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Paying Well Determinations

Required Information When Submitting Paying Well Determinations on Federal and Indian Exploratory Unit Agreements in the Montana, North Dakota, and South Dakota.

A detailed economic and technical analysis should be provided for each well in the table indicating its paying or non-paying status. The analysis for each well should include the following information:

  1. Name, completion date, API number, and surface and bottom-hole location(s), and point-of-entry (footages) into the producing zone of the subject well.
  2. Well petrophysical and reservoir engineering data (average porosity, water saturation, vertical net pay thickness, oil formation volume and gas expansion factors, etc.)
  3. For horizontal wells, the horizontal length, in feet, of the productive zone penetrated by the subject well.
  4. Monthly production history of the well since completion, including the number of days the well was producing for each respective month.
  5. Decline curve analysis showing the well's Estimated Ultimate Recovery (EUR) and including the well's economic limit.
  6. Mathematical calculations and formulas used to determine the drainage radius and drainage area of the well based upon the petrophysical data and EUR data.
  7. Depiction of the well bore, calculated drainage radius, and the lands proposed to be incorporated into a newly-formed or expanded Participating Area (PA) or Communitized Area (CA) on a large-scale map.
  8. Discounted cash-flow (DCF) model showing production, expenses, cash-flow, etc. projected to the economic limit of the well. Included with the DCF model should be detailed well cost, monthly expenses, commodity prices, etc. Actual commodity prices received and actual operating costs incurred should be used for historical production.
  9. Any other technical data, such as a structural contour map, net pay thickness map, etc., would be helpful in support of your analysis.

The above information should be compiled in a logical, well-written report to facilitate review and analysis by the BLM.

Upon receipt of the above information, the BLM will review the paying well determination provided by the operator, and make a determination as to whether the well is either paying or non-paying for unit purposes requiring the creation or expansion of a PA or submission of a CA, if appropriate. Any wells determined to be non-paying for unit purposes must be reported and produced on a lease basis.