Decline Curve Analysis by Permian Mineral Tax Consultants
Decline curve analysis requires expensive software and specialized knowledge. Permian Mineral Tax Consultants has both. We use the same software for our decline curve analysis that the big Oil & Gas companies use. The software is expensive, but we have found no other way to achieve the best analysis which leads to the lowest appraised values. Our engineers work tirelessly during tax protest season to analyze the properties for our clients. Our attorneys also work in the decline curves and know the details of every analysis so when it is time to meet with the appraiser, the attorney has the upper hand.
The first 3-5 years of a well’s life are extremely difficult to value. As such, we usually see the tax appraisals extremely high on new wells. That is why it is important to engage Permian Mineral Tax Consultants as your Oil & Gas Property Tax Consultants from the beginning. On new wells, it is not uncommon for our attorneys to reduce the appraised values by 60%!
We are not aware of any other Oil & Gas Property Tax Consultants with the same credentials. The mix of attorneys and engineers using the enterprise grade software cannot be beat.
Decline Curve Analysis for Appraisals
Decline curve analysis is used to estimate how a well will perform for the coming years. Production usually starts strong when a well comes online but as the pressure in the well decreases. The decline profile is constantly in motion and basically continues to moderate every day for the first 3 to 5 years of the wells life. The 3-5 years, the decline is drastic. Wells come online strong but quickly have production declines. After the first few years, the decline curve stabilizes and the decline is fairly consistent for the remainder of the well’s life. This is known as its natural decline.
Projecting each well’s future year’s decline profile becomes more accurate with more production history. Specialized engineering decline software can “Curve Fit” the known production points and project future decline rates with greater accuracy. This software incorporates the “slope” or bending of the projection line to fit each well’s individual production profile.
Therefore, instead of using the higher declines associated with initial well production or the January 1st rate, the slope of the decline, accounts for the lower decline at the end of the year also. If these higher decline rates were used in the appraisal, the projected production would be significantly “under-projected” and the corresponding market value would not be accurate for taxation or buying/selling purposes.
The “Annual” slope decline represents the actual mid-year decline (July 1) of all twelve months declines-high to low.
Permian Mineral Tax Consultants use the same software that the big Oil & Gas companies use for the decline curve analysis and our engineers understand the real production profiles and use our own analysis to convince the appraiser that our valuation is the right one.