Eagle Ford Shale Play- May 2017
After two years of struggle and industry contraction, the outlook in Texas' Eagle Ford Shale is looking more positive.
1) Oil and Gas Rig Count
As oil prices have rebounded, Eagle Ford producers found they could make a profit again and we are seeing more rigs dotting the landscape.
This time last year, the monthly rig count was consistently falling, but during the first quarter of 2017 that downward trend has reversed. Operators in the Eagle Ford Shale region are currently running 99 oil and gas rigs compared to 34 in May 2016.
2) Production Increases
During the first quarter of 2017, the Texas Railroad Commission (RRC) reported a spike in the number of drilling permits issued. The agency granted 3257 new drilling permits, more than double the number of this time last year.
This goes hand in hand with an increase in production. The Energy Information Administration (EIA) predicts that total America shale oil production will grow to about 438,712 barrels per day year-to-date through May 2017. The agency also estimates that the Eagle Ford shale will have added 78,468 barrels of oil per day from February 2017 to its May 2017 oil production estimate.
3) Reduced Costs
Throughout the downturn, producers have worked hard to manage and reduce operating costs and improve efficiencies as a strategy to survive. These have proven to be a key factor in the Eagle Ford come-back. For the first quarter of 2017, many companies credit lower costs to strong results.
- Cabot Oil and Gas reported 13% drop in drilling costs for Eagle Ford in Q1
- NuStar credited lower costs with strong first quarter results
- Encana has reduced transportation and operating costs by $100 million and claims some of the lowest drilling costs in the industry
- Carrizo lowered the estimate for a type curve well in the Eagle Ford by $100,000
Some analysts predict this positive trend to continue in the Eagle Ford throughout 2017.
“The Eagle Ford shale basin is experiencing a resurgence and oil production growth adding to global supply challenges, we believe that operational efficiencies gained over the past several years will enable producers to operate in an environment of oil prices in the high $40s to low $50s. ”