EXCO's Eagle Ford Results Are Meeting Expectations - Manufacturing Mode Coming

EXCO Eagle Ford Map

EXCO Resources completed the acquisition of Eagle Ford assets in the third quarter and ended September producing approximately 7,600 boe/d from the play.

Immediately following the Chesapeake deal, the company sold a 50% interest in the undeveloped portion of acquired assets to KKR for $131 million, so the two are partners with CNOOC in the Eagle Ford.

EXCO, as the operator, plans to run 4-5 rigs in full development mode and expects to drive down costs by leveraging what the company has learned through its "manufacturing" approach in other shale plays.

“Our acquisitions in the Haynesville and Eagle Ford shales support our strategy to grow in our core areas, add to our oil production, and use our outstanding operating expertise. We have begun our development program in the Eagle Ford through the drilling partnership with KKR. Our early drilling and completion results are meeting our expectations, and we plan to quickly implement a manufacturing program on both the Eagle Ford and Haynesville assets.”

— Douglas H. Miller, CEO

EXCO acquired 55,000 net acres from Chesapeake in July and entered a farm out agreement on another 147,00 acres.

EXCO then sold a 50% interest in the undeveloped acreage to KKR for $131 million. KKR owns half of the acquired interest in undeveloped properties and EXCO will assign half of its remaining interest to the company as each well is drilled. KKR will fund and own up to 75% of each well and EXCO will fund and own 25%. EXCO then has the right to purchase wells in batches from KKR starting in the first quarter of 2015.

Read the full press release at excoresources.com

Chesapeake - Utica JV - Eagle Ford Drilling at a High

Chesapeake Energy continued its string of successful joint-ventures (JV) following leasing that has added more than 5 million acres in shale plays over the past few years. In all, the company has spent $2,200 per acre and gone on to sell a portion of that acreage for almost $11,000 per acre. Chesapeake has recouped its investment in all of those plays by selling no more than a 33% interest in each shale play. In the latest JV, CHK is getting $2.14 billion or $15,000 per acre for a 25% interest in 650,000 net acres in the wet gas window of the Utica Shale in Ohio. I assume this is the area where CHK references "superior economics". It will be interesting to see what happens in the dry gas and oily windows.

Chesapeake's Eagle Ford drilling program has ramped up to 29 rigs running across the play. 29 rigs leads the way in South Texas and those numbers are expected to stay high as CNOOC's cost carry continues to help fund development.

This new JV would make our seventh. We started with the Haynesville in July of 2008, and in the 3 years since then, we have brought in partners on the Fayetteville, Marcellus, Barnett, Eagle Ford, Niobrara and now into 1 phase of the Utica play. In these seven JV areas, the company initially acquired approximately 5.1 million net leasehold acres at a cost of $11.1 billion. That's around $2,200 per net acre overall on average. We then sold 1.5 million of those acres for total consideration of $16.4 billion in cash and carries, meaning we recovered 150% of our total leasehold costs in all the plays combined, while leaving ourselves with 3.6 million net acres in 7 of the nation's very best plays, at a negative leasehold cost of $5.3 billion. That's about a negative $1,500 per net acre. I really don't think the magnitude or significance of what we have accomplished by owning 3.6 million net acres at a profit of $1,500 per net acre has been fully appreciated. It is quite simply unprecedented in our industry.

Read the entire press release at chk.com

Chesapeake - CNOOC Reach Eagle Ford JV Agreement

CNOOC-Chesapeake reach an agreement whereby Chesapeake will sell a 33.3% stake in its 600,000 Eagle Ford Shale acres to CNOOC for $2.16 billion ($10,800 per acre).  CNOOC will pay half upfront and carry 75% of development costs until the other $1.08 billion is paid.

Chesapeake Energy Corporation (NYSE: CHK) and CNOOC Limited (NYSE: CEO; SEHK:00883) today announced the execution of an agreement whereby CNOOC International Limited, a wholly-owned subsidiary of CNOOC Limited, will purchase a 33.3% undivided interest in Chesapeake's 600,000 net oil and natural gas leasehold acres in the Eagle Ford Shale project in South Texas. The consideration for the sale will be $1.08 billion in cash at closing, subject to adjustment. In addition, CNOOC Limited has agreed to fund 75% of Chesapeake's share of drilling and completion costs until an additional $1.08 billion has been paid, which Chesapeake expects to occur by year-end 2012. Closing of the transaction is anticipated in the 2010 fourth quarter.

The assets are located principally in the counties of Webb, Dimmit, LaSalle, Zavala, Frio and McMullen, and are located primarily in the oil window (~85%) and the wet gas window (~15%) of the Eagle Ford Shale and in the dry gas window of the Pearsall Shale.

Read the entire press release at chk.com