The Eagle Ford Shale Play

Chesapeake’s Eagle Ford Shale Production Tops 20,000 boe/d

RT Dukes — Wed, 22 Feb 2012 16:25:32 +0000

Chesapeake’s Eagle Ford Shale asset is garnering much of the company’s attention in 2012. To the tune of almost 25% of the company’s capital, with 33 of the company’s 161 rigs focused in the Eagle Ford.

Total net production averaged a little less than 18,000 boe/d net in the fourth quarter of 2011 and current production stands at 22,600 boe/d net. Production was up 60% quarter over quarter and 370% year over year. (You can get pretty amazing growth rates running 33 rigs) Gross operated production is close to passing 50,000 boe/d and stands at a little over 45,000 boe/d. CNOOC owns a 33% interest in Chesapeake’s acreage, so net will always be a close to 50% when you account for royalties and other WI owners.

The production mix is 50% crude, 20% NGLs, and 30% natural gas. That will likely stay the same for some time unless the company begins to target the natural gas rich Pearsall Shale……and that’s not happening at sub-$3 gas prices.

Well performance in the Eagle Ford continues to improve.

108 wells tested with peak oil rates of 500 barrels of oil or more

The company has drilled and is producing from 178 wells and has 200 additional wells close to coming to production. That is the main reason for adding almost 350 miles of pipelines in 2011 and plans for further expansions in 2012. It will be needed for the volumes of oil and gas the company plans to bring online.

Chesapeake will also add frack crews during 2012. 7 company crews are running now and that will grow to 11 by March and 13 by year-end. That should make them virtually self sufficient when it comes to fracking Eagle Ford wells.

Chesapeake has more than 400,000 net acres in the Eagle Ford primarily located in the oil window of the Maverick Basin.

Read the company’s press release at chk.com

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Carrizo Oil & Gas Eagle Ford Reserves Up 90% – 2011

RT Dukes — Wed, 22 Feb 2012 15:16:46 +0000

Carrizo Map | Click to Enlarge

Carrizo Oil & Gas announced year-end results along with updates from the company’s development in oil plays. Eagle Ford Shale reserves increased 90% year over year from 15 mmboe to 28.5 mmboe.

Carrizo’s 41,000 acres is primarily located in the gas condensate window, of La Salle and McMullen counties, where expectations are for a production stream of 75% liquids and 25% rich gas. Oil in the area is selling at an average of $4 better than NYMEX prices, so even with infrastructure constraints we’re seeing the benefits of proximity to the Gulf Coast refining complex.

The company’s first 26 wells have come online with initial production rates ranging from 600 to 1,000 bopd. 20 gross (15.5 net) wells were brought to production in 2011. The company still has a backlog of almost 10 wells waiting to be brought to production. While a very positive operations update, there were delays with coiled tubing services and mechanical problems requiring attention before wells were completed.

Production from the fourth quarter of 2011 was negatively impacted by delays in bringing multi-well drilling pads on production in the Eagle Ford. These delays were associated with availability of coiled-tubing drilling services and mechanical issues affecting ancillary well site equipment. The conditions causing these delays have been resolved and performance of our new wells in both the Eagle Ford and Niobrara continue to meet or exceed our expectations.

Carrizo has 4 rigs active now and will operate 3 net rigs throughout 2012 spending approximately $320 million of the company’s $440 million capital budget in the Eagle Ford Shale. That’s a quick shift for the historically gas focused company.

Capital budget allocations for 2012

$320 million – Eagle Ford Shale
$62 million – Marcellus Shale
$43 million – Niobrara Formation
$15 million – Barnett Shale

The company’s liquids/oil operations are focused in the Eagle Ford and Niobrara Shale of Colorado. The company will spend approximately 10% of its capital budget in the Niobrara this year, while $77 million will be spent in natural gas plays.

