Matador Reduces Eagle Ford Rigs in 2015

Matador Pulling Two Rigs in the Eagle Ford in 2015
Matador Pulling Two Rigs in the Eagle Ford in 2015

Matador Resources Company, a Dallas-based energy company heavily invested in the Texas shale oil industry, announced yesterday that it plans to reduce its operation by cutting production from two rigs in Eagle Ford in 2015.

This is a big move for the company considering that their oil, natural gas and total oil production were at record levels at the end of 2014. Management says that their strategy to narrow drilling efforts to three rigs in its Permian Basin operations is necessary in light of lower oil prices, which have dropped from $100 per barrel in June to below $50. But the company insists that it isn’t abandoning the region entirely.

As a result of the Company’s strong execution in the Eagle Ford over the past three years, this asset has become an “oil bank” that Matador can return to and develop further at a future time when commodity prices are more favorable.

Related: What Lower Oil Prices Mean for Texas and Eagle Ford

Matador was originally scheduled to release its full operational report by mid January, but have moved it to February 15th in order to have more time to better assess their current situation.Everyone is invited to listen in to this presentation and the details can be accessed through the Company’s website on the Presentations & Webcasts page under the Investors tab.

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Texas Oil Production Reaches Levels Not Seen Since the 70s

U.S. Oil Production
U.S. Oil Production

The "good ol' days" for the oil and gas industry are back in Texas! The Energy Information Administration (EIA) recently released data showing the state produced just over 3 million b/d of crude oil in April of 2014, reaching production levels not seen in the state since the 70s.

Many Texans remember well the oil bust of the early 80s, when the price of oil fell drastically, and what followed was a blight on the states' economy. A steady decline in oil production, which began in 1972, and fell sharply after the bust, signaled the state's oil boom days were likely over for good. But now Texas along with the rest of the U.S. is on track to become the top oil producer in the world by 2015, according to the International Energy Agency (IEA). The EIA said in the month of April, Texas and North Dakota, which encompasses the prolific Bakken Shale play, made up nearly half of U.S. oil production (48%).

The rise in Texas' oil production is thanks in large part to the tight oil and shale gas revolution in the Eagle Ford, and made possible by advancements in horizontal drilling and fracking technology. The Permian Basin in West Texas, a major oil producing area in the state for years, has also seen an increase in horizontal drilling since the end of 2013, and many of the areas untapped oil reserves are being accessed by the technology.

Read more: Why Horizontal Drilling is Important to Texas Oil Production

Texas Surpasses Iraq's Oil Production

The EIA's data is yet another indication of America's re-emerging prominence as a leader in world-wide oil production. In June of 2014, Iraq's production fell 400,000 b/d to 2.9 million, due to violence and civil unrest flaring up in the country, according to Bloomberg. That means Texas has likely surpassed Iraq's oil production, since Texas' production has increased on a month-to-month basis since 2011. Iraq was rated as the second largest OPEC producer in April at 3.2 million b/d.


Why Horizontal Drilling is Important to Texas Oil Production


The tight oil and shale gas revolution has been made possible largely by horizontal drilling and fracking technology. Although the controversial process of fracking tends to dominate the headlines, advancements made in horizontal drilling have allowed operators to precisely access more of the shale rock layer than was thought possible even a decade ago.

As of this writing, 237 rigs in the Eagle Ford are drilling horizontal wells, which accounts for 88% of all rig activity in the play. Without a doubt, horizontal drilling dominates the Eagle Ford play, not to mention the next most significant shale play, the Bakken Shale, where horizontal drilling also reigns supreme. On our sister site,, horizontal drilling in our coverage area accounts for nearly 90% of all active rigs.

Horizontal Drilling Ramps Up in the Permian Basin

Although the Eagle Ford is by far the top producer in the state of Texas, it is not the top dog for horizontal drilling. Rather, its the Permian Basin that currently wears that crown. For years, much of the oil produced in the state came from West Texas, and although the spotlight has recently shifted to the Eagle Ford, the Permian appears to be ramping up for a revolution of its own.

According to the U.S. Energy Information Administration, since the end of 2013, the number of horizontal rigs in the Permian Basin have increased dramatically. From December 27, 2013, to the week ending on May 9, 2014, the number of horizontal, oil-directed rigs in the Permian Basin rose by 63 rigs, which accounts for 50% of the total increase in the United States.

A change in the horizontal, oil-directed rig count of the scale seen in the Permian indicates a significant rise in activity in its tight oil plays relative to recent developments in other major production area.

At the beginning of 2013, both the Eagle Ford Shale and the Bakken Shale, exceeded the Permian Basin in the number of oil-directed horizontal drilling rigs. By the end of 2013, the Permian Basin's 215 rigs surpassed both the Eagle Ford and Bakken, which at that time had 173 and 164 rigs, respectively. During the first quarter of 2014, the increase in oil-directed horizontal rigs in the Permian Basin was more than four times the combined increase in the Eagle Ford and Williston Basin.


