Frio County — Eagle Ford Shale News

Since the Eagle Ford oil boom began in 2009, the prolific development of the liquids-rich shale formation has put Texas in an enviable position on the world-stage as a top oil producer. As with any boom, there have been positives and negatives associated with development. This week, the San Antonio Express News published an investigative report highlighting one of the negatives - the flaring of natural gas. As companies have aggressively developed the Eagle Ford Shale to benefit from the current high price of oil, natural gas, a lower priced commodity, has been flared in the process. A lack of natural gas pipeline infrastructure in some areas has also contributed to flaring. Federal rules implemented in 2011 that require greenhouse gas permits for things like compressor stations and processing plants have likely tied up pipeline projects that would've otherwise been implemented. Still, pipeline companies, which generally conduct an open season prior to beginning construction on a project, have had trouble getting enough commitments for natural gas pipelines in other oily plays like the Bakken Shale in North Dakota, which is the second most significant U.S. domestic shale play to the Eagle Ford. The Bakken Shale currently flares nearly 30% of its natural gas.

According to the paper, oil producers flared and vented 32.7 billion cubic feet (Bcf) of casinghead gas from 2009 to 2012. That's nearly 8% of all casinghead gas produced in the region, and 10 times higher than the flaring rate in the rest of Texas. During the same time frame, La Salle County, a top producer in the play, flared or vented about a fifth of its production — more than 10 million cubic feet (MMcf). At oil wells in Atascosa and Frio Counties, energy firms flared a quarter of the 17 Bcf of casinghead gas they produced. Companies operating in Wilson County produced nearly 1.4 Bcf of gas from oil wells, but flared or vented more than a third of it.

The question is could flaring be affecting health and quality of life. For some South Texas residents, there's no question - Yes! The paper revealed that an estimated 15,000 tons of volatile organic compounds and other contaminants were released into the air in 2012 from flaring.

In May of 2014, Oklahoma City-based Panhandle Oil & Gas Inc. signed an agreement with private sellers to acquire a 16% non-operated working interest in 11,100 gross Eagle Ford acres (1,775 net) for just over $80-million.

The properties are located in the core Eagle Ford oil window in La Salle and Frio counties.

The acreage block is held by production, with 52 Eagle Ford wells producing, and six awaiting completion. Five Pearsall wells and one Buda Limestone well are also producing. According to the company, the entire acreage has a drilling inventory of 113 undeveloped Eagle Ford locations.

“We are very pleased to be in a position to add this package of properties in the Eagle Ford Shale to Panhandle’s asset base. These properties produced an average of 733 net equivalent barrels of oil per day (80% oil, 10% NGL and 10% natural gas) during the first calendar quarter of 2014. Production volumes included two new Eagle Ford wells, which only produced the last 15 days of the quarter at a combined rate of 1,166 boe/d gross or 139 boe/d net. Another six new Eagle Ford wells have been drilled and are expected to begin producing this month at a first 30-day average gross rate of approximately 500 boe/day per well or a total of approximately 350 boe/day of additional net production. This transaction will significantly increase Panhandle’s current oil production, which is approximately 720 bbl/d.”

— Panhandle CEO, Michael Coffman

Panhandle estimates net proved developed reserves are approximately 1.72-million bbls oil, 1.73-million mcf gas and 297,000 bbls NGLs. Reserves for the 113 undeveloped locations, which are projected to have an average effective lateral length of approximately 7000', are estimated to be 5.57-million bbls oil, 4.58-million mcf of gas and 789,000 bbls NGLs.

Currently, the property is being developed with a one drilling rig program. The operator is Oklahoma City-based Cheyenne Petroleum Company.

The transaction is projected to close by mid-June of 2014, with an effective date of April 1, 2014.