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

EXCO Eagle Ford Map
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 & EXCO Reach Eagle Ford Deal - $680 Million

Chesapeake Eagle Ford Acreage Map
Chesapeake Eagle Ford Acreage Map

Chesapeake has agreed to sell approximately 55,000 net acres in Dimmit, Frio, La Salle, and Zavala counties to EXCO Resources for $680 million. The deal adds a new operating area for EXCO. The company currently operates rigs in West Texas, East Texas & North Louisiana, and the Marcellus Shale region.

The sale is part of Chesapeake's plans to raise $4-7 billion through assets sales in 2013.

The Eagle Ford acreage includes:

  • 120 producing wells (94 Eagle Ford wells)
  • 6,100 boe/d of production in May
  • 300 potential drilling locations

Douglas H. Miller, EXCO’s CEO, stated “The Eagle Ford acquisition establishes our position in the high value oil core area of the Eagle Ford shale, and delivers immediate production and reserve additions, significant resource potential, and solid economic returns.

Undeveloped locations in the Eagle Ford will be developed through a partnership between EXCO and KKR. KKR will fund approximately $133 million or 50% of the development costs and EXCO will operate the wells.


Comstock Directs 3 Rigs to the Eagle Ford - Sets Capital Budget

Comstock Resources Eagle Ford Map
Comstock Resources Eagle Ford Map

Comstock Resources' Eagle Ford assets will account for almost half of the company's activity in 2013. Three of six rigs planned to work throughout the year will be active in South Texas. The other three will be working in West Texas as the company works to shift its production mix to higher valued liquids.

Comstock has set its capital budget at $430 million in 2013. Roughly 27 wells will be drilled in the Eagle Ford, 20 vertical wells targeting the Wolfbone in West Texas, 7 horizontal wells targeting the Wolfcamp in West Texas, and less than 4 net wells in the Haynesville & Bossier shales. The Haynesville wells are being drilled to hold acreage. That's a total of a little more than 58 net wells planned in 2013.

The company's 35,000 gross (28,000 net) Eagle Ford acres are largely spread across Atascosa, La Salle, and McMullen counties. The company estimates wells will produce over 500,000 boe and that its acreage has net resource potential of 78 million boe. CRK's partner KKR has the right to participate in 1/3 of the company's 28,000 net acres.

Comstock - KKR Eagle Ford Partnership Agreed at $25,000/acre

Comstock Resources Eagle Ford Map
Comstock Resources Eagle Ford Map

Comstock and KKR (Kohlberg, Kravis, Roberts & Co) have signed a participation agreement in the Eagle Ford. KKR will have the right to participate for 1/3 of Comstock's interest in 28,000 net acres across Atascosa, Frio, Karnes, La Salle, McMullen, and Wilson counties. In exchange, KKR will pay the equivalent of $25,000 per acre through a drilling carry for each acre acquired. Comstock plans for development with spacing of 80-acres per well.

KKR has committed to the drilling carry equivalent of $25,000 per acre for the next 100 wells in Comstock's planned development. The private equity partner will have the ability to participate in additional Comstock wells under the same terms.

Check my math, but if KKR participates across all of Comstock's acreage:

28,000 net acres x 33% x $25,000/acre = ~$233 million

While there is potential for as much as a $233 million dollar investment, the announcement indicates KKR has the "right" to participate. I assume that means they are not "obligated" to participate. If you consider the next 100 wells,

100 wells x 80-acres/well x 33% x $25,000/acre = $66 million

It sounds like KKR has committed to spending $66 million and will have an option on participating on additional acreage that could increase the company's commitment up to $230+ million.

Check my math and let me know your thoughts on the deal in the comments below.

Kinder Morgan - KKR Announce Midstream Deal for Camino Real and Altamont Assets

Kinder Morgan is acquiring KKR's 50% interest in a joint-venture with El Paso that controls gathering and processing assets in Utah and the Eagle Ford Shale for $300 million. The deal is a precursor to the $20+ billion Kinder Morgan - El Paso acquisition that will close in May. At closing of both deals, Kinder will own 100% of the two systems. Both systems were in place to help gather and process El Paso's upstream oil and gas production in the areas. The Camino Real System in South Texas has capacity of 150 mmcf/d and 110,000 b/d. The Altamont system is larger and includes over 1,000 miles of pipelines, a processing plant, and a natural gas fractionator.

With over 1,100 miles of pipeline infrastructure, the Altamont system includes over 450 well connections with producers, and it operates a processing plant with the design capacity of 60 million cubic feet per day (MMcf/d) and a 5,600 barrel per day (Bpd) natural gas liquids fractionator. The Camino Real Gathering System has 150 MMcf/d of gas gathering capacity and 110,000 Bpd of oil gathering capacity.

Read the entire news release at kindermorgan.com