Eagle Ford Shale News

Karnes County Couple Sues Marathon Oil

Texas Mineral Owners Protect Royalty Payments

Mineral Owners Sue Marathon OilOne couple from Karnes County exemplify how hard mineral owners have to fight to make sure their royalty payments are correct.

Related: Mineral Owners Race the Clock in Texas

John and Kelly Foster filed suit on Wednesday in order to obtain records from Marathon Oil that details the activity from their 613 acres in production. The family’s attorney said the couple is currently not seeking damages, but that a lawsuit was the only way to obtain information about how their royalty payments were calculated.

Texas 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. If an owner suspects a problem, they have a four year time limit to request an audit. While this seems like it should be plenty of time, it isn’t always clear what operators are doing and sometimes a problem may not be obvious until it is too late.

Oil and gas attorney John McFarland told San Antonio Express News, “Not all companies are willing to share information, and not all leases have an audit provision that allows royalty owners to see the books that show how their royalties were calculated.”

Karnes county is the most prolific space in the Eagle Ford and across Texas, currently running eight rigs in their county . The Texas Railroad Commission records show that wells on the Fosters’ land have produced nearly 600,000 barrels of oil condensate and more than 4.2 billion cubic feet of natural gas over the past five years.

Sanchez Energy to Increase Upstream Spending

Company to Drop One Eagel Ford Rig by End of Year
Sanchez Energy Q2

Sanchez Energy 2016 Q2

Sanchez Energy Corp. reported excellent production returns for the second quarter of 2016 and announced plans to increase upstream capital spending to between $250 million to $300 million.

Related: Sanchez Midstream Deal Worth $44 Million

During a second quarter earnings call, Sanchez’ CEO Tony Sanchez credited their results to competitive well costs, record production and improvements in the commodity price environment.

Sanchez continues to experience great results from their Eagle Ford operations including drill costs of below $3 million for wells at both Catarina and Cotulla.

Sanchez commented “The commodities or the company’s Eagle Ford development plan remains focused on Catarina, where in conjunction with the uptick and spending plan under our updated capital plan, the company is currently running three rigs and expects to maintain an activity set of two rigs for remainder of the year.

Second quarter highlights include:

  • Plans to increase its 2016 upstream capital spending by up to $50 million, to a range of between $250 million to $300 million
  • Total production of 5.1 million barrels of oil equivalent (“MMBoe”) during the second quarter 2016, up approximately 4% over the second quarter 2015
  • Average production of approximately 55,900 barrels of oil equivalent per day (“Boe/d”), which exceeded the high end of the Company’s guidance of 48,000 to 52,000 Boe/d for the second quarter 2016 by over 7%
  • Average drilling and completion costs between $3-3.3 million per well
  • Revenues of approximately $111 million (up approximately 39% over Q1)
  • $146 million in revenue
  • Adjusted EBITDA of approximately $79.6 million (up 23% over Q1)

In July, Sanchez Production Partners (SPP) initiated a transaction with Sanchez Energy to acquire 50% interest in Carnero Gathering, LLC. The company expects that the $44 million deal will increase their midstream revenue and adjusted EBITDA to approximately $7 million.

 

Read more at sanchezenergy.com

Cabot to Reduce Spending in the Eagle Ford

Company Reports $62.9 Million Quarterly Loss
Cabot Oil and Gas Earnings Report

Cabot Oil and Gas 2016 Q2

Cabot Oil and Gas announced second quarter results, highlighting a 10% production increase, costs reductions of 12% and three Eagle Ford wells added to production.

Related: Cabot Waits to Resume Eagle Ford Drilling

During a recent earnings call, Cabot executives commented on their Eagle Ford operations, saying it is likely they will cut back on the money spent in the region for the rest of 2016. Though the company’s Eagle Ford assets assets exceed the capitol costs, the return doesn’t warrant additional spending at this time.

Cabot’s Eagle Ford Shale assets achieved net production of 14,312 barrels of oil equivalent (Boe) per day during the second quarter, an increase of 10% over the first quarter of 2016. The Company completed and placed on production three net wells during the quarter and plans to drill two Eagle Ford wells during the third quarter.

Dan O. Dinges – Chairman, President & Chief Executive Officer commented “Despite a significant reduction in our Eagle Ford operating activity, including no wells drilled and only three wells completed during the quarter, our oil volumes for the second quarter exceeded our guidance due to outperformance from the newer wells that were placed on production. We are forecasting declines in our oil production volumes for the remainder of the year (…) and our plan is to continue to allocate a minimum amount of capital to our Eagle Ford assets”

Second quarter highlights include:

  • Cash flow from operating activities was $85.2 million ($171.2 million for 2015)
  • Net loss was $62.9 million ($27.5 million for 2015)
  • Operating expenses decreased to $2.22 per thousand cubic feet equivalent (Mcfe), a 12% improvement

Read more at cabotog.com

Texas Oilfield Relief Initiative Takes Shape

RRC Unveils Details to Improve Effectiveness
TX RRC Logo

Texas Railroad Commission

The Texas Railroad Commission is getting a facelift designed to benefit public and industry interests.

