Oil Well financial Analysis #Finance

hi YouTubers welcome back to the Zack live so I’ve been asked hundreds of times in the comments people say how much money you make and I would kind of grew up being taught that that’s rude to ask someone but I realized being a YouTuber that you know you kind of open your life up

to some things that normally people wouldn’t ask you and that’s fine but I think often when people ask that question it’s always geared more towards a specific well you know I’ll be working on well I’ll say this what makes a barrel or two or something and and people

are genuinely curious how much money does that well make and I think that that absolutely is a reasonable question to ask and the truth is is that’s that’s an inanswerable question and I would like to explain in this CashNews.co why it’s it is an unanswerable question at least at

least an average and I’ve had several people get you know get kind of pissy about it and be like you know you know dang well exactly how many how much you make per barrel or you know take how many barrels you made last year divide about how much money you made that’s how much you make

per barrel and as I say I would like to explain exactly why that’s not true and why it is really complicated and and something worth talking about so I got this little well right here I would like to do a test on it we’re going to figure out exactly how much oil this thing is making I

had him in my head I have done this years ago and had determined that this well made between about a fourth and a seventh of a barrel of oil per day and it’s probably one of the lowest producing Wells that I have that I’m not going to plug that I’m going to keep and I’d like

to explain how this all shakes out in the you know shakes out of the books I’d also like to hit on another question because this is fixing to be applied to this I get asked all the time makes people say if you go well it makes a barrel or half a barrel or whatever and you shut it down you

just let it sit there for a few years will it will it you know for the lack of a better word will it fill back in Will It fill up will it make more oil and the answer to that question is generally no and the reason is is when I say or someone says they’ve got a well that goes dry it generally

means it turned to water it’s making clear water so this well is not exactly like that and this well has been down for several months we had to redo the electrical you know we did a bunch of Plumbing last week and it is hitting higher and I can tell it’s pounding fluid higher and I can

tell it’s making more total fluid and I assume it’s probably making more oil now with my skin system that I got running out here I promise we’re going to get to but those CashNews.cos are going to be hard and difficult and a pain in the butt to make it looked like that I picked up

almost a half a barrel per day over the last about 10 days four tenths or something like that my system is not super accurate and uh and I wouldn’t I wouldn’t expect even if that is just simply an anomaly in the daily production but that being said this well is going to be making more

oil today than it normally does in a few months if we come back I have a thing that probably back to you know quarter to a seventh you know one to one and a half barrels per week so here we’ve got a little 18 American running probably five Strokes a minute okay so I got a long nipple and a 90

screwed in here open this valve and shut this one now we’re gonna go set the pick up for 10 minutes and fill this bucket up and we’re going to time how long it takes us to make five gallons so in the meanwhile while it’s filling this bucket up I’ve got this crackpot looking

contraption and we’re going to stick this in here and fill this up out of the well so I’m often asked too people say Hey you have any wheels that make gas or why don’t you have the backside tied in the wheels that we have around here make virtually no gas and you can see

what’s coming out the tube in here this is less gassy than a Coca-Cola for sure or just we just produce very little gas I’m not sure how good you can see here but right here is the old Water contact Line This Is water this is oil if we measure this we’ve got about two and a

quarter inches of oil on top of this water remember that number let’s dump this back in here first so quite a few years ago when I bought that that thing to check oil Cuts I did some mathematical calculations and came up with about two-thirds of an inch of oil and the top of that is equal to

one percent of its whole volume so if we take 2.25 inches divided by 0.66 that gives us 3.4 percent oil cut so this well is making 3.4 percent oil and 96.6 percent water this isn’t quiet there I’m gonna call it we’re going to say 11 and a quarter minutes for five gallons of fluid

all right let’s do a little bit of math in here so five gallons divided by 11.25 minutes is 0.444 gallons per minute times 60 times 24 is 640 gallons of fluid a day divided by 42 is 15 barrels total fluid per day times .034 percent is 0.518 barrels of oil this thing’s making half a

barrel of oil which is interesting because that’s what Peter said so let’s uh let’s finish this up here in the studio I’ve been wanting to say that Let’s uh let’s break down and actually start talking about financial numbers I’m going to use this scenario

that this thing makes a quarter of a barrel per day um 365 days a year so when I break down and try to come up with you know Financial numbers of how much actual cash does this well make how much does it generate I use a number that’s about 65 percent of every dollar that this thing makes I

get about 65 cents that I get to use to pay bills and pay electric bills and maintenance and and you know and everything and where this goes is this is a 7 8 lease a 12 and a half percent out of every dollar twelve and a half cents goes to the minerals a lot of times this is a lower percentage

it’s uh a lot of leases are 80 instead of 87 and a half um and eight percent is probably more common that’s kind of where my my head defaults if you would to the percentages you’ve got a production tax and then you end up well we pay an extremely high amount of property

