Eagle Ford Shale News

Oil Export Ban Hurts Eagle Ford

Study Adds to the Growing Debate to Lift Ban
Eagle ford

Eagle Ford Hurt Most by Export Ban

A new study from Rice University reveals that the decades-long oil export ban is having the greatest impact on producers in the Eagle Ford Shale region of Texas. The study takes a unique look at the dozens of crude types on the open market and tries to calculate their potential prices in the absence of trade barriers.

Related: Oil Prices Can Vary A Lot Across the U.S.

The oil that is pumped out of the Eagle Ford has less sulpher than WTI or Brent and would attract a higher price on the international market.

According to the report, the U.S. refining infrastructure isn’t designed to handle the domestic crude qualities that are in abundance today, which has caused prices to be lower relative to internationally traded crudes.

Ken Medlock, head of Rice University’s Baker Institute for Public Policy“If the ban were lifted, it would immediately allow the sale of domestic crude oils into the international market, where prices reflect differences in crude quality and therefore would be higher for the light crude oils being produced from shale plays,” Medlock said.

Earlier this month, IHS issued a report on the implications of the current ban and concluded that lifting the export ban could create hundreds of thousands of additional U.S. jobs and add billions to the U.S. economy. The report goes on to say that eliminating the ban will have far-reaching consequences for the U.S. economy including:

  • Further increases in domestic oil production
  • Lower gasoline prices
  • 964,000 additional jobs
  • Benefits to manufacturing and service-related sectors in every state
  • Strengthening national security and America’s position in the world

Related: Oil Export Ban Is Hurting Your Royalty Checks!

Read more at news.rice.edu

Fracking in Texas Cities: Who’s the Boss?

Legislation Will Squash Local Control

Texas drilling: Who’s in control?

When it comes to drilling oil in Texas, all cities aren’t created equally. Laws and regulations vary from town to town and what is okay in one, might be illegal in another. So, who ultimately gets to decide the rules for fracking in Texas cities?

Since the city of Denton outlawed drilling within the city limits in 2014, the debate over who has the authority to regulate the oil and gas industry has heated up. In recent weeks, the Texas legislature has introduced legislation in both houses that would remove that control from local governments and give it back to the states. 

Related: Fracking Bans in Texas?

SB 1165 and HB 40 both favor state control that would would limit a city’s ability to impose regulations on oil and gas industry activities. The “Denton Fracking Bill” (SB 1165) unanimously passed and asserts that current statutes are already so effective that additional local regulations aren’t necessary . It goes on to say that the act would further “preempt regulation of oil and gas operations by municipalities and other political subdivisions.”

Todd Staples, president of the Texas Oil & Gas Association, said that “The threat to Texas and our state’s biggest economic driver, oil and gas, is real and it’s urgent,” Staples said in his remarks. “This is the very sector that is building our schools, paving our roads and funding our universities. Please make no mistake, this attack is growing and it must be fixed. We join Texans who support local control, but local control does not mean out-of-control.”

Reactions have been swift from local officials, environmental groups and private citizens. The Texas Municipal League was one agency that blasted the decision saying that if city ordinances are nullified, homeowners could be robbed of their property values overnight and would be stripped of their property rights.

Read more at http://www.legis.state.tx.us/

Eagle Ford Gas Headed to Mexico

Texas Resources Inportant to Mexico's Energy Reforms
Eagle Ford Pipeline to Mexico

Executives from Pemex, BlackRock and First Reserve sign a trans-border pipeline deal.

Petróleos Mexicanos announced Friday that is has acquired the funding to complete the construction of the pipeline Los Ramones II for an estimated $900 million.

The deal was a collaboration between Blackrock and First Reserve will be one of the first projects for Mexico’s historic energy reform that will enable a low-cost energy supply and create jobs. The first part of this project, the Ramones I, ranges from Eagle Ford in Texas to Los Ramones, Nuevo León and phase II will reach Guanajuato to supply the central and western parts of the country.

