Conoco Liquids Up 22% in Lower 48 Thanks to Eagle Ford

August 26, 2014 Kirk Eggleston

Liquids production volumes from Conoco Phillips' (COP) Lower 48 assets increased by 22% year-over-year thanks largely to the Eagle Ford and the Bakken, company officials reported in their second quarter 2014 report at the end of July.

COP production grew by 38% year-over-year to 208,000 boe/d in the Eagle Ford Shale and Bakken Shale plays combined. That's ~39% of the company's total production for its Lower 48 asset portfolio. In the Eagle Ford alone, production grew 12% quarter-on-quarter from 140,000 boe/d to 157,000 boe/d. However, company officials expect for the rate of growth to slow in both plays in the second half of the year due to multi-pad drilling effects and weather-related issues in the fourth quarter.

“We expect to have multi pad drilling effects and are anticipating winter weather impacts in the fourth quarter. So the rate of growth will slow in the second half of the year. The net effect of this is we are still on track to achieve our 2014 volume targets for both the Eagle Ford and Bakken but we do expect rates to flatten in third and fourth quarters and then begin to ramp up as we head in to 2015.”

— Conoco's EVP, Exploration and Production Matt Fox

Conoco Doesn't Have Plans to Apply for Permit to Export Eagle Ford Condensate

Despite advocating for condensate and crude oil exports, COP management indicated in the company's second quarter conference call on July 31st that it would not apply with the U.S. Commerce Department (U.S. DoC) for a permit to export Eagle Ford condensate.

Recently, the U.S. Commerce Department granted permission to certain companies to export minimally processed Eagle Ford condensate, which it considers a refined product. The oil export ban, which has been in place for nearly forty years does not limit the export of refined products. Just last week, BHP Billiton, a major Eagle Ford producer, applied with the U.S. DoC for an export permit.

“The larger issue we are having in North America is growing light oil production and the feasibility or the capacity being used up in the refining sector to really absorb. Right now we’re getting most of our condensate to the Gulf Coast putting it on ships and getting it around.”

— CEO, Ryan Lance

Lance continued, saying if the company saw an advantage to applying for a similar permit to those recently issued, the company would approach the U.S. DoC.

Eagle Ford's Sanchez Energy Reports Record Revenue in Q2 2014

August 13, 2014 Kirk Eggleston

Eagle Ford-focused Sanchez Energy reported record revenue of $151.7 million in the second quarter of 2014, with portfolio-wide production increasing 164% year-over-year to 20,437 boe/d.

At the end of the quarter, the company closed its massive Eagle Ford acreage deal with Royal Dutch Shell for 106,000 net Eagle Ford acres in Catarina. The acquisition almost doubled the company's acreage in the play. Total purchase price for the acquisition was approximately $639 million, less approximately $85.5 million in normal and customary closing adjustments.

“As of August 1, 2014, Sanchez Energy has officially taken over all operations at Catarina after a brief transition period with Shell. The transition of operations has gone smoothly and the ramp up of Sanchez Energy operations is ahead of schedule. We have fully staffed our operations at Catarina and now have drilling, completion, and artificial lift installation in progress. Additionally, now that we have achieved critical scale from the Catarina assets, we are utilizing a dedicated frac spread as well as direct sourcing of chemicals and proppant. We expect these factors will reduce completions costs by an additional 30%, allowing flexibility to increase fracture stage size or improve returns from a lower development cost.”

— Sanchez CEO, Tony Sanchez, III

With the Catarina acquisition, Sanchez increased its proved reserves 170% to approximately 117 MMBOE as of June 30, 2014. Crude oil constituted 49% and NGLs constituted 24% of the company's proved reserves. 56% of the company's proved reserves were classified as proved undeveloped, compared to 70% at same time last year.

Sanchez Eagle Ford Q2 Operations Update

Sanchez Energy currently has 6 gross rigs running across its Eagle Ford acreage, with 419 gross producing wells and 38 gross wells in various stages of completion.

By area, the company's Cotulla, Marquis, and Palmetto Eagle Ford operating areas comprised approximately 42% of the crude oil cut from total second quarter 2014 production volumes. Company officials expect the percentage of oil expected in the company's third quarter production volumes should decrease as the impact of the production volumes from Catarina are recorded.

The company's third quarter production guidance range portfolio-wide of 37,000 to 41,000 boe/d has been revised to 36,000 to 40,000 BOE/D while its fourth quarter production guidance range of 45,000 to 49,000 boe/d has increased to 48,000 to 50,000 boe/d. Production guidance for 2015 remains the same at a range of 53,000 boe/d to 58,000 boe/d.

