Eagle Ford Shale Regional Rig Count at 268 – August 3, 2012

Anadarko, EOG, and Marathon all announce significant improvements in drilling time
Marathon Spud to Spud Drilling Days Chart

Marathon Eagle Ford Spud to Spud Time | Click to Enlarge

The Eagle Ford Shale drilling rig count fell two rigs to 268 this week. Operators are drilling wells faster than before and simply don’t as many rigs to drill the same number of wells. Without a significant commodity price increase, the rig count will likely decline through the remainder of the year. If oil prices were to go well above $100 or if natural gas prices rose to $4, operators would likely increase the pace of development.

This week alone, we had three different operators highlight how fast they are drilling wells. EOG Resources and Marathon are both lowering their rig counts because they have dropped their drilling time significantly. Anadarko also announced a record drill time of just 6.8 days in the second quarter. As you can see in the chart above, Marathon has almost halved its spud to spud drilling time in the last ten months. I’m no math whiz, but that means they can drill the same number of wells with half the number of rigs they needed ten months ago. Wow.

You can read more second quarter highlights from each of these operators here:

Eagle Ford Oil & Gas Rigs

The number of natural gas rigs (Smithbits) fell to 58 this week, down two from last week. The only counties with over ten rigs targeting natural gas are still Karnes and Webb. For those keeping up with gas rigs, the region experienced a peak of 125 in October of 2011 and has been on a steady decline to the recent low. There are 209 oil rigs working, which is one shy of the record set in April.

Henry Hub futures were trading at ~$2.90 on Friday afternoon. That’s a slight drop after trading above $3 over the past two weeks. Notably, spot prices (physical prices today) are $3.15. The severe heat as helped support prices at three dollars, but the heat will need to continue if we’re going to lower the current natural gas storage surplus.

WTI was trading at ~$91/bbl Friday afternoon and LLS crude prices are just above $110/bbl. If we see prices rise throughout the remainder of the year, we’ll likely see operators commit additional capital to the area.

There are 242 horizontal rigs running in the region. The three counties leading development are Karnes with 37 rigs, McMullen with 34 and both Dimmit and La Salle with 31 each. Webb (22), DeWitt (16), Gonzales (15), Atascosa (12), and Live Oak (11) round out the top Eagle Ford counties.

News items this week included:

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Drilling Rig Count by Operator

Operator Name Prior Week Current Week
Chesapeake 30 28
Marathon Oil (Hilcorp) 22 23
Petrohawk (BHP) 19 22
EOG Resources 22 20
ConocoPhillips 11 11
Pioneer Natural 12 11
Anadarko 9 10
Murphy Oil 9 10
Talisman Energy (Statoil) 9 9
Lewis Petroleum 8 8
Plains Exploration 8 8
SM Energy 7 7
Shell 7 6
Rosetta Energy 5 5
Swift Energy 4 5
El Paso Energy 3 4
Blackbrush O&G 3 3
Cabot Oil & Gas 3 3
Carrizo Oil & Gas 4 3
Dan Hughes 3 3
Hunt Oil 4 3
All Others 68 66
Total 270 268

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
KARNES 37 37 BRAZOS 3 3
MCMULLEN 31 34 GRIMES 3 3
DIMMIT 30 31 LEON 3 3
LA SALLE 31 31 ROBERTSON 3 3
WEBB 26 22 BEE 1 2
DEWITT 17 16 BURLESON 2 2
GONZALES 18 15 DUVAL 1 2
ATASCOSA 12 12 MAVERICK 2 2
LIVE OAK 12 11 Washington 2 2
FRIO 8 9 AUSTIN 1 1
MADISON 9 9 BASTROP 0 0
LAVACA 5 5 COLORADO 1 0
ZAVALA 4 5 GOLIAD 0 0
FAYETTE 4 4 LEE 0 0
WILSON 4 4 MILAM 0 0
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R.T. Dukes

R.T. Dukes

Managing Editor at EagleFordShale.com
R.T. is the managing editor of EagleFordShale.com. In prior roles, he advised major oil companies on strategy, the macro business environment, and opportunity screening. 2503 Robinhood, Houston, TX, 77005, U.S.A. | Telephone: 832.429.4790

Comments

  1. Phil Lippman says:

    Haven’t received an answer to an email I sent at an earlier date. I was asking about the current situation with the Salud Well to be drilled by Sanchez Exploration. It was to be drill concurrently with Sante. I heard recently that this was not going to happen. Will it be drilled at a later date or is Salud history.

    • R.T. Dukes RT Dukes says:

      Mr. Lippman,

      I spoke with a representative from Sanchez earlier this morning and was given the indication that both the Sante and Salud wells are still being drilled. A little later I received an email that the information I was given might not be correct. I’ll comment again when I get a definitive answer.

  2. Welder says:

    Do you think we could actually see that 270 rig count cut in half by the end of the year? If so would that mean this boom is a bust? Also what effects will extensive U.S. Sanctions on Iran have on the play?

    • R.T. Dukes RT Dukes says:

      The short answer is No. Operators are lowering their rig count by 10-20% because they have reduced their drilling time by that much or more. They all have kept the number of wells they will be drilling the same. That means there will technically be the same amount of drilling activity as before, but with fewer rigs. Changes like this should be attributed to a maturation process and should not be characterized as a bust.

      I’ve said many times before. The biggest threat to the Eagle Ford is commodity prices. If we were to enter another world-wide recession and prices fell below $70/bbl, you’d begin to see major declines in activity. Otherwise, the play seems to be getting better as operators improve their knowledge of the play.

      I don’t see sanctions on Iran impacting South Texas. The U.S. doesn’t import oil from Iran and most of the affects of sanctions have already trickled through the world market.

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