Taxes and when you add the property tax or production tax and how much the mineral owners get uh pretty much as a good round number out of every dollar that this thing makes we’re going to get about 65 cents all right let’s see if we can throw a Profit

expense calculation together really crudely and quickly on this on this particular well so if we’ve got a quarter of a barrel times 365s 91 barrels a year times seventy dollars a barrel uh times .65 for my part of it 4151 dollars so the first big expense is electricity this ain’t got

one horse motor on it it probably pulls about 800 watts when it starts the upstroke probably most of the downstroke it pretty much free Wheels I’m going to say that the average consumption of this is probably about 400 watts so let’s do uh electrical calculation here so we got at 400

watts times 24 is 9.6 kilowatt hours per day times 365 is 3504 kilowatt hours per year our cost is 3.8 cents plus two point something for the delivery charge um let’s multiply this times uh 0.5 oh six since per kilowatt hour it’s 210 dollars per year maintenance this thing about every

seven or eight years has got to have a full-blown uh pull the tube in test the tube and blow half the tube and up buy some more tubing there’s going to be about two more times in here it’ll need a pump change uh the down home cost I think I might have overshot here I’m gonna say

four thousand dollars for a two-in job plus 800 for a pump change plus 800 for a pump change that’s fifty six hundred dollars and let’s say this lasts seven years this will give us a more of a worst case situation all right so that’s eight hundred dollars now along with these

expenses I’m going to add another 500 per year for other total maintenance uh this buys some packing uh once a year this buys us a few belts this buys us some motor every year too when the lightning gets it plus some grease and then I want to say also that that includes a little bit of my

time this does not require much time maybe every other month it might take 15 minutes or something degrees it check the oil in it tighten the packing something like that I would say it’s probably somewhere in the 15 minutes a month type scenario and so there’s not a lot of my time in

this okay so here are the numbers I’ve come up with the 50 oil that’s a Profit about fourteen hundred fifty dollars at seventy dollar oil it’s twenty six hundred and hundred dollar oil it’s forty four twenty uh these are obviously very rough numbers and very

rough calculations uh but this does give a reasonable idea and I do think that these expenses and Income are are reasonably accurate another aspect that makes this well so cheap to operate is that one it’s actually the closest wealth to the county road you have to drop by

everyday driving at least the other thing is is the injection Wheels we’ve got we don’t have to pump our water under a lot of pressure uh they’re basically take everything on gravity but the water tank level this sort of stays full you know sometimes the pump comes on and pumps it

down a little bit and it’ll go three or four days and then it might actually gravity and catch up empty the water tank it’ll kind of suck some air in air lock the injection system and then it fills up real quick the pump kicks on and you know there’s this there’s very little

horsepower there’s very little electricity used in disposing of this water and so disposing of you know 10 barrels of water foreign you know the cost is you know completely negligible uh when you when you factor in and you know having other Wells to maintain that and maintain that system all

right for me this is the next day I shot the next segment out there on location and I really did a poor job of it and I want to I want to rerun it I’m going to cut in part of it let’s watch it right now and then we’ll come back finished up now this is a very simple very basic

minimal setup uh we’ve got an old tank separator water tank water pump we’ve talked about the separate before the fluid comes in the back of the separator the oil goes in the whole tank the water goes in the water tank it’s got a head switch a head switch when the when the fluid

gets high enough turns the pump on Via compactor and the pump pumps it down an injection well I got a couple CashNews.cos coming up about injection Wells so I’ll ask a million questions and I’m going to answer it but that’s for another day this tank costs nineteen thousand dollars

it’s a few years old I think that cost about sixty five hundred dollars I’m not sure what a water tank cost that’s five or six eight thousand bucks a little 30 to 11 piece of crap like this is probably a used one it’d be at least 7 500 that’s usually about what it

costs to rebuild them I actually bought a new head switch today lost a thousand this cost 860. I think those are about four or five hundred dollars one of the really key components of this CashNews.co that I wanted to to try to drive home was that this little well is crappy in as little as it makes

and everything else it’s going to make a little bit of money but this well could never in a million years ever pay for all that equipment it’s just not possible there’s not enough money there to be passed out to buy that stuff much less actually make a Profit um

key component what I wanted y’all to understand is if you’ve got a will that makes a little bit of money it does not necessarily mean that your lease will be Profitable the only reason that that well is able I’m able to keep that well and produce it is because

there’s two other Wells that are you know as I explained in the previous CashNews.co they’re about six thousand feet across the pasture about a mile away they make two barrels each they make four barrels out of two Wells and those two Wells pay for all that equipment you know if that if

that little American was plugged and gone at least would still make money and so you add that little American back and and it adds you know a couple thousand to three thousand dollars at the end of the year uh additional Profit to that lease you know those other two Wells pay for

the road maintenance they pay for them you know all equipment there they pay for the electrical infrastructure they pay for you know fill in the blank whatever they make that work point I wanted to make I’m gonna set one more time just because the world makes money doesn’t mean the

least makes money you take this one more step just because that lease out there makes money if that was the only lease I owned it doesn’t mean that as a business I would be Profitable you know I’ve got all these huge expenses like uh you know big

