It was a comfortable and lucrative first couple years in the business. But my big break came in the middle of a bust…
During the $10-a-barrel bust of 1986, Southwestern Energy closed its Denver office. So I started a small oil and gas company called Flavious Smith Petroleum Properties. My friends said starting an oil and gas company with prices at $10 per barrel was “crazy talk.” But in the end, my decision to launch the business was about downside risk versus upside potential. I mean, how much lower could it go? And all I needed was a desk, a chair, a truck, and a place to drill. Easy, right? The test is called a drill-stem test. It opens the well up and lets oil and gas into the testing tool connected to the drill string. If there is any oil or gas in the formation, it will flow into the test tool and you can determine the potential productivity of the well. The test usually lasts three hours. As we pulled the test tool out of the hole, oil started pouring out of the drill pipe onto the rig floor. The well – Kunau #1 – is still producing in 2017. It has produced almost 500,000 barrels of oil since that first drill stem test. It has paid a lot of bills over the years through boom and bust. Kunau #1 is a vertical, conventional well. The rocks are full of oil. They’re porous and permeable, meaning the oil flows through them easily. They like to give up their oil. The well also has a typical conventional linear decline rate of about 4% per year over its productive life. The productive life of conventional wells can last decades. I ran to town and called my wife: “Sweetheart, we’re rich!” That autumn, I drilled my first well. It was in Nebraska, and we were testing the target interval.
35
Made with FlippingBook - Online Brochure Maker