Eagle Ford Rate of Return Higher than Other U.S. Shale Plays

Small Eagle Ford Producers May Feel Pinch by End of Decade With Declining Oil Prices
Eagle Ford Shale Well Map

Eagle Ford Shale Well Map | Click to Enlarge

At the annual Benposium Conference in Houston, TX, in early June of 2014, the Eagle Ford ranked highest for internal rate of return* (IRR) among all other U.S. Shale plays. According to Bentek Energy Senior Analyst Catherine Bernardo, the Eagle Ford is sitting at just over 70% IRR. Compare that to a 20% IRR, which Bernardo said is generally the rate at which producers move rigs into plays.

As development in the Eagle Ford continues, drilling efficiency is a primary goal for producers. According to Bernardo, the average number of drilling days has decreased 34% from 23 days to 15 days between 2010 – 13.

Small Eagle Ford Producers May Feel the Pinch by End of the Decade

The Eagle Ford is a very oily play, and with the price of oil over the $100/bbl mark, drilling is very active in the area. EagleFordShale.com tracks activity in the Eagle Ford, and currently, there are 269 rigs running across our coverage area. In the years to come however, small producers in the Eagle Ford Shale may feel the pinch as the price of oil begins to fall.

Read moreEagle Ford Shale Rig Count Increases by Seven to 269

In her presentation, Bernardo said, “Bentek predicts the price of crude oil will fall to $82 by 2018 – 19… That will have some cash flow impact on the smaller producers from being as low as that.”

Bernardo continued, saying that its not until oil falls between $80 and $60 dollars does it become uneconomic for some producers.

Tight Oil vs. Shale Gas

While the Eagle Ford Shale is proving to be very lucrative for producers, unconventional gas plays like the Haynesville Shale in Louisiana, are not seeing as much activity, with an IRR of just over 20%. The primary reason is attributable to the price of natural gas, which is around $4.50/mmbtu.

Producers will need to see gas prices go up and stabilize in order to have confidence in re-entering U.S. shale gas plays. Between 2010 – 11, the rig count in the Haynesville Shale was close to 140; however, the price of natural gas at that time was around $12/mmbtu.

Bentek’s annual Benposium conference is held in Houston each Spring.

internal rate of return (IRR)* – IRR calculations are used to evaluate the desirability of investments or projects. The higher a project’s IRR, the more desirable it is to undertake the project.

Comstock Directs 3 Rigs to the Eagle Ford – Sets Capital Budget

Three of Six Rigs Will Work the Eagle Ford in 2013
Comstock Resources Eagle Ford Map

Comstock Resources Eagle Ford Map | Click to Enlarge

Comstock Resources’ Eagle Ford assets will account for almost half of the company’s activity in 2013. Three of six rigs planned to work throughout the year will be active in South Texas. The other three will be working in West Texas as the company works to shift its production mix to higher valued liquids. [Read more…]

Goodrich Petroleum Allocates ~65% of 2013 Budget to the Eagle Ford

GDP Will Drill As Many As 28 Operated Wells
Goodrich Petroleum Eagle Ford Map

Goodrich Eagle Ford Map | Click to Enlarge

Goodrich Petroleum has planned for a capital budget of $175-$200 million in 2013. Of that, $115-137 million will be spent to drill 24-28 gross (16-19 net) wells targeting the Eagle Ford. The rest of the company’s budget will be spent between the Haynesville Shale and Tuscaloosa Marine Shale plays.

Production growth will be mute as the company goes full force into its liquids producing plays. Natural gas volumes will decline and oil volumes are expected to roughly offset the decrease. [Read more…]

Matador Resources’ Capital Budget is Focused in the Eagle Ford Shale

Drilling and Capital Is Shifting From the Haynesville Shale In Favor of the Eagle Ford Shale

Matador Resources will spend almost 85% of its capital budget developing properties and acquiring new properties in the Eagle Ford Shale in 2012. The company wil drill no Haynesville Shale operated wells in 2012 and will keep two rigs active in the Eagle ford throughout the next 12-months. [Read more…]

Apollo Buys El Paso’s E&P Unit Before Kinder Morgan Closes on the Pipeline Segment

El Paso Eagle Ford Shale Map

El Paso Eagle Ford Map | Click to Enlarge

Apollo and El Paso reached a $7.15 billion agreement for El Paso’s E&P segment. The deal is subject to the closing of the El Paso-Kinder Morgan pipeline merger.

El Paso’s exploration and production segment has been on the sales block since the Kinder Morgan deal was announced, but the question remained whether the assets would be sold in pieces or all together.

While Apollo has been rumored to be considering the deal, it comes as a bit of a surprise that the private equity group acquire El Paso E&P. Most industry experts thought El Paso would be a great fit for an international company looking to expand its footprint in the U.S. (e.g. Statoil-Brigham). Low natural gas prices that are limiting many companies’ upstream budgets might have opened a window for the Apollo group to step in. [Read more…]

Comstock Moving Haynesville Rigs to the Eagle Ford and West Texas

Comstock Resources’ Eagle Ford production grew more than 120% in the fourth quarter to 3,300 boe/d. The Eagle Ford accounted for 7% of the company’s total production at year-end 2011 and there’s no sign of growth letting up. The company plans to have all of its rigs moved out of the Haynesville Shale and into South and West Texas by March. Low gas prices are pushing the company to make a shift to oil and liquids. The Wolfbone in West Texas and Eagle Ford is South Texas are the primary development targets in 2012. [Read more…]