EOG Resources Increases Eagle Ford Reserve Potential 45%

August 6, 2014 Kirk Eggleston

EOG Resources Eagle Ford Reserve Potential

In its second quarter report, EOG Resources revealed a 45% increase in its Eagle Ford estimated potential reserves from 2.2 net BnBoe to 3.2 net BnBoe. This is the company's third reserve increase in four years. EOG officials expect continued production growth in the Eagle Ford, with a current drilling inventory of 12 years.

In the report, company officials said the Eagle Ford Shale was a significant contributor to EOG's U.S. crude oil production growth (33% year-over-year) and associated natural gas liquids (NGLs) growth (22% year-over-year). Natural gas production from the play was also credited as contributing to the company's total production growth. See below for EOG's U.S. production volumes for the quarter:

Crude Oil and Condensate - 274,600 b/d
NGLs - 78,500 b/d
Natural Gas - 925 MMcfd

EOG Eagle Ford Second Quarter Operations Update

In Karnes County, the McCoy Unit #1H and #2H began production at 5,290 and 5,415 b/d with 475 and 415 b/d of NGLs and 2.7 and 2.4 MMcfd of natural gas, respectively. The Wolf Unit #6H, #7H, #8H and #9H, began sales at rates ranging from 3,160 to 3,600 b/d with 310 to 390 b/d of NGLs and 1.8 to 2.3 MMcfd of natural gas.

Northeast of Karnes in DeWitt County, the Justiss Unit #11H, #12H and #13H had initial production rates of 4,000, 3,900 and 4,130 b/d with 690, 650 and 750 b/d of NGLs and 4.0, 3.8 and 4.3 MMcfd of natural gas, respectively.

In Gonzales County, EOG recorded a number of wells with strong initial production including the Boothe Unit #11H and #16H, which had rates of 4,570 and 3,245 b/d with 580 and 500 b/d of NGLs and 3.4 and 2.9 MMcfd of natural gas, respectively. The Zimmerman Unit #14H began sales at 3,800 b/d with 350 b/d of NGLs and 2.0 MMcfd of natural gas.

Southwest of Gonzales in La Salle County, the Naylor Jones Unit 127 #1H, #2H and #3H had initial production rates ranging from 2,200 to 2,500 Bopd with 220 to 250 Bpd of NGLs and 1.3 to 1.5 MMcfd of natural gas. EOG has 100 percent, 100 percent and 75 percent working interest in these wells, respectively.

EOG is the largest oil producer and acreage holder in the Eagle Ford, with ~632,000 net acres across the play.

Marathon Turns More Eagle Ford Wells to Sales in Q2 2014

August 5, 2014 Kirk Eggleston

In Marathon Oil's second quarter report released on Tuesday, higher density pad drilling and improved execution techniques were credited for a 55% quarter-on-quarter increase in gross operated wells turned to sales. The average time to drill an Eagle Ford well in the second quarter of 2014, spud-to-total depth, was 13 days - the company's goal for the year is 11 days.

Marathon's average net Eagle Ford production was 102,000 boe/d, representing an increase of 26% year-over-year and 6% quarter-on-quarter. Approximately 66% of net production was crude oil/condensate, 16% was natural gas liquids (NGLs) and 18% was natural gas.

Recently, Marathon sold its Norwegian assets for $2.7 billion to re-focus capital investments in the Eagle Ford Shale and other U.S. domestic assets. At the end of the second-quarter, Marathon had approximately $1.1-billion in E&P capital expenditures across its North American asset portfolio.

Marathon Eagle Ford Enhanced Completion Design

According to company officials, enhanced Eagle Ford completion design is delivering strong preliminary results. Wells with 180-day cumulative production are yielding on average 25% improvement relative to modeled type curves.

“We have high confidence in Eagle Ford volumes growth as our well results continue to outperform modeled type curves and deliver strong economics. This quarter we brought 76 gross operated Eagle Ford wells to sales. We expect that momentum to carry forward, generating double-digit production growth quarter-on-quarter in the Eagle Ford for the remainder of 2014.”

— Marathon CEO, Lee Tillman

Marathon Austin Chalk/Upper Eagle Ford Update

Marathon Oil continued its successful delineation of the Austin Chalk/Upper Eagle Ford for co-development with an initial 15,500 net acres now delineated. During the second quarter, the company brought online three Austin Chalk/Upper Eagle Ford wells, including two in the condensate window: the Children Weston 4H and the Franke well, which had a 30-day initial production (IP) rate of approximately 1,650 boe/d (73% liquids). The third well with a 30-day IP rate of 600 boed (90% liquids) was the first in the black oil window. Nine additional Austin Chalk/Upper Eagle Ford wells are currently being drilled, completed or awaiting first production.