PXP is increases its spending in South Texas by $110 million in 2012 in response to operational efficiencies that have led to significantly more Eagle Ford drilling than planned. Original plans for 2012 called for the drilling of 83 Eagle Ford wells, but Plains is on pace for 148 wells. I’d say they might have been a tad bit conservative in their early projections.
Higher spending in the Eagle Ford Shale is leading to an approximate 78% increase in wells drilled and a 25% increase in average daily sales volumes over the 2012 base plan.
PXP plans to drill 124 wells next year, but don’t be surprised if they outperform that number too. The company is already planning for cost savings of $500,000 per well on the service side. That will drive well costs down to ~$8 million. Any additional savings in costs will allow the company to invest more heavily in development. Operational efficiencies don’t really ever hit a limit. Operators might start measuring hours instead of days, but there are always improvements that can be made. Shave 10% more off their drill time and PXP could drill closer to 140 wells next year.
In the Eagle Ford Shale, third-quarter daily sales volumes averaged 30.4 mboe/d net to PXP compared to third-quarter 2011 average daily sales volumes of 5.2 mboe/d net to PXP. At the end of October, PXP had 7.1 net drilling rigs operating on its acreage and 35 wells drilled but waiting on completion or connection to pipelines. PXP expects to exit the year producing between 32 – 36 mboe/d net.