Related: Nordheim Citizens Sue Texas Railroad Commission

Railroad Commissioner Christi Craddick gave more details this week on the Texas Oilfield Relief Initiative, a new project designed to make the state’s energy regulatory body more efficient and effective. Craddick says that the initiative will still ensure public and environmental protections while also reducing the regulatory administrative burden on industry.

“With the current industry downturn, at stake is the survival of the state’s small producers and the oil industry’s many marginal wells, which make up 85 percent of total U.S. oil wells and 18 percent of the nation’s total oil output,” said Judy Stark, Panhandle Producers and Royalty Owners Association Executive Vice President. “During this critical time, Commissioner Craddick’s initiative will provide relief to Texas’ independent producers, the backbone of both our state and nation’s oil industry. For that, PPROA’s members are truly grateful.”

 

Industry officials and interest groups have been quick to praise the initiative, including representatives of the Texas Independent Producers and Royalty Owners Association, Panhandle Producers and Royalty Owners Association, Texas Alliance of Energy Producers, Permian Basin Petroleum Association and the Texas Oil and Gas Association.

 

Details of the Texas Oilfield Relief Initiative that will reduce adminstrative burdens include:
  • Identify agency reports and filings that can be reduced or eliminated
  • Amend rules to modify gas well deliverability reporting requirements
  • Reduce the need for G-10  filings except for surface commingled production
  • Allow a calculated well shut-in pressure to be provided when filing Form G-10 for gas wells
  • Amend production requirements for marginal and stripper wells
  • Revise “Active Oil Well” definition from ten barrels of oil (BO) per month for 3 consecutive months to five BO per month for 3 consecutive months or any reported production in each month for a consecutive 12 month period (SWR 15)
  • Revise “Active Gas Well” definition from 100 mcfg per month to 50 mcfg per month or any reported production in each month for a consecutive 12 month period (SWR 15)
  • Implement a revised internal inspection priority system
  • Reviewing washout factors to determine whether different washout factors should be used in certain areas of the state to calculate cement tops
  • Identify counties or portions of counties in which the usable quality water protection depth is constant.
  • Issue guidance for implementation of the Texas Environmental, Health & Safety Audit Privilege Act, permitting operators of new property to identify and remedy violations resulting previous to their ownership
  • Conduct an extensive review of all Railroad Commission forms required determine whether data collected is currently used or no longer necessary. Eliminate forms no longer useful to the Commission’s regulatory functions to reduce regulatory administrative burden on staff and industry.
  • Simplify the complete duplication of a drilling permit application with a sworn statement of no changes to the original application

Read more at rrc.texas.gov

EOG Boasts 2,000 Eagle Ford Locations

Company Remains Focused on Cutting Costs
EOG Earnings Report

EOG Resources 2016 Q2

EOG resources announce they have increased their Eagle Ford investments to almost 2,000 locations.

Related: EOG Highlights Eagle Ford Well Performance

For the second quarter of 2016, EOG Resources reported a net loss of $292.6 million while increasing their premium drilling locations from 3,200 to 4,300. They were also able to decrease cash operating costs per unit by 15% compared to full-year 2015.

Eagle Ford Operations

During a conference call last week, EOG executives highlighted their Eagle Ford assets, saying these continue to lead the company in activity and production.

Lloyd W. Helms, Jr. – Executive Vice President, Exploration & Production commented, “Year after year, we improve our well productivity in the Eagle Ford. Much of this year’s increase can be attributed to our shift to premium drilling. However, just 60% of our 2016 drilling program is premium, so we expect to see improvement for many years to come.”

Eagle Ford Highlights for 2016 Second Quarter

  • Increased premium inventory by 390 net drilling locations to almost 2,000 total
  • Completed 60 wells with an average treated lateral length of 4,800 feet per well
  • Averaged 30-day initial production rate per well of 1,705 barrels of oil equivalent per day (Boed)
  • Droped total well cost another 11% year to date to $5.1 million

Read more at eogresources.com

Nordheim Citizens Sue Texas Railroad Commission

Waste Site not Welcome in Eagle Ford Town
Lawsuit Against RRC

Citizens Sue Texas RRC

A group of citizens from one Eagle Ford town is suing the Texas Railroad Commission over plans for a waste site in their community.

Related: Eagle Ford Waste Facility Approved Amidst Protests

Folks in Nordheim, TX, population 316, have been waging war for several years against Pyote Reclamation Systems over a proposed waste site that borders their small Dewitt County town.

Residents have sent over 200 protest letters, showed up at RRC meetings and started a non-profit form Concerned About Pollution.

When the Texas Railroad Commission permitted the waste project in May, the group filed a lawsuit against the state’s regulatory agency.

The 143-acre waste pit would store drill cuttings, oil-based muds, fracking sand and other toxic oilfield leftovers. Citizens are concerned over potential safety issues such as increased truck traffic, the proximity to schools and the inability of the fire department to respond to a fire.

Even RRC Commissioner Ryan Sitton wasn’t keen on the waste site but said he had no other choice but to approve it.

Commissioner Ryan Sitton asked Pyote’s attorney “Does your client understand the social license to operate they have asked for here? I’ll be candid. I don’t like the site.”
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