Related: Eagle Ford Natural Gas is Headed for Mexico

Jim Barry, CEO of the Infrastructure Investment Group of BlackRock commented that “Participation of the private sector in infrastructure will be very important in Mexico, and around the world. Given the recent reforms, growth in Mexico and economic stability, investment opportunities in Mexican infrastructure have definitely drawn our attention and we hope to explore other opportunities in the near future.”

The terms of the deal commit BlackRock to $4.6 billion and First Reserve to $30 million over 25 years and gives them a combined 45 percent control of the project.

Related: Eagle Ford Shale in Mexico Needs Private Investment

Mexico’s rising demand for natural gas has created a lucrative export industry for Eagle Ford producers in recent years. The country hopes to lessen its dependence on other sources by tapping into its own shale oil and natural gas within the next five to 10 years.

Read more at pemex.com

Enlink Midstream Aquires Pipeline Company

First of Many Transactions with Devon
Victoria Express Pipeline

Victoria Express Pipeline |Click to Enlarge

Enlink Midstream Partners announced Monday it will acquire Victoria Express Pipeline (VEX) from Devon, giving the new company a “strategic footprint” into the Eagle Ford Shale play.

Read more about the VEX

The deal is estimated to be worth $220 million and includes the following assets:

  • A 56-mile multi-grade crude oil pipeline
  • Facilities at the Port of Victoria with an eight-bay truck unloading terminal and 200,000 barrels of above ground storage
  • Facilities near the origin of the pipeline (under construction) including an eight-bay truck unloading terminal and 160,000 barrels of above-ground storage
  • A condensate pipeline from the Eagle Ford Shale to Victoria

The transaction, expected to close on or about April 1st, is the first of many between Devon and Enlink (formerly Crosstex), who announced a partnership in 2014.

Read more about Devon in the Eagle Ford

Barry E. Davis, EnLink President and Chief Executive Officer. “This transaction marks the first dropdown from Devon to EnLink, and we expect transactions like this to play a significant role in our future growth. These assets will give EnLink a tremendous growth platform in the Eagle Ford Shale. We look forward to providing high-quality midstream services to producers and marketers in the Eagle Ford area.”

Read more at enlink.com

Eagle Ford Traffic Deaths Increase 13%

TxDOT Continues Road Improvements
Gravel Road In The Eagle Ford

Gravel Road In The Eagle Ford

Texas oil regions saw a surge in traffic deaths in 2014 including 272 people who died  in traffic accidents in the Eagle Ford. According to TxDOT, this is an increase of 13 percent over 2013, where 240 people were killed in the 26-county region.

Overall in the Eagle Ford last year, there were 3,658 traffic accidents in which people were killed or seriously injured, up from 3,446 the year before. This is a high percentage of the 8,600 accidents reported statewide.

Related: Another Fatal Crash in the Eagle Ford

Roadways have continued to deteriorate over the past few years as more traffic and heavy trucks damage roads and make for unsafe conditions. Over the years, several several efforts have been put into place to address the road conditions including assembling a task force in 2012 and TxDOT’s Be Safe. Drive Smart. campaign that was launched over the summer.

TxDOT spokeswoman Laura Lopez said that “The number of deaths have increased. We want to remind folks, especially in the energy sector areas, to watch out for those 18-wheelers. And the same message to those in the 18-wheelers, ‘Watch out for vehicles.’ ”

The San Antonio New Express reports that there is a recent surge in road construction across the oil regions to improve conditions and make things safer. Several projects underway in the Eagle Ford include repairs of $5.8 million to Texas 97, FM 1099 and FM 1344 in Wilson and Atascosa counties as well as widening and repair of FM 1916 in Dimmit County at a cost of $999,000.

Chesapeake to Reduce Spending by $500 Million

Company Will Reduce Wells and Slow Production
Chesapeake Cuts Budget for 2015

Chesapeake Cuts Budget for 2015

Chesapeake Energy announced on Monday it plans further cuts to its 2015 capital spending. The company will reduce spending, cut rigs and slow production in order to navigate the current low crude pricing environment.

For 2015, Chesapeake will spend $3.5 billion to $4 billion, a $500 million reduction from its last update in February.

