Eagle Ford Oil Boom - Natural Gas Slump - EagleFordShale.com Quoted

July 23, 2012 R.T. Dukes

Eagle Ford oil potential has kept drillers interested and even shifting capital to the play over the past year. Both oil and gas prices are up over the past few weeks, but comparatively $92/bbl is much better than $3/mcf. Read the entire article that details rig activity and production growth at chron.com

R.T. Dukes, a director at the website EagleFordShale.com, which posts news about the shale, said oil companies' budgets "are being pressured by natural gas prices, but drilling activity hasn't really slowed down in the Eagle Ford." However, if the price of oil should drop again and gas prices remain low, "you'll probably see some sort of slowdown in the second half of the year."

Yet Dukes remains bullish on the Eagle Ford.

"It's a first-class play in the United States," he said. "That usually doesn't change over short periods of time. On a relative basis, it's still better than most plays in the U.S.," he said.

Should natural gas prices go much higher, "you'll see additional capital come to the Eagle Ford," he said.

Eagle Ford Shale Regional Rig Count at 271 - July 20, 2012

July 20, 2012 R.T. