Submitted by Michael McDonald via OilPrice.com,
There were a lot of predictions last year that 2016 would lead to the disappearance of many strippers – the oil well producers who take nearly depleted “stripper” wells and keep them running and producing a few barrels a day.
This year is proving that strippers are much tougher than many analysts
gave them credit for. While many strippers have taken action to cut
back some of their less profitable wells, by and large, stripper production is much more resilient than many had expected. That reality holds important implications for the industry at large - more on that later though.
Stripper wells are generally operated by very small firms – often
family owned, with limited access to capital, and less economical
operations than most large scale fracking producers. Yet unlike
many of the large fracking companies which are large organizations with
the associated bureaucracy and overhead, strippers are small firms that
often have no choice, but to keep their nodding donkey pumps running.
Strippers appear to be doing everything they can to hold on to their
meager wells which produce a combined total of about 10 percent of U.S.
output across the country.
The strippers are pursuing a variety of techniques to keep their leases active on wells and minimize their losses. The result is that while output has fallen from strippers, it is still significant as a portion of U.S. production according to the EIA.
Getting reliable data on exactly how much production comes from
stripper wells is nearly impossible because of the vast number of wells,
and informality of the market.
Strippers are facing new problems from proposed federal oil and gas regulations though.
The oil price crunch has failed to force strippers to their knees, but
the new federal rules might. The rules come from the U.S. EPA and relate
to the production of methane from wells. For larger companies and more
productive wells, the new rules are a nuisance, but not a serious threat
to economic viability. For
strippers producing 5, 10, maybe 15 barrels of oil per day at each well
using inexpensive, and often antiquated equipment, the rules could be a
death sentence, which is the point - to destroy family owned businesses.
"These new rules will cripple stripper and marginal well
owners and operators, and on top of historically low oil prices, we are
looking at total disaster," according to National Stripper Well Association Chairwoman Darlene Wallace. "By
requiring the addition of new costly equipment requirements and
expensive leak detection the economics within the oil and gas industry
as a whole will be fundamentally changed, severely and forever."