This is the bit from the call he was talking about. I can't make heads or tails of what it means....
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The addition to oil and gas, what comes out of ground for every barrel of water you pump down there, it’s roughly 5 barrels of oil, which is called, I mean, 5 barrels of water, which is called produced water comes up. What are you going to do with it? You got to put it somewhere. You can’t transport it very far. It’s too expensive because water is heavy. You can make some efforts to recycle it, and it’s done in some cases, but it’s a lot of water and it’s very expensive. So what they do with this is they dispose of it by pumping it back into the ground. Now to give you an idea of the magnitude of the problem, I say a barrel of oil, very few people know what a barrel oil is, a barrel of oil or a barrel itself a barrel of water. It’s 42 gallons.
No one knows what a barrel looks like, if we do gallons, everyone knows what gallon looks like. So you take 8 million barrels times 42 million — 42 barrels per each barrel of oil, multiplied by doing this right, yes. So it’s 8 million barrels of oil, 42 gallons in a barrel. So now that’s 336 million per day times five. That’s 1.68 billion to be gallons of water had to be disposed of each and every day. So the value to land is what’s under the land. And the — there’s only a finite amount of land that can be used for that purpose, and we’re going to run out of land one day. So the price for injection in produced water keeps going up. It used to be, a couple of years ago, $0.01 a barrel. Now it might be $0.06 a barrel and $0.50 or even $1 a barrel on day is readily conceivable.
So if you start figuring in how much, let’s say, let’s say, an acre of land. And let’s say, for a year, I’m making up numbers, just to give you — show you how huge these aren’t real numbers. So let’s say you could pump 60,000 barrels of water into the ground every day for a finite period of time. Well, 60,000 barrels of water is in terms of gallons, 2.5 million gallons a day. So if you’re getting, let’s say, $0.01, well, let’s say you’re getting $0.10. So that’d be $6,000 a day. So you could do it for 365 days. Maybe they’ll do longer. So that’s $2,190,000 with no expense associated with just giving somebody right to put water on your property, underground. So let’s do it again. It’s 60,000 barrels a day, if that’s what the number was. It’s $0.10 a barrel.
$6,000 a day, times 365 days at $2,190,000. They can only do it for a year. The acre of land this has no meaningful assets on it, that acre of land, maybe you could buy it for $500. That’s what they valued at. But if only for a year, you get $2,190,000 and you still have the acre surface land is still there. Next thing, easements. Eventually you’re going to run out land and go further out? Well, you can’t put any more water in that acre, but you got to bring the water somewhere else and somebody has to have a pipeline that traverses your land and you get a lease on that. So the acres you save worth $500 an acre. Well, what do you think they’re going to charge somebody for right away. I think it’s $500 a year. Even it was that’s 100% return on capital.
What if it was $10,000 a year? What if have you had 400,000 acres and all you got was an easement, $10,000 a year. Well, it’s 400,000 acres of Class B land, $10,000 a year. That’s probably even $1,000 a month. See what that is, that’s $4 billion would it be cash flow with no expenses against it. This is the after the produced water. So I think those figures I can do other kind of things. I think those figures speak for themselves. People that know about them because the produced water problem only became a big deal a couple of years ago. And numbers have not gotten to the size and the price to dispose the barrels have not gotten to a level where it’s a problem. But it’s rapidly going in that direction. So that’s the value proposition among other things, I would say. |
