Eagle Ford Shale News

Lucas Energy Re-Activates Eagle Ford Assets

Company Borrows $1 Million for Eagle Ford Projects
Lucas Re-activates Wells in the Eagle Ford

Lucas Re-activates Wells in the Eagle Ford

Lucas Energy re-energizes their activity in the Eagle Ford.

Related: Lucas Energy Joins Lonestar for Eagle Ford Development

This morning, executives of Lucas Energy announced they recently completed two wells in Karnes County in addition to re-activating their Griffin 1H Austin Chalk well. The first tests on the Griffin 1H is showing production of 55 boe/d after having produced 5 Boe/d prior to shut-in.

In south Gonzales County, Lucas has participated in the Cyclone #9H well that tested 598 barrels of oil equivalent per day (Boe/d) and a 30-day initial production rate of 486 Boe/d. The Cyclone #10H tested 631 Boe/d and a 30-day initial production rate of 521 Boe/d. Originally estimated to cost an average of $5.2 million, these wells have been drilled and completed at an average cost of $4.7 million. Both are producing approximately 90% crude oil from a processed three-stream basis on a 18/64″ choke. Lucas owns an 8% working interest in these two wells.

In August, Lucas Energy announced that its wholly-owned subsidiary, CATI Operating, LLC will borrow $1 million to fund drilling, completion and maintenance projects in the Eagle Ford Shale. The company will enter into a joint operating agreement with Lonestar Resources that will cover over 1,450 gross acres. Lucas will have a 8% -14% working interest in the units.

Anthony C. Schnur, the Chief Executive Officer of Lucas Energy commented, “As we ramp up production on our legacy and newly-acquired assets, the Company continues to aggressively pursue acquisition opportunities with both producing and nonproducing reserves. “

Second quarter highlights for Lucas’ Eagle Ford assets include:

  • Placed two new Eagle Ford shale wells on stream during May of the quarter
  • Crude oil production rose 17% sequentially in the second quarter as Lonestar’s 2016 completions have all been in the crude oil window.
  • Net loss of $12.8 million for 2Q16 versus a net loss of $8.4 million in 2Q15
  • Adjusted EBITDAX was $16.0 million compared to $22.0 million for 2Q15

EIA: Eagle Ford Shale the Biggest Loser

Drops in Oil & Gas Production Expected
Eagle Ford Production Decline

Eagle Ford Production Continues Decline

The Eagle Ford Shale is expected to see the biggest production declines in the industry for both oil and gas next month.

Related:Billions of Barrels Still Available in the Eagle Ford

U.S. Energy Information Administration (EIA) released its latest drilling productivity report today that forecasts shale oil production was expected to fall for a 12th consecutive month in November.

The agency predicts that the Eagle Ford will be the hardest hit with a regional decline of almost 0.2 bcfd for natural gas from October to 5.6 bcfd in November. This is the lowest level of output in the basin since November 2013. For oil, the Eagle Ford is set to drop by 35,000 bpd to 947,000 bpd.

Total oil production for November is expected to fall by 30,000 barrels per day to 4.43 million bpd, the lowest output since March 2014. Total natural gas production will decline for a seventh consecutive month in November to 46.0 billion cubic feet per day, the lowest level since July 2015.

eagle Ford decline


In September,the University of Texas’ Bureau of Economic Geology released new research that shows there are still billions of barrels to be recovered in fields across the Eagle Ford. Highlights of the study include:

  • The play holds an estimated 230 billion barrels of oil (only 10 billion can be recovered now)
  • The play has an estimated 462 trillion cubic feet of natural gas, with 34 trillion cubic feet recoverable.
  • At least 80,000 more wells will be drilled

Read more at eia.gov 

Chesapeake Faces Antitrust Investigation

U.S. Department of Justice Issues Subpoenas
Couple Sues Talisman

Chesapeake Antitrust Investigation

Chesapeake Energy if under federal investigation for possible antitrust violations.

Related: Chesapeake to Pay Record Royalty Settlement

TheU.S. Department of Justice announced last month that it has opened an investigation into possible antitrust violations by Chesapeake Energy Corp.

ABC News is reporting that the agency has issued subpoenas for documents related to how the Chesapeake pays royalty owners and accounts for oil and gas reserves.

Chesapeake’s 2015 annual report, stated:  “There are ongoing governmental regulatory investigations and inquiries into such matters as our royalty practices and possible antitrust violations. The outcome of any pending or future litigation or governmental regulatory matter is uncertain and may adversely affect our results of operations. In addition, we have incurred substantial legal expenses in the past three years, and such expenses may continue to be significant in the future.”

As crude prices and rig counts plummeted over the last year, the number of lawsuits have increased and Texas courts are seeing everything from royalty, lease and title complaints to more complicated contract disputes involving major investors.

Chesapeake has been at the forefront of oil and gas litigation across the country including being named in several lawsuits alleging underpayment of royalties in Arkansas, Louisiana, Ohio, Oklahoma, Pennsylvania and Texas.

