Pioneer Taps the Brakes in the Eagle Ford

Pioneer Natural Resources had planned to grow its rig count to 14 in 2012, but 25% of the company's development was set for dry gas. With natural gas prices below $3/mmbtu, Pioneer is backing off and delaying the two new rigs until 2013. The company still plans to have 19 rigs running by 2015. Production also made a considerable jump in the fourth quarter. The company produced more than 20,000 boe/d, compared to 14,000 boe/d in the third quarter. Gathering constraints are being eased and more companies are seeing significant production jumps. 

The company's well costs are expected to run $7-8 million per well in 2012 and the white sand, instead of ceramic, proppant will be used in 50% of the company's wells. White sand saves the company $700,000 per well.

The company's midstream partnership with Reliance Industries will also complete three additional central gathering plants in 2012. That will bring the total number of gathering plants to 11 across the company's acreage.

Read more at the Pioneer Natural Resources Eagle Ford page.

Pioneer Natural Resources Adds Frack Crew - White Sand Completions - Q311 Ops

Pioneer Natural Resources (PXD) reported strong growth from its Eagle Ford Shale assets when the company operates in partnership with Reliance Industries. The company is currently running 12 rigs in the play and has assembled 2 frack crews solely dedicated to the Eagle Ford. The second crew will be active in Q4 2011. Both crews compliment the company's two-year third party completion agreement. Wells are producing a 65% liquids cut that includes oil, condensate, and NGLs. Average wells laterals extend 5,500 ft and completions involve 13 frack stages. Wells are being brought on at restricted rates (16/64ths) to protect against reservoir damage at high flow rates. To date, company is seeing improved declines.

The company's midstream partnership will continue to build out gathering facilities in 2012 and will begin financing construction through outside sources in the next year. Well costs across the play average $7-8 million, but the company is saving as much as $700,000 per well by utilizing white sand in the more shallow portions of the play.

Production grew quarter over quarter from 8,000 boe/d to 14,000 boe/d and is expected to reach as high as 60,000 boe/d in 2014. 

PXD Q311 Eagle Ford Well Results
PXD Q311 Eagle Ford Well Results

"Based on our drilling plans for the Spraberry field, the Eagle Ford Shale and the Barnett Shale Combo play, we expect the Company to deliver production growth of 20+% in 2012 compared to 2011 and U.S. production growth of 22+%.

Eight central gathering plants (CGPs) have been completed as part of the joint venture's Eagle Ford Shale midstream business. Three additional CGPs are planned for 2012. Pioneer's share of its Eagle Ford Shale joint-venture midstream activities is conducted through a partially-owned, unconsolidated entity. Beginning in June 2011, funding for ongoing midstream infrastructure build-out costs that are in excess of operating cash flow are expected to be provided from external debt sources. Cash flow from the services provided by the midstream operations is not included in Pioneer's forecasted operating cash flow of $1.4 billion to $1.5 billion in 2011.

Pioneer's gross well cost in the Eagle Ford Shale ranges from $7 million to $8 million per well. Using this cost, flat commodity prices of $90 per barrel for oil and $5 per MCF for gas, estimated future production costs, and excluding the benefit of the joint-venture drilling carry, before tax internal rates of return are estimated to be 80% for high condensate yield wells (200 barrels per million cubic feet) and 60% for lean condensate yield wells (60 barrels per million cubic feet).

Pioneer has been testing the use of lower-cost white sand instead of ceramic proppant to fracture stimulate wells drilled in shallower areas of the field. Twenty wells have been tested to date, with a savings of approximately $700 thousand per well. Early well performance has been similar to direct offset ceramic-stimulated wells. Pioneer plans to continue to monitor the performance of these wells and plans to use white sand in approximately 30% of its 2012 drilling program.

Read the full press release at pxd.com

Pioneer Natural Resources Using White Sand in Completions

Pioneer's Eagle Ford Shale completion costs are lowered by as much $700,000 when the company uses white sand instead of ceramic proppant. That's an almost 10% savings on wells that costs $7-8 million. The company is testing white sand on 30% of its wells in 2011 and 2012. It will take some time to truly determine is white sand can hold up under the pressure of the Eagle Ford Shale. Pioneer also lowered its drilled but uncompleted well inventory during the second quarter. The company went from 23 wells to just 11 as central gas processing facilities were brought online.

Okay, turning to Eagle Ford Shale, that's Slide 14. The Eagle Ford shale assets are hitting their stride. As planned, we're running 12 rigs. The average lateral length of the wells is now up to about 5,500 feet. The economics are quite outstanding as we've always discussed, owing to the rich condensate and generally liquid-rich nature of these wells. We're seeing very good performance in Dewitt County, offsetting Black Hawk. One thing we're doing, as we discussed in the last call, is to push the envelope with regard to the use of white sand as a proppant. We have already stimulated 10 wells, and the performance of the wells looked very good and very similar to the direct offset wells where we used ceramics for the proppant. So the idea this year is about 30% of our wells this year, we'll be using white sand, and that's the number also planned for next year, 2012, about 30% of the wells.

And importantly, that reduces the cost of the wells, something like $700,000 per well, which is very significant, if you look at the future drilling campaign. Infrastructure build-out continues. We now have 6 of our central gas processing facilities completed. A seventh will be completed by the end of this quarter and eight in the next quarter. So we are really ahead of the game when it comes to build-out of infrastructure.

And the result as you see on Slide 15 is the ability to put more wells on production. We've met our goal in the second quarter of putting wells on production in the Eagle Ford. We put 18 wells on production. That's reflecting the frac bank being significantly reduced as well. The frac banks starting the second quarter was 22 or 23 wells, now it is 11 at the end of the second quarter, which is basically our minimum run rate, which is one -- basically one well per rig. But you can see, as we bring the 2 new CGPs online this quarter, we have a substantial ability to add a lot more wells to production. And in addition to that, we'll see a similar ability to do that as we get into the fourth quarter. So this area is going to be ramping up dramatically as shown on Slide 16, with the crude oil production well count increasing, third quarter should see a significant increase as shown on the slide, up to 14,000 to 17,000 BOE per day.

You can see we're going to 14 rigs next year. Those 14 rigs are all under contract. And then 16 rigs and 19 rigs looking forward.

Read the full press release at SeekingAlpha.com