SHELF ENERGY - PROJECT UPDATE - LL&E WELL - Unidraulic Pump change out
To Investors:
The below snapshot are the engine change-out on the LL&E #1 Unidraulic Pump that was performed today. This gas engine-driven pump is the secondary method of producing our well. The current engine service provider Regan is being swapped with another rental engine company, Tacks Gas Compression Rental, in order to lower monthly rental costs by about $600/month in rental fees. The older engine rental caused numerous downtimes due to the age of the unit. Also, additional hours from the Gauging Company, Production Inland Crews (PIC), is another charge that will be alleviated, as they are the first responders when the well or engine goes down; then the mechanics are called out. So even though the maintenance is part of the monthly rental, expenses go up along with loss of revenue through lower production. With this change we are planning on lowering overall monthly rental charges from $1650/mon, plus eliminating other miscellaneous charges from PIC and increasing run time efficiency of the well.
A note on owning or renting equipment: Shelf normally rents engines as a whole. The rental engine repairs are part of the rental package, and Shelf cannot compete with the mechanics' charges that come out to service the engine. Also, with a rental the regular maintenance is included, so mechanic fees are included. Additionally, major engine repairs are included with the rental package.
Conclusion: Shelf has found that overall, a rental engine in most cases is advantageous over owning for two main reasons. First, Shelf cannot compete with the regular maintenance, as that has to be done normally every 6-8 weeks, and second, the responsibility with having to incur large capital expenditures in the event of engine failure. Each well is different, and Shelf structures are spent where it makes the best sense and can save cost and unnecessary downtime over the life of a well.