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Greetings! New to this Board, but have worked in the E&P (exploration and production) side of the bidniss for 14 years.You appear to misapprehend how rig day rates relate to oil prices. Please let me explain, because your inference about dayrates and prices might appear logical to most people, given the information you quote in your Posting. Rig day rates are just that: the price an operator (usually an oil company, but can also be a private individual) pays for the use of a drilling rig, its crew, and ancillary equipment, quoted (for historical reasons based on the hiring rate of a horse-drawn wagon, or "rig," used to transport men and equipment to a drill site) per day. The flow rate from a producing well is greatly influenced by a long list of factors, including the size of the opening the oil flows through, the pressure drop from reservoir to the surface, the amount of oil storage capacity immediately available, to name but a few.Between the two facts mentioned in your Posting is a whole host of factors influencing the actual market price of oil. For a thorough understanding, both historical and technical, of the oil biz, try reading Daniel Yergin's "The Prize: The Epic Quest for Oil, Money, and Power." Most companies will quote in their annual reports their "Finding and Development" costs expressed in dollars per barrel. These include the rental/building costs of rigs, overhead (executives, managers, geoscientists, buildings, and other Company assets), lease purchase prices for land and/or rentals, investments in data collection such as 2-D and 3-D seismic (sound reflections of subsurface rock layers, kinda like ultrasound images), etc. These are all added together and divided by the quantity of oil found in a given year, expressed in barrels (or more usually, millions of barrels). The result should be the actual, full-accounting cost of a barrel of oil. The production test flow rate is merely an indication of how prolific a particular well drilled into a particular oil reservoir might be. It is a very indirect indicator of the size of the reservoir. So, using your example, and assuming the only "F&D" cost is rig dayrate, there's not enough information about the reservoir size, expressed in millions of barrels of oil (MMBO), or the number of days the rig was used (anywhere from 1 week to more than a year, in some cases) to determine the cost per barrel. However, a well that flows 10,000 BOPD might roughly imply a total reservoir size of anywhere from 100-500 MMBO. Therefore, the "F&D" cost of those barrels would range in your example from (let's assume a 30-day drilling schedule for one well) $0.06/bbl to $0.012/bbl. Your example would only be correct if the well took one day to drill, produced only 10,000 barrels, and there were no other associated costs. To further over-answer your question, test flow rates usually (not always) ARE lower than production flow rates. Test flows are done to give management an indication of what the production flow rates might be, and allow for extrapolation of same to calculate a future revenue stream (how much money will come in over a given time period as the oil is produced and sold). $200 K/day rigs are almost exclusively used for exploration, because expensive rigs are used on high-risk/high-reward, we-think-there's-oil-there-but-we-don't-know-FOR-SURE, exploratory wells. Production drilling CAN be done with the same type of rig (at occasionally the same or similar rates), but often is done with cheaper-dayrate rigs. Rig dayrates are purely a function of the number of correct rig types available for contract, and what the market is willing to pay to use them. And yes, the rigs usually, but not always, do move off the producing well (and in many cases are long gone by the time the well is production-tested) to another drilling location, often halfway around the world, or maybe only a few tens of feet away within the same oil field. Sorry for the length of this Post, but I couldn't let misapprehensions about the interrelated costs of finding and producing oil go by. And I haven't even touched on one percent of how oil and gas are really discovered and produced, but hey, you asked... Better read the book. Let me know (seriously!) if there's anything else you'd like to know about the oil biz, and I'll try to give you an answer(the reason mine are long is because the oil game IS complex, with lots of interrelated steps).And I used to be a long-winded English major before becoming a geoscientist.
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