Eagle Ford Spending Could Reach $30 Billion in 2014

January 8, 2014 R.T. Dukes

Eagle Ford spending could stretch to new heights this year.

Eagle Ford oil production will surpass 1 million b/d early this year (combined oil and condensate production already has) and strong growth won't stop there.

GlobalData expects development spending could reach as high as $30 billion. If that happens, Eagle Ford oil production won't just reach 1 million b/d, it'll blow right past it. Other research organizations estimate spending somewhere in the $20-25 billion range.

If spending ends up closer to $20 billion, it will tie directly to cost savings the industry is capturing across the board and not necessarily due to less activity.

“With over 250 rigs operating in Eagle Ford, companies are expected to spend approximately $30 billion in capital this year, and nearly all of the major operators are projecting at least five years’ more drilling at the current rapid pace. The most efficient operators in sweet spots are achieving over 100% pre-tax Internal Rates of Return (IRR) with conservative pricing.”

— Taryn Slimm, GlobalData’s Lead Analyst covering US Onshore

BHP Lowers Eagle Ford Capital Spending For Fiscal Year 2014

August 21, 2013 R.T. Dukes

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.

SM Energy Increases Eagle Ford Completion Guidance - Adds Eaglebine Acreage

August 5, 2013 R.T. Dukes

SM Energy Eagle Ford Acreage Map — SM Energy Eagle Ford Map

SM Energy has raised full-year, company-wide production guidance by 10% to 47.9 mmboe. The increase is largely due to impressive performance in the Eagle Ford.

Operated Eagle Ford production volumes increased 28% from the first quarter to the second quarter. Operated production in the play averaged 66,100 boe/d and non-operated production averaged 17,400 boe/d for a total of 83,500 boe/d net.

SM also increased its Eagle Ford completion guidance from 75 to 95 for the full year. Better yet, the company isn't increasing its planned capital outlay. That means they'll bring 20 wells to production at the same level of investment previously announced. That's the kind of win-win every operator is looking for.

Well costs in the Briscoe area have fallen to $5.4 million per well, or 13% less than 2012.

Expanding East Texas Eagle Ford & Woodbine Position

SM Energy increased its holdings in its Eagle Ford and Woodbine prospect to 195,000 net acres in the quarter. Watch for results from exploratory wells in the second half of the year. The play could provide another growth opportunity for the company.

Read the company's full press release at sm-energy.com

Carrizo Expects The Eagle Ford To Drive Oil Production Growth Higher

July 26, 2013 R.T. Dukes

Carrizo Oil &Gas Eagle Ford Well Pad Map

Carrizo Oil & Gas raised oil production growth guidance from 28% to 40% earlier in the summer due to improving well results in the Eagle Ford.

The company also raised second quarter oil production guidance from ~9.800 boe/d to ~11,000 boe/d. That represents and increase of more than 12%. There were a few factors that led to the increase:

“Key drivers of the outperformance have been flatter-than-expected decline rates from new wells in a number of areas, successful results from artificial lift installations and less well downtime than expected.”

Oil production is outperforming expectations, while gas and NGL production is coming in at the high end of guidance. Carrizo increased its company-wide growth target from 6% to 10% for the year.

Carrizo is running three rigs in the Eagle Ford, one in the Niobrara Shale, and one in the Marcellus Shale. Along with production guidance, Carrizo increased its capital spending plans by ~$35 million to $530-540 million in 2013.

In the Eagle Ford Shale, Carrizo is increasing planned 2013 drilling activity by three wells as a result of increases in drilling efficiencies, and increasing planned completion activity by 35 net frac stages primarily for lease management purposes.

Read the full press release at crzo.net

Eagle Ford Capital Spending Makes the Play the Largest in the World

December 18, 2012 R.T. Dukes

Did you know? The Eagle Ford now ranks as the largest single oil and gas development in the world based on capital expenditures. That means more will be invested in the South Texas oil play than any other single oil and gas development in the world! That's the headline takeaway from a recent report released by Wood Mackenzie Analyst Callan McMahon.

The report notes that BHP, ConocoPhillips, and EOG Resources have a combined value of more than $30 billion in the Eagle Ford. That number likely doubles when you add other large players like Anadarko, Chesapeake, Lewis Energy, Marathon Oil, Murphy, Pioneer, and Talisman. If natural gas prices recover to more than $5/mmbtu, it's quite possible more than $100 billion in value has been created by operators across the Eagle Ford.

“Some of these numbers can be difficult to put into perspective, but US$28 billion would put one at roughly the median country annual GDP.”

— Mr. McMahon

In terms of costs, Wood Mackenzie notes the play will likely surpass the Kashagan project in Kazakhstan, which will have an estimated $116 billion invested in the coming years. At the current rate of spending in the Eagle Ford, the play will surpass the the Kashagan project in as little as four years.

"With US$28 billion in capex being spent in 2013 and development now in full swing, the excitement in the Eagle Ford Shale and value being extracted from the play continues to exceed expectations." explains Callan McMahon, Upstream Research Analyst for Wood Mackenzie.

Other highlights from the report include:

Growth from zero to more than 700,000 b/d of oil and natural gas liquids (NGLS) in three years
Eagle Ford is the top liquids producing shale in the world with Q3 volumes of 1 million boe/d (Bakken ranks #1 for oil production alone)
DeWitt, Gonzales, and Karnes counties account for 50% of liquids production
74% of estimated future activity will target liquids areas (this changes if natural gas prices go up)
Capacity constraints have eased
The Eagle Ford accounts for 38% and 20% of EOG's and BHP's upstream value, respectively
In 2013, the play will account for 27% of all upstream spend in the Lower 48

Mr. McMahon added: "Being located near the coast allows Eagle Ford realized (oil and gas) price fluctuations to be mitigated through being linked to a global price index. Additionally, a number of upsides remain in the form of downspacing, increases in natural gas prices, increases in well performance, decreases in well costs and increases in operational efficiencies on the crowded surface of the Eagle Ford."

Read the entire press release at woodmacresearch.com