gas operator can accurately determine the production rate of a particular lease.

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How does an oil and gas operator determine production rates for a particular lease?

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