Pioneer CEO Confirms Condensate Exports to Europe

Condensate Exports Fuel Conversation for Lifting Oil Export Ban
Pioneer Central Gathering Plant

Pioneer Central Gathering Plant | Click to Enlarge

Pioneer Resources CEO Scott Sheffield confirmed this week the company has exported its second round of condensate exports – this time to Europe – during an investor webcast presentation. The first exports were to the Asian market in South Korea in July.

In June, Pioneer and Enterprise Products Partners, a midstream service provider, received permission from the U.S. Commerce Department (U.S. DoC) to export minimally processed condensate to foreign buyers. Other major operators in the Eagle Ford like BHP Billiton have also applied for permits, but have not gotten the nod from the U.S. DoC.

Read more: Eagle Ford’s BHP Billiton Seeks to Export Condensate

Sheffield said, “I expect the commerce department to approve several more permits, primarily for condensate, in the Eagle Ford, as long as it goes through the distillation process. I am optimistic this administration or the next one will remove the export ban.”

The pressure to lift the oil export ban is mounting from other industry executives. This week, Shell’s CEO Ben van Beurden urged Barack Obama to lift the ban during a speech he gave at Columbia University.

Van Beurden said, lifting the ban “would reinforce the long term future of North American energy production, and help make the global energy system more stable.”

Under the oil export ban, refined products can be exported. Pioneer’s minimally processed condensate exports are considered a refined product by the U.S. DoC.

Listen to the Pioneer Webcast

Eagle Ford’s Sanchez Energy Reports Record Revenue in Q2 2014

Company Increases Proved Reserves 170% (117 MMBOE) Following Eagle Ford Acquisition from Shell
Sanchez Energy Eagle Ford Acreage Map

Sanchez Energy Eagle Ford Acreage Map | Click to Enlarge

Eagle Ford-focused Sanchez Energy reported record revenue of $151.7 million in the second quarter of 2014, with portfolio-wide production increasing 164% year-over-year to 20,437 boe/d.

At the end of the quarter, the company closed its massive Eagle Ford acreage deal with Royal Dutch Shell for 106,000 net Eagle Ford acres in Catarina. The acquisition almost doubled the company’s acreage in the play. Total purchase price for the acquisition was approximately $639 million, less approximately $85.5 million in normal and customary closing adjustments.

Read more: Sanchez Nearly Doubles Eagle Ford Acreage in $639 Million Deal with Shell

Sanchez CEO Tony Sanchez, III, said,”as of August 1, 2014, Sanchez Energy has officially taken over all operations at Catarina after a brief transition period with Shell. The transition of operations has gone smoothly and the ramp up of Sanchez Energy operations is ahead of schedule. We have fully staffed our operations at Catarina and now have drilling, completion, and artificial lift installation in progress. Additionally, now that we have achieved critical scale from the Catarina assets, we are utilizing a dedicated frac spread as well as direct sourcing of chemicals and proppant. We expect these factors will reduce completions costs by an additional 30%, allowing flexibility to increase fracture stage size or improve returns from a lower development cost.”

With the Catarina acquisition, Sanchez increased its proved reserves 170% to approximately 117 MMBOE as of June 30, 2014. Crude oil constituted 49% and NGLs constituted 24% of the company’s proved reserves. 56% of the company’s proved reserves were classified as proved undeveloped, compared to 70% at same time last year.

Sanchez Eagle Ford Q2 Operations Update

Sanchez Energy currently has 6 gross rigs running across its Eagle Ford acreage, with 419 gross producing wells and 38 gross wells in various stages of completion.

By area, the company’s Cotulla, Marquis, and Palmetto Eagle Ford operating areas comprised approximately 42% of the crude oil cut from total second quarter 2014 production volumes. Company officials expect the percentage of oil expected in the company’s third quarter production volumes should decrease as the impact of the production volumes from Catarina are recorded.

The company’s third quarter production guidance range portfolio-wide of 37,000 to 41,000 boe/d has been revised to 36,000 to 40,000 BOE/D while its fourth quarter production guidance range of 45,000 to 49,000 boe/d has increased to 48,000 to 50,000 boe/d. Production guidance for 2015 remains the same at a range of 53,000 boe/d to 58,000 boe/d.

Read more at sanchezenergycorp.com

Eagle Ford Deal Closings – June 2014

Encana Deal is the Largest - $3.1 Billion

Several significant Eagle Ford acquisitions were announced in April and May of 2014. In June of 2014, the details of these acreage deal closings were announced by the buyers, which included Encana Corporation, Sanchez Energy, Panhandle Oil & Gas and Warwick Energy.

Encana Corporation

Freeport-McMoRan Eagle Ford Acreage Map

Freeport-McMoRan Eagle Ford Acreage Map | Click to Enlarge

The Encana deal was by far the largest. The company completed its acquisition of ~45,000 net Eagle Ford acres located in the oil window of Karnes, Wilson and Atascosa Counties from Freeport McMoran on June 20, 2014 for $3.1 billion.

In the first quarter of 2014, the acreage produced 53,000 boe/d. Company officials estimate a drilling inventory of more than 400 locations. The company plans to update its production guidance in its next quarterly report on July 24, 2014.

Read more about the deal: Encana Purchases Eagle Ford Assets from Freeport McMoran

Sanchez Energy

Dimmit County Eagle Ford Shale Map

Dimmit County, TX

Sanchez Energy announced on June 30, 2014 that it closed its massive Eagle Ford acreage deal with Royal Dutch Shell for 106,000 net Eagle Ford acres.