Insurance policies I’ve got an office we’ve got to hire people to help us do paperwork to deal with Road Commission which is another stupid nightmare um you know I gotta have a pickup I gotta have you know you you fill in the blank all this stuff to make a business make

money just because at least it’s Profitable doesn’t make make a business Profitable uh if you’ve got a business and the business will turn a little bit of money uh and it’ll pay you a paycheck that doesn’t even mean to me that

you’re sustainable because even if you can make a paycheck you’ve got to be able to get ahead and have some money in the bank in case you’ve got some major failure like you lose an injection well or something like that people ask me how much money you make per barrel and it really

is an unanswerable question and it depends uh because every single situation everywhere is different you take that well not there and I can say you know it’s probably 50 Profit or something to that effect I haven’t made that number up I’m not sure but you go to

another well that might make a lot more oil it’s on release all by itself and you’ve got all these expenses that are uh that are you know combined in part of that of that you know that lease is infrastructure and road maintenance Etc and it doesn’t look nearly as good on paper

even if the well makes a lot more oil than this one go coming back the Oklahoma Jack CashNews.co it has very little overhead the electric bill is about 300 bucks a month I pay a guide I actually go out there and check it he goes in there several days a week I pay him 300 bucks a month you know I

could run some numbers here I’m coming up with a gross Income on at least about 28 000 bucks I really thought about this here for several minutes and I come up with about a number of 10 000 bucks a year uh expenses and maintenance uh this including all of Fortune I spent on

electric wire and buried a couple years ago uh pressure gauge for the injection pump when it loads up once a year packing the water pump we had to buy a tank a couple of years ago including kind of long-term expenses uh you know doing a tubing leak on one of the wells you know a little bit of Well

Servicing uh grease a bucket oil for the for the unit this comes out to something to me about about ten thousand bucks a year and so we take 3 600 a year for the Christie thirty six hundred dollars in labor the pumper the guy that checks it for me ten thousand bucks at Seventeen hundred two hundred

dollars uh 28 000 gross minus Seventeen two is ten thousand eight hundred dollars uh this is Profit that goes in to the corporation that goes into our business that pays things like the tires you want to pick up my salary my uh you know Insurance pays electric bill

and office up here you know blah blah blah I’ve already been through this if you were a uh a fellow that uh worked in the factory wanted to buy an oldies didn’t care about having Insurance just went out there and winged it you know you could probably make about a

thousand bucks a month off this lease something like that another thing I’d like to talk about real briefly not not in detail but the cost of plugging these Wells for some reason you read on the internet and it’s these huge inflated numbers I don’t know why that comes from where

that comes from or what the point of that is but you know that I didn’t get I was going to take a picture of a talk but I forgot what I was out there that that what we worked on the previous CashNews.co that Jensen back down the corner um it’s still making crystal clear water I

don’t expect it to ever make a rainbow and it’s probably going to get plugged next year I’m going to run it for a while there’s not a lot of cost in this so I think that I spent including the tube and I bought in the stuffing box and all that crap and the Well Servicing I

spent about 5 000 bucks on that as well something like that you tried out it’s not a lot of money of course if you do that every day you’d be broke but it’s it’s you know not uh it’s it’s not a unreasonable amount of money to try something like that so when I go

to plug this thing I’ve already spent 5 000 bucks on it the cost of the Well Service and to pull everything out of it probably is going to run about a thousand dollars to come out there and pull rods full pump pull the tubing the stuffing box the new connections I put on and all that stuff is

still just as valuable as when I bought it to me now you couldn’t sell it for that but to me it’s worth you know not having to buy another one it still has all of its value that I paid for it and it’ll be used elsewhere um that well is four and a half it’s small casing

it’s wrapped up a cement the casing is cemented from the bottom all the way to the surface it’s one of the cheapest Wells that you can plug uh and I probably can get that plug they’ll run in with a poly School a poly pipe at the bottom uh they’ll set a 20 sack plug 20 sacks

of cement in the bottom uh it’ll probably have to have an intermediate plug about 1400 and then they’ll they’ll plug like 250 foot at the surface or something that it’ll have three strings or three plugs of cement with grilling mud in between the plugs the cement and

I’ll probably get this done water truck cement pump truck everything for around a little over two thousand bucks 2200 or something like that so even with paying for the Well Servicing to pull everything back out of it the equipment that I’ll get out of it will pay for having it plugged

you know it’s not it’s not a scenario a lot of people get this idea that you know you got these old junk Wells and you just pull them off and put them off and put them off uh because you don’t want to pay the plug them I actually will at least break even if not be money ahead to

uh to get rid of that well so I hope I showed enough reality to uh to kind of show reality you know a lot of y’all ask me questions specifically about numbers what do things cost how much money you make and I hope I showed enough of you know how this how this works where the money goes um you

know show reality see how it is you know we make a living we’re certainly not getting rich it’s just uh it’s just another job you get up early and work your butt off and uh good then unless you get a paycheck just like anything else it’s not like it was in the 70s when the

price all was high and everything else was cheap you know everybody got rich but it’s not not that way anymore I’m done rattling I appreciate you watching um not sure what we’ll do next week I’ve got a bunch of CashNews.cos in the works I need to finish some stuff up and uh

whatever it is catch you next time