that will sell. If those wells stop producing material that sells, there is nothing 

 much to value. The writer knows of wells that have declined as much as 75 

 percent while a valuation was being prepared — if a last minute check-up had not 

 been made, the declines never would have been suspected. When valuing an oil 

 or gas well, always remember Mark Twain's definition of a mine, "A hole in 

 the ground owned by a liar." 



GAS PROPERTIES The geology of the structure and the intimate 



study of the reservoir rock itself is the same 

 for the valuation of gas property as for oil. But, because gas is dealt with as a 

 vapor and is so highly compressible, some other considerations enter into gas 

 valuations. 



In oil properties, the deeper the well, the greater the shrinkage factor: 

 1000 barrels of reservoir oil at 5000 feet is usually more stock-tank oil than 

 1000 barrels at 10,000 feet- — or, to put it another way, 20 feet of sand usually 

 contains more recoverable oil at 5000 feet than at 10,000 feet. But just the op- 

 posite is true for gas — 20 feet of sand at 10,000 feet contains nearly twice as 

 much recoverable gas as the same 20 feet of sand would contain at 5,000 feet. 

 Oil at greater depth is worth less because of the excessive cost of drilling deep 

 wells — gas values are affected less because gas wells are always so widely spaced, 

 usually on 320- or 640-acre units. By and large, oil decreases in value with 

 depth, but gas increases in value with depth. 



Assume that the same 160 acres overlies gas instead of oil. In gas valu- 

 ation, the formula begins with 43,560 as the number of cubic feet in one acre 

 (one always deals with cubic feet in gas — mcf, thousand cubic feet — or mmcf, 

 million cubic feet) . In order to obtain cubic feet of reservoir space it would be 

 necessary to multiply by porosity and connate-water factors — in this case again 

 refer to Figure 40-1 and find that for 22 percent porosity and 34 percent connate 

 water, there are 6512 cubic feet of gas space in each acre foot. Again, using 

 5576 acre feet of reservoir, one finds that there are 36,310,912 cubic feet of 

 storage space in the reservoir. At atmospheric pressure and temperature, this 

 reservoir would contain 36,310,912 cubic feet of air, and would hold that much 

 gas. 



But this reservoir is not at atmospheric conditions; it is under very high 

 pressure and is always much hotter than the atmosphere. According to Boyle's 

 Law, as the pressure is increased, the amount of gas a reservoir contains also 

 increases. If the pressure is doubled (temperature remaining the same) there is 

 twice as much gas — so that each time an atmosphere of pressure (14.7 lbs.) is 

 added, a reservoir full of gas, or 36,310,912 cubic feet is added. 



If bottom-hole pressures have been taken on the gas wells, exactly the pres- 

 sure existing in the reservoir will be known. Or, if the well-head pnessures, 



806 