Total consideration for the acquisition was approximately $553.5 million, comprised of the $639 million purchase price less approximately $85.5 million in normal and customary closing adjustments. The transaction was funded from cash on hand from a portion of the net proceeds from the company’s previously issued $850 million senior unsecured 6.125% notes due in 2023.

Read more about the dealSanchez Nearly Doubles Eagle Ford Acreage in $639 Million Deal with Shell

Panhandle Oil & Gas

Panhandle Oil & Gas announced the closing of its Eagle Ford acquisition on June 17, 2014. The deal includes a 16% non-operated working interest in a 11,100 leasehold acres (1,775 net) block that company officials say is held largely by production with 63 producing wells.

Net to the company’s interest, May 2014 production in the newly acquired acreage was 825 boe/d , with an 80% oil cut. The property is currently being developed with a one drilling rig program by the operator, Oklahoma City-based Cheyenne Petroleum Company.

Read more about the deal: Panhandle Oil and Gas Acquires Interest in Eagle Ford Acreage for $80 Million

Warwick Energy

Read more about the deal: Warwick Energy Buys Eagle Ford’s R/C Sugarkane for Undisclosed Amount

Closing details: Warwick Energy Closes Deal for 7,300 Net Eagle Ford Acres

Sanchez Nearly Doubles Eagle Ford Acreage in $639 Million Deal with Shell

Deal Includes 106,000 Net Eagle Ford Acres
Dimmit County Eagle Ford Shale Map

Dimmit County, TX

Houston-based Sanchez Energy Corporation announced in May of 2014 that it has entered a deal with Royal Dutch Shell subsidiaries in the Eagle Ford to purchase 106,000 net acres for $639-million. The acquisition increases Sanchez’s total net Eagle Ford acreage to 226,000, and adds 60 MMBOE of proved reserves, nearly doubling the company’s acreage position and proved reserves in the play.

During the first-quarter, the acquired assets had production of 24,000 boe/d (60% liquids). Sanchez estimates there are at least four years of drilling inventory from 200 “de-risked” wells in the new acreage, which extend across Dimmit, La Salle and Webb Counties.

CEO Tony Sanchez III, said, “the addition of this asset includes at least 200 identified drilling locations and up to 800 additional potential locations that can be added through our planned appraisal work on the rest of the asset and will take us to a total of almost 3,000 potential drilling locations. The estimated 200 de-risked ready-to-drill locations will provide at least four years of drilling inventory at a 50-well-per-year pace. We expect that this drilling activity will generate well-level rates of return in excess of 35% – 50%.”

This most recent acquisition is the largest for Sanchez in a string of acreage deals beginning early last year. In March of 2013, the company purchased 43,000 net acres in Dimmit, Frio, La Salle, and Zavala counties from Hess Corporation for $265-million. At that time, the acquisition from Hess also doubled the size of the company. In June of 2013, Sanchez stuck another deal for Eagle Ford acreage, acquiring 10,300 net acres in Fayette, Lavaca, and Gonzales counties for $28.8-million.

Read more: Sanchez-Hess Reach Eagle Ford Deal for $265 Million

Read more: ZaZa Selling Eagle Ford Assets to Sanchez Energy For $28.8 Million

Shell Exiting the Eagle Ford

In September of 2013, Shell announced it had plans to sell 106,000 acres in the Eagle Ford. The oil giant, unlike many other companies in the Eagle Ford, didn’t meet its internal targets for size and profitability in the play. With the divestiture of its primary Eagle Ford assets, Shell retains 147,000 acres of non-operated leases in Maverick County.

Read more: Shell’s Eagle Ford Acreage is For Sale

The acquisition is expected to close in the second quarter of 2014, with an effective date of January 1, 2014.

Read more at SanchezEnergyCorp.com

Eagle Ford Regional Rig Count 267 – Shell Will Exit the Eagle Ford – Oct 4, 2013

Shell Will Sell Over 100,000 Acres and Gross Production of More Than 30,000 boe/d
Eagle Ford Shale Well Map

Eagle Ford Shale Well Map | Click to Enlarge

The Eagle Ford Shale rig count decreased by two rigs from 269 to 267 running last week. Without a major change in commodity prices, watch for the rig count to remain flat to up a bit throughout the rest of the year. Also, watch for companies to begin releasing 2014 development plans. We’re hearing several companies might add rigs early in the year.

The most interesting announcement of the week was from Shell. The company plans to sell over 100,000 acres and operated production of ~30,000 boe/d gross in the play. They company stated their position simply hasn’t met their criteria for size and investment returns. My bet is a smaller company can make the position work better than a super-major with competing interests around the globe. Read the full article Shell’s Eagle Ford Acreage Is For Sale.

The U.S. rig count increased 12 rigs from 1,744 to 1,756 running over the past week. A total of 378 rigs are targeting natural gas (2 more than last week) and 1,372 are targeting oil in the U.S. The remainder are drilling service wells (e.g. disposal wells, injection wells, etc.). 830 rigs are running in Texas. [Read more…]

Shell’s Eagle Ford Acreage Is For Sale

106,000 Acres & 150 Producing Wells Will Be Sold
Dimmit County Eagle Ford Shale Map

Dimmit County, TX

Shell’s Eagle Ford acreage is on the figurative auction block. The company plans to sell over 106,000 acres and more than 190 gross producing wells targeting the play. [Read more…]

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