  • January: the Fort Worth school district was awarded $1 million when Chesapeake improperly deducted expenses from royalties owed to the district and its taxpayers. The suit involved at least 30 leases on land covering at least 1,000 acres.
  • February: the Texas Supreme Court upheld a lower court’s ruling to award at least $1 million in royalties, interest and attorney fees to the Hyder family who had been fighting Chesapeake Energy since 2010.
  • May: Chesapeake agreed to pay Fort Worth $15 million to settle a lawsuit that claimed the company owed $33.5 million in royalty payments from more than 260 leases on about 5,800 acres of city property in Tarrant and Johnson counties.
  • April: the Michigan Attorney General reached an agreement with Chesapeake that included setting up a $25 million fund to pay residents who say they were defrauded by the company.

Read more at chk.com

Texas Tax Revenues Drop 3.9%

Oil & Gas Downturn Blamed for Decreases
Texas Tax Revenues Decline

Texas Tax Revenues Decline

Tax revenues for the Lone Star State fell for the fifth straight month in September as oil and gas operators keep spending low.

Related: Some Eagle Ford Schools Fighting to Survive

The Texas Comptroller’s office reported the state’s lowest September sales tax collections since 2013 with a decline of 3.9% below the same month last year.

The Texas budget relies on sales taxes, which account for 58% of all statewide tax collections. As the shale boom subsided, the decrease in spending in the oil and gas sector has begun to affect the state budget. The Comptroller’s report showed:

  • Sales tax revenue were at $2.13 billion in September (down 3.9%)
  • Natural gas production tax: -14.66%
  • Oil Production and Regulation Taxes: -2.52%
“Subdued spending for oil and gas drilling continues to depress sales tax revenue,” Comptroller Glenn Hegar said in a statement. “Consumer spending also appears to have slowed, as sales tax collections from retail trade were down from the previous year. In contrast, construction sector receipts continued to grow.”

One effect of lower taxes is the lower amounts of money flowing into Eagle Ford school districts. During the height of the shale boom, the drilling frenzy brought $1.5 billion in property tax revenue for local Eagle Ford schools and another $676 million for the Permanent School Fund. But as the oil and gas activity dried up, so have the tax revenues that fund local school districts.

The bust now threatens to be a serious financial blow to many districts. For the upcoming 2016-2017 school year, some are facing serious deficits and others will delay pay raises and hiring in order to juggle their budgets.

Read more at comptroller.tx.gov

Sanchez Production Partners to Acquire New Eagle Ford Assets

Deals to Close in Fourth Quarter

partnershipSanchez Production Partners (SPP) moves forward with plans to acquire new Eagle Ford assets.

Related:  Eagle Ford Midstream Deal Worth $44 Million

Sanchez Production Partners announced last week that it has executed agreements with Sanchez Energy Corporation to purchase a working interests in 23 producing Eagle Ford wellbores in Dimmit and Zavala counties plus an escalating working interests in an additional 11 producing wellbores in Gonzales County.

This transaction will add an average of 700 Boe/d of production in 2017.  The estimated proved reserves from the producing wellbores is approximately 2,136 MBoe, of which 73% is oil, 13% natural gas liquids, and 14% natural gas.

An additional transaction includes a $47.7 million agreement to acquire Sanchez Energy’s 50% interest in Carnero Processing, which is currently constructing a cryogenic natural gas processing plant in La Salle County. The “Raptor Plant” will be connected to Sanchez Energy’s Catarina via the Carnero Gathering System.

Sanchez Energy CEO Tony Sanchez, III said: “Proceeds from the transactions, which are expected to close in the fourth quarter 2016, are expected to enhance the company’s already strong liquidity position which, as of the end of the third quarter 2016, totaled approximately $629m, consisting of approximately $329m in cash and cash equivalents and an undrawn bank credit facility with an elected commitment amount of $300m.”

Read the full press release here

DeWitt Landowners Sue Talisman

Couple Alleges Underpayment of Royalties
Couple Sues Talisman

Couple Sues Talisman

The Eagle Ford’s DeWitt County is at the center of a royalty dispute over unpaid royalties for one couple.

Related: Repsol to Aquire Talisman Energy

Eugene and Kimberly Cran, have taken their complaints to court, filing lawsuit against Talisman Energy (Repsol) earlier this week. The couple claims they were underpaid for their royalties for oil wells on their land in DeWitt County.

The Crans had entered into a lease with both Talisman and StatOil USA. They became suspicious when their royalty checks from Talisman were consistently lower than those from StatOil. The couple turned to the courts when they could get no reasonable answers from the company.

The suit alleges that Talisman “systematically failed and refused to pay Plaintiff(s) the full royalties due and owing according to their mineral rights and leases.”

The Provost Umphrey Law Firm LLP represents the Crans and more than 100 royalty owners in the Eagle Ford. They expect to file more royalty payment lawsuits again Talisman over the next few weeks.

Talisman became a casualty of the crude pricing crisis. After a devastating $1.59 billion loss in the fourth quarter of 2014 and announcements of major job cuts, the company was sold to Repsol in 2015 for $8.3 billion.

Read more at bizjournals.com