WoodMac: Eagle Ford to Hit Two-Million b/d Mark by 2020

Eagle Ford Shale Well Map
Eagle Ford Shale Well Map

According to the oil and gas research and consulting firm Wood Mackenzie, the Eagle Ford will reach two-million b/d of crude and condensate production by 2020. Compared to the next most significant liquids-rich shale play in the U.S., the Bakken Shale, in North Dakota, the Eagle Ford is expected to produce 16% more crude and condensate production during the same year combined.

The Eagle Ford Shale is really on a roll. In June of 2014, analysts at the Bentek Energy Benposium Conference, in Houston, TX, said the Eagle Ford had the highest internal rate of return (IRR) among all other U.S. Shale plays. According to Bentek Energy Senior Analyst Catherine Bernardo, the Eagle Ford is sitting at just over 70% IRR.

Read moreEagle Ford Rate of Return Higher than Other U.S. Shale Plays

Potential for Eagle Ford Production Constraints

Currently, there aren't  any production constraints in the Eagle Ford. That's due to a number of factors, but namely an already existing midstream infrastructure in Texas, the completion of multiple midstream projects since the boom began and the Gulf Coast refining markets ramping up to accommodate Eagle Ford production.

At Benposium, analysts predicted the Eagle Ford market would not see a lot of production constraints near the end of the decade; however that could change if Eagle Ford production reaches a certain threshold.

If the Eagle Ford reaches two-million b/d by 2019, there would be production constraints in the play.
— Bentek Energy Sr. Analyst, Erika Coombs

Should Eagle Ford production reach two-million b/d of crude and condensate production by 2020, that means industry players essentially have a one-year pad to accommodate for the anticipated increase.

Eagle Ford Capital Spending Makes the Play the Largest in the World

Eagle Ford Capital Expenses
Eagle Ford Capital Expenses

Did you know? The Eagle Ford now ranks as the largest single oil and gas development in the world based on capital expenditures. That means more will be invested in the South Texas oil play than any other single oil and gas development in the world! That's the headline takeaway from a recent report released by Wood Mackenzie Analyst Callan McMahon.

The report notes that BHP, ConocoPhillips, and EOG Resources have a combined value of more than $30 billion in the Eagle Ford. That number likely doubles when you add other large players like Anadarko, Chesapeake, Lewis Energy, Marathon Oil, Murphy, Pioneer, and Talisman. If natural gas prices recover to more than $5/mmbtu, it's quite possible more than $100 billion in value has been created by operators across the Eagle Ford.

Some of these numbers can be difficult to put into perspective, but US$28 billion would put one at roughly the median country annual GDP.
— Mr. McMahon

In terms of costs, Wood Mackenzie notes the play will likely surpass the Kashagan project in Kazakhstan, which will have an estimated $116 billion invested in the coming years. At the current rate of spending in the Eagle Ford, the play will surpass the the Kashagan project in as little as four years.

"With US$28 billion in capex being spent in 2013 and development now in full swing, the excitement in the Eagle Ford Shale and value being extracted from the play continues to exceed expectations." explains Callan McMahon, Upstream Research Analyst for Wood Mackenzie.

Eagle Ford Shale From Space - NASA
Eagle Ford Shale From Space - NASA

Other highlights from the report include:

  • Growth from zero to more than 700,000 b/d of oil and natural gas liquids (NGLS) in three years
  • Eagle Ford is the top liquids producing shale in the world with Q3 volumes of 1 million boe/d (Bakken ranks #1 for oil production alone)
  • DeWitt, Gonzales, and Karnes counties account for 50% of liquids production
  • 74% of estimated future activity will target liquids areas (this changes if natural gas prices go up)
  • Capacity constraints have eased
  • The Eagle Ford accounts for 38% and 20% of EOG's and BHP's upstream value, respectively
  • In 2013, the play will account for 27% of all upstream spend in the Lower 48

Mr. McMahon added: "Being located near the coast allows Eagle Ford realized (oil and gas) price fluctuations to be mitigated through being linked to a global price index. Additionally, a number of upsides remain in the form of downspacing, increases in natural gas prices, increases in well performance, decreases in well costs and increases in operational efficiencies on the crowded surface of the Eagle Ford."

Read the entire press release at woodmacresearch.com

Big Firms Say Shale Plays Are Here To Stay

"Shale gases have redefined natural gas supply" is the quote from Hill Vaden of Wood Mackenzie. As large scale firms enter shale plays across the U.S., it is an indication that things have changed for the long term. The Kinder Morgan - El Paso merger is the latest shale driven deal that expands a companies foot print and leverage to the growing shale boom. With Exxon and international companies like Statoil in the fray, you can bet many of the development decisions that are made today are part of long - very long term plans. Shale plays are ushering in a new wave of domestic development. Just visit North Dakota, Pennsylvania, or Texas if you don't believe me.

Since 2008, energy companies have spent $133 billion on mergers and acquisitions related to shale, according to energy research firm IHS-Herold. That's more than China spends on its military annually — the second-largest defense budget in the world behind the United States'.

And that includes just companies gaining access to the acreage and resources for shale drilling. It doesn't count Kinder Morgan's $21.1 billion deal to buy El Paso Corp. and its network of natural gas pipelines.

Read the entire news release at mysanantonio.com