Read the entire press release at crzo.net

Escondido Resources Horizontal Eagle Ford Drilling Results – 2011

RT Dukes — Tue, 21 Feb 2012 15:42:29 +0000

Escondido Resources II announced well results from the company’s 2011 drilling program in South Texas. Escondido drilled 17 wells in 2011 with an average IP rate of 7 mmcfd. That is not just Eagle Ford wells. The company has drilled a total of 29 wells since 2009, with 18 in the Escondido formation, 7 targeting the Olmos, and 5 targeting the Eagle Ford Shale. All 17 wells in 2011 were horizontal.

The company primarily operates in Northern Webb County targeting the Escondido and Olmos formations, but also operates acreage in La Salle and McMullen counties. The company owns the deeper Eagle Ford rights on over half its 60,000 net acres in the area.

The jewel of the Eagle Ford wells came online at 10 mmcfd of wet gas in late 2011 and another well that had good log shows is set to be completed in March.

Read the full press release at escondido-resources.com

Cheniere Energy’s Corpus Christi Liquefaction (LNG) to Hold Open House

RT Dukes — Tue, 21 Feb 2012 15:22:05 +0000

Cheniere Energy’s subsidiary, Corpus Christi Liquefaction, plans to hold an open house in Portland, TX to discuss the proposed LNG facility that would export Eagle Ford natural gas. The event is scheduled for February 28th, and you can get the full details at our Eagle Ford Shale Events page.

This will be the perfect chance to ask questions about the number of jobs the project might create, exactly how much of the channel it will affect, and general questions about the scope of the project. It will also be important that this facility has access to adequate supply for a very long time, so it will be very interesting to hear what FERC and Cheniere expect from the Eagle Ford.

Read more about the project at cheniere.com

Hydraulic Fracturing Does Not Contaminate Drinking Water

RT Dukes — Mon, 20 Feb 2012 15:10:02 +0000

Hydraulic fracturing, fracking, or frac’ing, depending on who you talk to, DOES NOT contaminate drinking water. That was the conclusion from a University of Texas Energy Institute study of the process.

The study noted that contamination is usually related to above ground spills or a mishandling of wastewater.

Noteably, the study was not funded by industry dollars.

Eagle Ford Rig Count Up 1 Again This Week – Feb 17, 2012

RT Dukes — Fri, 17 Feb 2012 21:19:00 +0000

The Eagle Ford Shale drilling rig count grew by 1 rig again this week. Activity across the play is resisting sub-$3 natural gas prices and it looks like we’ll find out if operator’s capital budgets can resist low gas prices as well. EOG Resources increased its reserves estimate to 1.6 Billion barrels and I don’t believe they will be slowing down any time soon. It will be interesting to see what happens for the guys producing more natural gas and not benefiting from oil prices across their portfolio. La Salle County dropped two rigs, so we have no counties with more than 40 rigs working.

The natural gas rig count was up 2 this week to 81. The entire increase was attributable to Karnes and DeWitt counties where gas wells produce considerable amounts of liquids. The oil rig count fell 1 to 175. Natural gas and oil prices were both up a bit on the week. Gas prices were trading at ~$2.70/mmbtu on Friday and the March WTI oil contract increased to more than $103 per bbl. Horizontal wells account for activity from 237 rigs and we have 1 disposal well being drilling in Leon County (not a core Eagle Ford area).

La Salle County’s lead in drilling shrunk to 1 with 38 rigs working. Karnes (37),Webb (34), DeWitt (25), McMullen (23), Gonzales (22), Dimmit (16), and Live Oak (10) make up the top Eagle Ford targeted counties.

It was another busy week for news on the pipeline and midstream side, but EOG’s addition of 700 million barrels in potential reserves in the Eagle Ford trumped all other announcements.

News

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For everyone out there considering all the driving jobs that are paying north of $30 an hour, Devorah Fox of Mike Byrnes & Associates, Inc. contributed an article related to getting a CDL license.

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Drilling Rig Count by Operator

Operator Name	Prior Week	Current Week
Chesapeake	30	32
EOG Resources	26	26
ConocoPhillips	17	17
Petrohawk (BHP)	16	17
Pioneer Natural	11	12
Marathon Oil (Hilcorp)	12	11
Talisman	10	11
Anadarko	9	9
Lewis Petroleum	9	9
XTO (ExxonMobil)	8	8
All Others	108	105
Total	256	257

What is the Rig Count?

