Definitive Estimate

b) A detailed and comprehensive cost assessment with high accuracy.

c) -5% to +10%

c) Daily operational cost tracking

b) A review of an existing estimate to ensure accuracy and completeness.

c) Elimination of all project delays and complications.

While specific cost elements will vary based on the project, here's a possible breakdown:

1. Key Cost Elements:

• Drilling Costs: Drilling rig rental, drilling fluids, casing and cement, logging and testing, directional drilling (if applicable).
• Wellhead and Surface Equipment: Wellhead assembly, flowlines, separators, tanks, and other processing equipment.
• Completion Costs: Completion tools, perforating, stimulation, production tubing, and downhole equipment.
• Construction and Site Preparation: Roads, pads, pipelines, access infrastructure, and environmental remediation.
• Labor Costs: Drilling crew, engineers, technicians, and support staff.
• Materials and Supplies: Consumables, chemicals, spare parts, and equipment.
• Transportation and Logistics: Moving equipment, supplies, and personnel to the site.
• Environmental and Regulatory Costs: Permits, environmental impact assessments, and compliance monitoring.
• Contingency: A buffer to account for unforeseen costs and risks.

2. Calculation Approach:

• Drilling Costs: Obtain quotes from drilling contractors, factor in drilling depth, formation characteristics, and estimated time for drilling operations.
• Wellhead and Surface Equipment: Research and gather pricing for specific equipment based on project requirements, factor in installation costs.
• Completion Costs: Get quotes for completion services, consider well design, stimulation methods, and production targets.
• Construction and Site Preparation: Develop detailed cost estimates based on site surveys, engineering drawings, and contractor bids.
• Labor Costs: Estimate labor hours based on project activities, use industry wage rates and include benefits, payroll taxes, and insurance.
• Materials and Supplies: Create detailed material lists, obtain quotes from suppliers, and factor in transportation costs.
• Transportation and Logistics: Assess transportation distances, utilize freight rates, and consider logistics challenges.
• Environmental and Regulatory Costs: Estimate costs for permits, environmental studies, and compliance measures based on local regulations.
• Contingency: Allocate a percentage (e.g., 5-10%) of total estimated costs to cover unforeseen expenses and risks.

3. Influencing Factors:

• Market Conditions: Fluctuations in oil prices, equipment rental rates, material costs, and labor availability can significantly impact costs.
• Geological Complexity: Difficult drilling conditions, formation types, and reservoir characteristics can lead to higher drilling and completion costs.
• Regulatory Environment: Strict environmental regulations and permits can increase costs associated with environmental assessments, remediation, and compliance.
• Project Scope Changes: Unforeseen modifications or additions to the project scope can lead to cost overruns.
• Weather and Seasonal Conditions: Weather-related delays, access restrictions, and increased logistics costs.
• Technological Advancement: New drilling technologies or advanced completion methods can affect costs.

Remember that a comprehensive Definitive Estimate requires a detailed analysis of each cost element, using accurate data and specific calculation methods. Consider all potential influencing factors to achieve the highest level of accuracy and ensure a realistic cost projection for the project.