Eagle Ford Oil Prices Trade at a Premium to WTI – Condensate Weaker

Eagle Ford crude oil prices have been $10/bbl better than WTI at times this year

Eagle Ford oil prices realize a nice premium to WTI and higher API condensates trade at a discount. One of the great advantages the Eagle Ford has over other shale plays is location, location, location. A short commute to the nation’s petrochemical backbone means operators realize better oil prices than most areas of the U.S.

Eagle Ford Shale Oil Price Premium

Eagle Ford oil prices trade at a premium to WTI or a discount to LLS depending on who you talk to. Over the past two months, posted Eagle Ford prices have traded at a ~$6-8 premium to WTI and a ~$6 discount to LLS posted prices. That’s after spending part of April and May at >$10 premium to WTI and almost parity with LLS.

Eagle Ford Condensate Prices Trade at a Discount to Crude Oil

Oil Drum ImageIn 2011, over 36% of reported liquids production from the Eagle Ford was considered condensate and as much as 50% of production today is estimated to be condensate. That’s a significant portion of production, so it’s important to understand its pricing. [Read more…]

Chesapeake’s Eagle Ford VPP Plans Could Mean $1 Billion

Chesapeake Energy announced plans to sell a volumetric production payment (VPP) related to its Eagle Ford Shale assets earlier in the year. The plans were outlined with other assets sales to help fill a funding gap created by decade low natural gas prices.

Since the initial announcement, the company has delayed plans to sell the VPP in the Eagle Ford. I’ve seen two reasons given in the press. The reason I believe to be accurate is that Eagle Ford assets were retained to hold output and cash flow at levels required by debt covenants. With favorable oil prices and production additions in the tens of thousands of barrels per day in 2012, it stands to reason the Eagle Ford is becoming a significant contributor to the company’s bottom line. [Read more…]

Enterprise Products Expands ECHO Crude Storage – Eagle Ford Receipt Point

Enterprise Product Partners announced the acquisition of a 37-acre tract next door to the company’s Enterprise Crude Houston (ECHO) oil terminal and plans to expand storage capacity to 6 million barrels. The expansion will be completed just in time to begin  receiving crude from Enterprise’s 350,000 b/d Eagle Ford pipeline set for full completion in Q1 2013. [Read more…]

Eagle Ford Crude is Pushing Out African Imports

Eagle Ford crude production is pushing out African imports. The Gulf Coast region alone is importing 400,000 barrels per day less than it did at this time in 2010.

Domestic oil production is on the rise and foreign crude will continue to be displaced by locally sourced Bakken, Eagle Ford, and Permian crudes. Don’t expect that trend to slow as the Bakken and Eagle Ford are on pace to produce 1 mmboe/d each in less than five years.

Don’t underestimate the advantages of domestic crude. There are a lot more jobs on the upstream side of the business. It takes multiples more to drill and produce than it does to refine oil. The oil patch is a bright spot in what has been a rather dim jobs market over the past couple of years. As long as oil prices support development, this trend isn’t going to change any time soon.

[Read more…]

Not Enough Pipelines, Railcars, or Trucks for U.S. Crude

West Texas Intermediate (WTI) crude is trading at a more than $25 discount to Brent Crude. Brent prices are used as the benchmark for two-thirds of the international crude trade. WTI is used as the U.S. benchmark. More than $25 per barrel is an amazing spread when you consider WTI is priced in Cushing Oklahoma and the U.S. accounts for almost 25% of worldwide oil demand. How can oil be cheapest where demand is the highest? When you have a moment, look at Bakken and Eagle Ford drilling levels.

Shale Plays Adding Production Outside of the Gulf Coast

Shale plays like the Bakken and growing plays in West Texas along with an influx of Canadian oilsands production in the midwest have pushed a surplus of oil all the way to Oklahoma. In a perfect market, we could move oil quickly and easily to take advantage of the arbitrage or “free money”. Oil needs to penetrate the Gulf Coast refining market to recognize higher prices. Sounds simple. [Read more…]