The Eagle Ford Shale Rig Count is an index of the total number of oil & gas drilling rigs running across a 30 county area in South Texas. The South Texas rigs referred to in this article are for ALL drilling reported by SmithBits and not solely wells targeting the Eagle Ford formation. All land rigs and onshore rig data shown here are based upon industry estimates provided by the Baker Hughes Rig Count and/or Smith Service Co’s (Schlumberger) Smith Rig Count.

Drilling Rigs by County

Texas County	Prior Week	Current Week	Texas County	Prior Week	Current Week
LA SALLE	40	38	WILSON	3	3
KARNES	35	37	BEE	2	2
WEBB	31	34	BRAZOS	3	2
DEWITT	25	25	LEE	2	2
MCMULLEN	23	23	MAVERICK	2	2
GONZALES	23	22	ZAVALA	2	2
DIMMIT	18	16	FAYETTE	1	1
LIVE OAK	10	10	MILAM	1	1
FRIO	8	8	Washington	1	1
LEON	7	7	AUSTIN	0	0
ROBERTSON	6	6	BASTROP	0	0
ATASCOSA	4	5	BURLESON	0	0
MADISON	3	4	COLORADO	0	0
GRIMES	3	3	DUVAL	0	0
LAVACA	3	3	GOLIAD	0	0

EOG Eagle Ford Reserves Potential Jumps 700 mmboe to 1.6 Billion Barrels

RT Dukes — Fri, 17 Feb 2012 13:54:50 +0000

Aerial View of Cheapside, TX - Click to Enlarge

EOG Resources’ Eagle Ford Shale assets continue to outperform. The company announced an increase in potential recoverable reserves of 700 million barrels. That brings EOG’s Eagle Ford reserve potential up to 1.6 billion barrels. The catalyst was successful testing of tighter well spacing.

U.S. proved oil reserves are just over 20 billion barrels, so a 1.6 billion barrel addition, from a single company, is significant to say the least.

Strong Initial Production Rates at 65-Acre Spacing

EOG reported monster wells from two of its 65-acre test units.

In Gonzales County, the Henkhaus Unit #1H, #2H, #3H, #4H, #6H and #7H wells were drilled on a pattern of 65-acre spacing. The six wells were completed to sales at individual initial production rates ranging from 2,424 to 3,733 barrels of oil per day (Bopd) with 442 to 679 barrels per day (Bpd) of natural gas liquids (NGLs) and 2.2 to 3.4 million cubic feet per day (MMcfd) of natural gas per well. The Mitchell Unit #3H, #4H, #5H, #6H, #7H and #8H wells, which were also drilled as down-spaced pilots, began initial production at 2,833 to 3,527 Bopd with 275 to 485 Bpd of NGLs and 1.4 to 2.4 MMcfd of natural gas per well. The Meyer #3H, #4H, #5H, #8H and #9H wells had individual peak oil rates ranging from 1,647 to 2,813 Bopd with 199 to 413 Bpd of NGLs and 1.0 to 2.1 MMcfd of natural gas.

The results are a great sign for EOG, but a bad sign for natural gas fundamentals. If oil rigs are bringing on wells with 1-3.4 mmcfd of gas production, dropping gas rigs just got a little less important.

EOG Downspacing for Greater Oil Recovery Rates

The company originally planned for 130-acre spacing, but now believes it will develop the field at 65 to 90-acre spacing. The recovery factor in the field is now pegged at 6%. With a total of almost 28 BnBoe of oil in place and 3,200 wells left in the company’s inventory, I’m guessing there will be a lot of things learned over the course of the next few years that will only increase the recovery factor.

The company has built its knowledge and understanding of the play by drilling more than 375 wells to date. EOG only trails Chesapeake in terms of drilling and has 26 rigs working the area as of February 2012.

EOG exited the year with more than 66,000 boe/d of production (78% crude oil) in the Eagle Ford. Total crude production eclipse 50,000 b/d for the first time and, with the activity EOG has planned, it will likely be in the rearview mirror for some time to come.

