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Beauty in Maturity

By Elliott H. Gue on Jan. 28, 2014

Linn Energy operated 4,206 productive oil wells at the end of 2012 and 3,785 net wells at the end of 2011–an average of 3,996 net oil wells. The MLP produced about 29,200 barrels of oil per day in 2012, which translates into 7.3 barrels of daily oil output per well.

Based on the current price of West Texas Intermediate crude oil, this production generated about $690 per day in revenue, or $250,000 per year.

Although these volumes pale in comparison to the 24-hour initial production rates that upstream operators have announced in the most prolific shale basins, the wells owned by Linn Energy are hardly undesirable, clapped-out assets.

In fact, mature oil wells of this nature predominate in the US. And per well production statistics reveal that Linn Energy isn’t the only oil and gas company that owns a significant number of older wells.

For example, ExxonMobil Corp’s (NYSE: XOM) upstream portfolio included about 13,430 productive wells that flowed an average of 418,000 barrels per day in 2012, equivalent to daily output of 31.1 barrels per well.

Although the energy giant owns plenty of prolific wells in Alaska and the deepwater Gulf of Mexico that produce thousands of barrels per day, the world’s largest oil company also owns thousands of onshore wells with flow rates that are on par with Linn Energy’s asset base.

Investors should also note that ExxonMobil’s production statistics don’t differentiate between crude oil and natural gas liquids (NGL), a group of hydrocarbons that includes ethane, propane, butane and natural gasoline.

If we factor in NGL production, Linn Energy’s portfolio of 8,415 wells produced 112,410 barrels of oil equivalent per day, or 13.4 barrels of oil equivalent per day.

Even Chevron Corp (NYSE: CVX) and Occidental Petroleum Corp (NYSE: OXY)–two of the leading oil and gas producers in the US–exhibit similar levels of liquids production per well.

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