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

ConocoPhillips Eagle Ford Map
ConocoPhillips Eagle Ford Map

Oklahoma-based Warwick Energy announced in June of 2014 that the company closed its purchase of R/C Sugarkane LLC, an Eagle Ford upstream oil and gas company, last month.

At closing, Warwick Energy gained R/C Sugarkane's 7,300 net Eagle Ford acres, with current production of ~1,200 net boe/d in Live Oak, Atascosa and Karnes counties. The deal also included R/C Sugarkane's gathering and other related midstream infrastructure in the play. In April of 2014, Warwick announced it agreed to purchase R/C Sugarkane from affiliates of a New York-based private equity firm, Riverstone Holdings LLC, for an undisclosed amount.

Read more: Warwick Energy Buys Eagle Ford's R/C Sugarkane for Undisclosed Amount

According to Warwick officials, the operators of the acquired acreage are ConocoPhillips, Marathon and BHP Billiton. Warwick officials say they are encouraged by downspacing results and optimizations being achieved by these operators.

The Eagle Ford Shale is a world class, liquids-rich resource play and through this acquisition we have acquired a multi-year drilling inventory that is both substantially de-risked and held by production.
— Warwick CEO, Katherine Richard

Warwick was founded in 2010, and manages non-operated oil and gas interests across the country, with interests in over 5,000 wells in 13 states. The R/C Sugarkane acquisition will be funded by ArcLight Capital Partners affiliated equity investors.

Read more at warwick-energy.com

BHP Lowers Eagle Ford Capital Spending For Fiscal Year 2014

Petrohawk Eagle Ford Shale Map
Petrohawk Eagle Ford Shale Map

BHP touted the strength of the Eagle Ford in its year-end results, but also announced plans to lower capital spending in the play to a little more than $2.9 billion over the next twelve months.

BHP's fiscal year 2013 ended on June 30th, so the company is reporting year-end results.

BHP is lowering its onshore U.S. oil & gas spending from $4.8 billion in fiscal year 2013 to $3.9 billion in fiscal year 2014. Approximately 80% of spending was allocated to the Eagle Ford and Permian in 2013 and approximately 75% of spending will be allocated to the Eagle Ford in 2014. The remaining 25% of drilling activity will be allocated in the Permian Basin and Haynesville Shale.

Approximately 75 per cent of operated drilling activity will be focused on our liquids rich acreage in the Eagle Ford.

At times over the past couple of years, BHP has had as many as 30 rigs running in the Eagle Ford, but plans call for 19 rigs in fiscal year 2014. This doesn't necessarily mean fewer wells will be drilled. While the company isn't as vocal about its operations, there is no doubt wells are going down much faster today than in years past. The company noted as much back in mid-July:

An improvement in drilling productivity is expected to facilitate a reduction in our rig count in the 2014 financial year, while a lower level of capital expenditure for Onshore US will be increasingly focused on our liquids rich acreage in the Eagle Ford.

BHP produced a little more than 32 million boe or close to 90,000 boe/d from the Eagle Ford in fiscal year 2013.

BHP has completely suspended drilling the Fayetteville Shale.


BHP Job Fairs Underway in the Eagle Ford

Eagle Ford Event Registration Line Photo
Eagle Ford Event Registration Line Photo

BHP began holding jobs fairs this past week and still has a few on the schedule. If you're looking for a South Texas oilfield job, BHP is one of the largest operators in the play and plans to hire hundreds in the region. The company plans three job fairs next week:

  • April 9th – Oil & Gas Industry Job Fair, (5:30-7:30 pm) BHP Billiton Petroleum Job Fair, Floresville Event Center in Floresville, TX
  • April 10th – Oil & Gas Industry Job Fair, (5:30-7:30 pm) BHP Billiton Petroleum Job Fair, Jourdanton Community Center in Jourdanton, TX.
  • April 11th – Oil & Gas Industry Job Fair, (5:30-7:30 pm) BHP Billiton Petroleum Job Fair, Solomon P. Ortiz Center in Corpus Christi, TX.

The company employs 1,800 people in the area today and expects to have more than 3,000 employees when its Eagle Ford office opens in 2016.

If you'd like, you can read more about BHP's Eagle Ford History Here.

Pioneer Permits Another Long Lateral in Live Oak County

Pioneer Natural Resources permitted another long lateral in Live Oak County, TX this past week. The well is almost six miles north of Three Rivers, TX and will be drilled to a total depth of 21,000 ft in the Sugarkane field. Other permits across the play included the normal players Chesapeake, EOG, Petrohawk (BHP), and Talisman. 


Utica Shale - Eagle Ford Shale Debate Pits Texas vs. Ohio

The Utica Shale vs. the Eagle Ford Shale debate has drawn a lot of attention since Chesapeake announced a 1.25 million acre position in the Utica Shale. Aubrey McClendon's comments have gotten a lot of traction:

As a result of its analysis, the company believes the Utica Shale will be characterized by a western oil phase, a central wet gas phase and an eastern dry gas phase and is likely most analogous, but economically superior to, the Eagle Ford Shale in South Texas.


That quote sent many articles to the press touting the Utica Shale as the new great shale play and made many Texans wonder if we'd lose some drilling rigs to Ohio. You can track the rig count yourself with the Eagle Ford Shale Drilling Index that is updated each Friday, but if you don't have the time, the counties where the Eagle Ford is present have seen more than 40 rigs come into the play over the past three months. That's more than 10% of the total U.S. onshore rig count (230+ rigs) working in an area that is economically inferior. The catch, it's possible, but the Eagle Ford shouldn't lose much if anything.

We'd like to see an open debate between Chesapeake and other operators like Anadarko, BHP, EOG Resources, Petrohawk, and Marathon Oil. I doubt the guys that have poured billions into the Eagle Ford will agree. But if the hype is true, you'll see rigs working in both plays and will not have to worry about the Utica pulling resources away from Texas.

While the Utica Shale likely has areas that provide better economics than parts of the Eagle Ford, it is hard to imagine any drilling rigs leaving for Ohio. Natural gas rigs deployed in other parts of the country are far more likely to make the move. Natural gas is trading below $4 per mcf as of August 2011. That's not what most plays need to make an economic return and you'll see more drilling shift to liquids plays like the Utica and Eagle Ford.

Not every acre in any play will be economic. We've seen how a highly touted play can do a 180 in the Haynesville Shale and we've even experienced a little of that in South Texas. Most recently, Petrohawk abandoned its Red Hawk Field in Zavala County. That means that Zavala County might face more challenges than we thought, but Dimmit County, DeWitt County, Gonzales County, Karnes County, LaSalle County, and Webb County will likely benefit as rigs move within the Eagle Ford.

In summary, I don't think the entire Utica will prove to be economically superior to the entire Eagle Ford, but I do believe you could read between the lines and say that Chesapeake's Utica Shale acreage looks to be better than Chesapeake's Eagle Ford Shale Acreage.

In short, the Eagle Ford and the Utica look to be big resource wins for the U.S.