CALGARY, Alberta (Feb. 7, 2024) — Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company, has released a report that details the impact that the EPA’s Quad O regulations will have on upstream oil and gas producers in the U.S.
“The EPA’s recently finalized Quad O regulations will raise fixed costs, pushing lower producing wells into uneconomic territory later this decade when it is fully implemented,” said John Gutentag, product owner at EIR.
“EIR modeled that 34% of actively producing wells in the Lower 48 states will see additional costs of at least $10 per boe, a threshold we believe makes the wells potentially uneconomic, leading to accelerated plugging and abandonment timelines and an inevitable influx of orphaned wells,” said Gutentag.
Key takeaways:
- EIR concludes the EPA’s Quad O regulations represent a step change that will accelerate plugging and abandonment (P&A) timelines, and investors and operators should start modeling these implications now.
- EIR estimates the monitoring and amortized capital costs of retrofitting process controllers alone will add more than $10/boe in costs to 34% of actively producing wells, a threshold we classify as potentially turning the wells uneconomic. These wells, however, represent only 0.4% of U.S. production.
- EIR finds 46% of producers (5,163 companies) that account for 21.7% of Lower 48 unplugged wells face concerning plugging liabilities with an undiscounted well-plugging liability exceeding $100,000/boe/d (20:1 basis).
- Given these costs, EIR expects many of these operators will struggle to fund the accelerated plugging timelines, likely forcing bankruptcies and increasing the number of orphaned wells.
- Operators with a large base of newer producing wells will be far less impacted by the operational changes. We estimate wells that represent 95.2% of U.S. production will add less than $1/boe in costs.
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Additional Resources:
- EPA’s emission revision: More rules, double the methane, triple the tax (Sept. 19, 2023)
- Starting the descent to net zero (Jan. 17, 2023)
- Say goodbye to flaring uncertainty (Dec. 30, 2022)
Members of the media should contact Jon Haubert to schedule an interview with one of Enverus’ expert analysts.
EIR’s analysis pulls from a variety of Enverus products including Enverus Intelligence® Research and Enverus ESG® Analytics.
About Enverus Intelligence Research
Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. Enverus is the most trusted, energy-dedicated SaaS platform, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 98% of U.S. energy producers, and more than 35,000 suppliers. Learn more at Enverus.com.
Media Contact: Jon Haubert | 303.396.5996
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