What the 2% rate is costing Okla in tax revenue
Article in the IHS Drilling Wire
Here is an example of what the 2% rate is costing Okla in tax revenue in just 2 sections,- and that’s at $45 oil. This is almost criminal!! It also demonstrates how difficult this is to put in plain language every day Oklahomans can understand. Oklahoma reminds me of the brother Esau in the Old Testament story of Jacob and Esau. As I recall he sold his birthright for a bowl of stew. We are selling our states birthright on the cheap!
OEPA
This article was sent to us by Steve Altman, a Petroleum Engineer and President of Brown and Borrelli Inc.
Article is from August 25, 2017, Volume 64, No. 164, page 5:
IHS Copyright and disclaimer, 8-25-17 <link>
Couple this with the previous article from July 14, 2017, volume 64, No. 134, page 1:
It talks about the Devon well completed for 6000 BOE/d. On the second page, next to the last paragraph, Devon talks about their increased density pilot (Showboat) coming up in the third quarter where they plan to drill 25 – 2 mile lateral wells in sections 3 and 10 T16N R9W, landing in two upper Meramec intervals, one lower Meramec interval, and the Woodford. This would make 6 wells per level, which would match their talk at the SPE luncheon a couple of months ago where they indicated 5 wells per landing zone, in their opinion, was not enough.
When you figure 25 wells and the payment is $2500 per acre, you are talking about $100 per acre ($200 for the 2 mile lateral) for a well that is making 6000 BOE/d. That is a heck of a deal for them.
And the State of Oklahoma keeps taking it in the shorts on taxes. Assuming $10,000,000 per well cost, and assuming the wells only break even, which takes $13,000,000 after taxes and royalty and operating, the gross income is $325,000,000. The 5% GPT we lose is $16,250,000 in just these two sections, with 50% to 75% of that coming in the first three years.
It once again confirms what Joe Warren and others have been shouting from the rooftops: Forced Pooling is being used to artificially hold down lease prices.
Since the STACK play is now being talked about as an equal in quality to the Eagle Ford and Permian plays, the only difference in prices is Forced Pooling in Oklahoma.
By a factor of 10 or more!!
Steve Altman