Clayton Williams Falls Short of First-Quarter 2014 Production Estimate

Clayton Williams Eagle Ford Acreage Map
Clayton Williams Eagle Ford Acreage Map

Clayton Williams production, revenues and operating costs for the first-quarter of 2014 were down compared to the first-quarter of 2013, after two significant divestitures over the course of the last year. Overall production was 250 boe/d below analyst estimates for the first-quarter of 2014 according to company officials.

In March 2014, Clayton Williams sold all of its interests in certain non-core Austin Chalk and Eagle Ford assets. Due to the divestiture, production for the sold assets in the first-quarter of 2014 went down 47% compared to the first-quarter of 2013. Daily production for the sold assetsin the first-quarter of 2014 was 385 boe/d.

Read more: Clayton Williams Sells Eagle Ford and Austin Chalk Acreage for $71 Million

Across the company's portfolio, production costs decreased 16% to $26.4 million in the first-quarter, compared to the first-quarter of last year. Company officials attributed this decrease primarily to another acreage asset divestiture in the company's Andrews County Wolfberry Play in April 2013.

In Reeves and Burleson Counties in Texas, two wells experienced drilling and completion complications, which company officials say accounted for production delays of 400 boe/d.

After giving affect to asset sales, Clayton Williams saw a total production increase per BOE of 25% across its' portfolio in the first-quarter of 2014 compared to the first-quarter of 2013. Oil and NGL production increased to 2,756 b/d and 378 b/d consecutively. Gas production decreased 455 Mcf/d.

Clayton Williams Eagle Ford Operations Update

Clayton Williams continues to see consistent results from its horizontal Eagle Ford Shale play in the northern portion of its legacy Austin Chalk acreage block in Robertson, Burleson and Lee Counties, Texas. The Company has nine horizontal Eagle Ford wells in this area that have been on production for 30 or more days. The peak 30-day production rate for these wells has averaged 574 BOE per day (96% oil).

Clayton Williams' First Quarter Highlights

  •  Overall Q1 production down 250 boe/d from analyst estimates
  •  47% production decrease in divested Austin Chalk and Eagle Ford assets in Q1 2014 compared to Q1 2013
  • Q1 drilling and completion complications in Reeves and Burleson Counties in Texas accounted for production delays of 400 boe/d
  • Oil and NGL production increased to 2,756 b/d and 378 b/d consecutively across portfolio in Q1 2014
  • Gas production decreased 455 Mcf/d in Q1 2014


Is the Eagle Ford on Its Way to 2 Million Barrels Per Day of Oil Production?

Eagle Ford Production
Eagle Ford Production

Eagle Ford Production has outpaced expectations for five years and it should be no surprise if the area eventually produces more than 2 million barrels of oil per day.

It's hard to comprehend the full context of the previous statement, so let me state it another way. If the Eagle Ford eventually produces between two and three million barrels of oil per day, the play by itself could land in the list of the top 10 oil producing countries in the world. The entire world produces just under 90 million barrels of oil per day.

Most research organizations predict production will reach between 1.6 and 2 million b/d sometime between 2017 and 2020. Recent results in the Buda and Austin Chalk make it easy to see how the area could produce much more if other formations prove commercial. Add the Permian Basin, where Texas is experiencing similar growth, and the state is closing in on Mexico as the third largest producer in North America (behind the U.S. and Canada)

Eagle Ford Oil Production Expected to Eclipse 1 Million b/d in 2014

EIA Eagle Ford Oil Graph
EIA Eagle Ford Oil Graph

Eagle Ford oil production is nearing 700,000 b/d and Eagle Ford condensate production measured at the wellhead has surpassed 200,000 b/d. Add condensate that falls out further downstream and the play is close to reaching 1 million b/d of total oil and condensate production.

The EIA's most recent drilling productivity report proclaimed the Eagle Ford has already surpassed 1 million b/d of oil production, but the agency is counting both oil and condensate from the entire region. Most analysts are predicting the play will reach the million barrel benchmark for oil only sometime in 2014.

If the whispers we're hearing about capital budgets in 2014 are true, the play will likely surpass the 1 million b/d mark in the first half of the year.

North America Is Becoming More Important in the Global Oil Market

Watch the video depicting North America oil production over the past 30 years below. There's not a whole lot of change until the last few years and that has been magnified in 2013. The Bakken and Eagle Ford are nearing 1 million b/d and the Permian Basin has already surpassed that mark.

The Eagle Ford Influences the Natural Gas Market

Eagle Ford natural gas production is approximately 3 Bcf/d or 5% of onshore production in the contiguous states. That's no small feat for an oil play. Natural gas prone portions of the play provide additional opportunity if prices improve to more than $4/mcf in the coming years.

The Eagle Ford is best in class when it comes to shale plays. Great economics combined with access to the Gulf Coast industrial complex provide a strategic advantage not matched by any play in the world. Watch for the Eagle Ford to continue driving the economy in South Texas even if oil prices drop as much as 20%.