Other important spending updates include:

  • Plans to spud and connect to sales approximately 520 and 650 gross operated wells, respectively, in 2015 (a decrease from 1,175 and 1,150 wells in 2014) 
  • Connect to sales approximately 650 gross operated wells, respectively, in 2015 (a decrease from 1,175 and 1,150 wells in 2014).
  • Lowering its targeted 2015 production to 231 236 million barrels of oil equivalent, or average daily production of 635 645 thousand barrels of oil equivalent, which represents 1 3% production growth over the prior year after adjusting for 2014 asset sales.
Doug Lawler, Chesapeake’s Chief Executive Officer, said, “We entered 2015 with a strong liquidity position and we intend to manage it prudently. In response to continued weak commodity prices, we are further reducing capital expenditures and associated drilling activity. As a result, we now forecast ending 2015 with approximately $6 billion in combined cash and borrowing capacity under our credit facility. With this budget revision we anticipate being free cash flow neutral by the end of 2015.”

Legal trouble continues to plague Chesapeake. In January, the company agreed to pay $119 million to settle a class action suite from 2013 that included thousands of royalty owners involving possibly 10,000 wells. And, most recently, a group of landowners in  Bradford County, PA filed a suit alleging that Chesapeake and Williams Partners violated antitrust laws by conspired to restrain trade in the market for gas gathering services. Read more here.

Chesapeake Energy is active all across the Eagle Ford including Atascosa County, Dimmit County, Duval County, Frio County, Goliad County, LaSalle County, McMullen County, Washington County, Webb County and Zavala County.

Photo: © Larryhw | Budget Cuts / Inflation Photo

Talisman Energy Cuts Jobs

Up to 200 People Expected to Lose Jobs
Talisman Cuts Jobs

Talisman Cuts Jobs

Talisman Energy Inc., with extensive holdings in the Eagle Ford shale play, announced this week that it is cutting its workforce due to the continuing drop in crude prices.

Related: Energy Giants Announce Layoffs

Layoffs will affect between 150-200 employees and contractors from Talisman’s head office in Calgary. These cuts coincide with the company’s plans to trim its 2015 capital program to $2.1 billion, a 30 percent drop from 2014. So far, the company has not announced any job cuts in its Texas operations.

Talisman spokesperson, Brent Anderson, commented to Bloomberg that “Our decision to reduce our workforce numbers is based on the decline in global commodity prices, which has meant a reduced capital spending program for us this year. The impacts of the reductions are hitting all functions supporting all parts of the organization.”

Oil prices have fluctuated since the first of the year. After a short move upwards, the price has hovered around the mid forties for the past two weeks.

In February, Talisman Energy shareholders finalized the sale of the company to Repsol and expected to close in the second quarter of 2015. The company announced that job cuts are unrelated to this acquisition.

Read more: Repsol to Aquire Talisman Energy

Talisman’s interests in the Eagle Ford shale play are located in southeast Texas, where the Company now holds approximately 59,000 net acres of land in the following counties:

Chesapeake Lawsuit Adds to Legal Trouble

Slain Deer at Center of Latest Legal Battle
White Tail Deer at Center of Lawsuit

White Tail Deer at Center of Lawsuit

Legal trouble continues to haunt Chesapeake Energy as mineral owners dispute royalty payments and contracts. This week, white tailed deer are at the center of another lawsuit that is now in a San Antonio court.

A recent lawsuit filed in January, claims that a Chesapeake employee hunted, killed and removed the white-tailed deer that roamed the Dimmett County property of James Birkner. Birkner’s lease with Chesapeake dates from 2010 and does not authorize hunting by Chesapeake employees on this land. Once the allegations were made, the company abruptly ended negotiations to renew its lease and vanished from the property. The claims against Chesapeake include negligence, trespass and breach of contract.

The company has other legal trouble. In January, the company agreed to pay $119 million to settle a class action suite from 2013 that included thousands of royalty owners involving possibly 10,000 wells. And, most recently, a group of landowners in  Bradford County, PA filed a suit alleging that Chesapeake and Williams Partners violated antitrust laws by conspired to restrain trade in the market for gas gathering services.

