Will Iranian Oil Be Bad for Eagle Ford?

Crude Prices Expected to Drop
Oil Prices Predicted to Fall

Oil Prices Predicted to Fall

Last week, the U.S. reached an historic agreement with Iran that will include lifting economic sanctions and allow the oil-rich nation to sell its oil once again. This news has analysts and energy executives worried about the impact on the global oil markets and the Eagle Ford Shale specifically.

Related:EIA: U.S. Oil Production Has Peaked

Clearly this is bad timing. Since crude prices bottomed out in November, many producers have struggled to stay afloat while waiting for things to stabilize. If Iran floods the market with its crude as expected, prices will continue to fluctuate and will likely decline. Some analysts predict a drop in the price of WTI to as low as $40 a barrel.

This price point will be difficult for most producers to withstand for the long term, but many have been able to stay the course and gain strength by slashing costs associated with drilling through greater efficiencies and supplier reductions. Eagle Ford Economist Tom Tunstall of UTSA believes prices will definitely fall, but the efficiencies of the unconventional drilling will allow for smart Eagle Ford producers to remain profitable.

Related: Birthday of 2014 Oil Crash

Bloomberg’s Mark Barton doesn’t think that there will be an immediate impact and believes that it will take 6-12 months for Iran to even begin moving towards production. He goes on to say that Bloomberg is predicts $62 a barrel in the fourth quarter. See Barton’s full comments in the video below:


Eagle Ford and Bakken Drilling Permits Fall 30%

Oil Prices Down 40% in the Past Six Months

Oil prices have plummeted 40% in the last six months, and that’s putting the kibosh on some new drilling across North American shale plays.

According to DrillingInfo.com, applications for new drilling permits in South Texas’ Eagle Ford Shale and North Dakota’s and Montana’s Bakken Shale fell approximately 30% in November of 2014 compared to the previous month. However, the Texas Railroad Commission reports a whopping 4,891 new drilling and re-enter permits in the Eagle Ford from Jan. – Oct. of this year, already surpassing the total for new drilling and re-enter permits in 2013 of 4,416.

The rig count in the Eagle Ford Shale has not dropped off yet, staying between roughly 260 – 270 rigs running across EagleFordShale.com’s 30-county coverage area per week since June of 2014. But on Friday, oilfield services giant Baker Hughes, which will soon be purchased by rival Halliburton, reported a sharp drop in the U.S. oil rig count, with a decrease of 29 rigs.

As prices fall, new drilling in some areas of the Eagle Ford will also fall, but as we’ve reported, the “sweet spot” areas of the play will continue humming with drilling rigs.

Read more: What Lower Oil Prices Mean for Texas and Eagle Ford

Where the pinch will be felt the most in the coming months is with oilfield services companies. At higher oil prices, service companies have benefitted from charging a premium for their services, but expect for many contracts to be renegotiated as operator’s look for ways to trim the fat, and focus more on efficiency.