Oil/Gas/old oil well and AFE
Question 1: I went back into an old oilwell that has not been pumped for 6 years. It is unclear why the previous operator left but he said it was pumping water only. We cleaned the old hole out and had to recase it. Very expensive. Then the well was "swabbed". It is about 3000 feet deep and they swabbed it 15 times. Before swabbing they dumped 250 gallon of acid in the well. When swabbing they did not pull any oil out except the last 5 swabs and it was hardly noticible. At this point do I quit because they didn't pull any measurable ammount of oil out or does this mean anything?
Question 2: I and the Operator have split the working interest 50/50. The operator gave me an AFE before I signed the contract with him. He has now spent over what was estimated in the AFE, and is demanding 50% more. Am I obligated to pay him?
#1) There are many factors that can cause a well to produce water. Typically, the hydrocarbons will sit on top of the water and when the perforations are made in the casing they shoot in the upper section of the reservoir. As the hydrocarbons are produced the water moves upward and over time water production will increase. Once all of the hydrocarbons are produced then only water will flow into the well. Another cause of produced water is poor isolation in between the zones behind the casing. If the cement did not properly isolate the zones then water can flow into the well from another location above or below the perforations. At this point you need to perform an economic analysis using the historical production data for this well and determine if it makes sense to sink more money into additional workover procedures or not. Sometimes (but not always!) the best decision is to simply plug and abandon the well and drill a new one nearby in the same reservoir.
#2) This depends on the language in the working interest contract that was signed between both parties. If you are unfamiliar with the legal terminology in the contract then I would recommend reviewing the contract with an attorney who is familiar with oil and gas operations.