In February, Chesapeake filed a lawsuit against American Energy Partners alleging that ex CEO Aubrey McClendon stole confidential documents including maps of oil and gas prospects before leaving the company in 2013. Read more here

With more and more Texas lease holders scrutinizing their royalty statements the company may have more to worry about. Read more:  Mineral Owners Race the Clock in Texas

Chesapeake is active all across the Eagle Ford including Atascosa County, Dimmit County, Duval County, Frio County, Goliad County, LaSalle County, McMullen County, Washington County, Webb County and Zavala County.

 

© Nicolaselowe | Dreamstime.comWhite-tailed Deer Photo

Halcón Announces 2014 Earnings

Company Reduces Rigs to Cut Costs
Halcon Resource's Eagle Ford Acreage Map

Halcon Resource’s Eagle Ford Acreage Map | Click to Enlarge

Halcón Resources announced its 2014 results that included a net income for of $71.7 million and record production for its Eagle Ford operations.

Related: Halcón Resources Reduces 2015 Budget | Bakken Shale

Halcón operations in the Eagle Ford saw a production growth of 136% year-over-year. The company operated an average of three rigs in El Halcón during the fourth quarter, but currently have only one rig running. For 2015 El Halcón drilling program will focus on capturing leases and holding acreage. Foremost, the company will focus on ways to reduce completed well costs.

Other 2014 highlights include:

  • Q4 revenues of $239.5 million
  • Revenues for the full year 2014 totaled $1,148.3 million, an increase of 15% compared to the full year 2013
  • Q4 production was 46,076 barrels of oil equivalent per day (Boe/d) and 42,107 Boe/d, respectively
  • Production was comprised of 81% oil, 9% natural gas liquids (NGLs) and 10% natural gas for the quarter and 83% oil, 7% NGLs and 10% natural gas for the year.
  • Q4 operating costs per unit decreased by 23% compared to the same period of 2013
  • Total operating costs per unit for the full year were $24.14 per Boe, representing a decrease of 17%
Floyd C. Wilson, Chairman & CEO stated “We’ve reduced our 2015 drilling completion budget several times over the past few months. Service costs have come down significantly and continue to come down since the beginning of the year. Companywide, we currently have 26 operated wells being completed or waiting on completion. We’re operating three rigs, two in the Williston and one at El Halcón in East Texas.”

Halcón expects that completed well costs will decline by an additional 10% to 20% by midyear. In addition to across-the-board service cost reductions, they also plan to bring certain tasks in-house in order to reduce middlemen cost.

Read more at halconresources.com

Mineral Owners Race the Clock in Texas

Law Favors Operators over Owners
Mineral Owners May be Losing Money

Mineral Owners May be Losing Money

The oil and gas boom has made many Texans rich since 2008, but some mineral owners may not be getting what they deserve. A four year statute of limitations to correct payments errors has many owners scrambling to make sure they are being treated fairly.

Read more about mineral rights in Texas

Texas has a provision that allows mineral owners to request an audit if they have a dispute with an operators, which might involve royalty payment discrepancies, lease issues, drilling provisions or surface obligations. During an audit, production information, check stubs and other data is scrutinized to make sure operators have held up to their commitments in the lease.

If an owner suspects a problem, they have a four year time limit (from the time of infraction) to request an audit. This may seem like plenty of time, but it is not always clear what operators are doing and sometimes a problem isn’t obvious until it is too late.

Texas case law has laid a heavy burden on mineral owners to make sure energy companies pay what is owed. In 2012, the Texas Supreme Court issued a decision in Shell v Ross that requires owners to do their own exhaustive audits to find out if payments are correct.

“Readily accessible and publicly available information could have led the Rosses to discover that Shell was underpaying royalty before the limitations period expired,” the Texas Supreme Court ruled. “We hold that evidence conclusively established that Shell’s alleged fraud could have been discovered by the Rosses through the exercise of reasonable diligence.”

This increased responsibility for mineral owners can be overwhelming and, in some cases, impossible if they don’t have access to the proper information. Owners must be extra vigilant about all parts of the process, especially making sure they have a good lease that gives them the authority to inspect an operator’s books, accounts, reports or other accounting records.  

Connect with other mineral owners at MineralRightsForum.com

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