A highlights include:

3,000 b/d IP rates
1.6 BnBoe of Reserves after Royalty might be the largest discovery since Prudhoe Bay in the 1960s
3,200 wells yet to be drilled in the Eagle Ford
Almost 28 BnBoe of oil in place
Targeting $5.5 million well costs with 4,000 ft laterals
Self sourced sand and frac crews contribute a 80% ATROR

If you want to listen in on the conference call, it’s at 8 am central and can be accessed through the company’s website. You can also read the full press release at eogresources.com

Energy Transfer Adding 100,000 b/d Mont Belvieu Fractionation Plant for Eagle Ford Production

RT Dukes — Thu, 16 Feb 2012 16:20:44 +0000

Energy Transfer and Regency Energy announced construction of a second Mont Belvieu fractionation facility at a cost of $350 million. The plant will complement infrastructure being built to support the Eagle Ford Shale, Permian Basin, and Woodford Shale.

Lone Star NGL, the official name of the Energy Transfer and Regency Energy partnership, will build a second 100,000 barrel per day natural gas liquids (NGLs) fractionation plant to support growing demand from liquids-rich areas in Texas and Oklahoma. A 100,000 b/d fractionator is currently under construction with a planned completion date in the first quarter of 2013 and the new fractionator will be completed in the first quarter of 2014.

The new plant is fully contracted with long-term agreements and marks a string of major developments increasing capacity for crude and NGLs produced in the Eagle Ford.

In the past two weeks, we’ve had the following major announcements:

Read the entire press release tat energytransfer.com

Talisman Energy Exits 2011 With 54 mmcfed of Eagle Ford Production

RT Dukes — Wed, 15 Feb 2012 17:31:47 +0000

Talisman Energy exited 2011 producing more than 54 mmcfed. That’s up from just 8 mmcfed in the fourth quarter of 2010 and means total operated production is over 100 mmcfed. Talisman operates a 50/50 JV with Statoil in the Eagle Ford.

Talisman operates 10 rigs in the play currently and has plans to ramp up to 14 rigs by the end of the year. The company has $500 million in spending planned for the Eagle Ford in 2012, which means the partnership will spend more than $1 billion developing acreage during the year. With $1 billion budgeted for the partnership, I expect the four additional rigs will be added in the later half of the year.

Production is expected to at least double from approximately 30 mmcfe/d as we build out our drilling programs and secure access to additional egress.

With 54 mmcfed of production at the end of 2011, I don’t believe Talisman will have any trouble averaging more than 60 mmcfed in 2012. It should be another big growth year for production in the Eagle Ford.

Enterprise Products Expands ECHO Crude Storage – Eagle Ford Receipt Point

RT Dukes — Wed, 15 Feb 2012 14:50:41 +0000

Enterprise Product Partners announced the acquisition of a 37-acre tract next door to the company’s Enterprise Crude Houston (ECHO) oil terminal and plans to expand storage capacity to 6 million barrels. The expansion will be completed just in time to begin receiving crude from Enterprise’s 350,000 b/d Eagle Ford pipeline set for full completion in Q1 2013.

The first phase of Enterprise’s Eagle Ford pipeline is set to be completed in the second quarter of 2012 and the line will be fully operational by the first quarter of 2013. The expanded receipt point will also be able to receive crude from the Seaway system that is being reversed to bring crude from Cushing to the Gulf Coast and the Cameron Highway System that delivers oil from the Gulf of Mexico.

New CME Crude Contract Delivery Point

There is also potential for the storage and receipt point to become the delivery point of a new Chicago Mercantile Exchange (CME) crude oil contract. The traditional contract priced in Cushing Oklahoma, West Texas Intermediate (WTI), has come under scrutiny as differentials expanded to $10-15 less than comparable Brent crude oil prices. The new CME contract will provide an alternate trading point that is better aligned with Gulf Coast prices.

For reference, the 6 million barrels of storage at ECHO will be a little less than 10% of total storage capacity estimated in Cushing, OK.

Read the full press release at enterpriseproducts.com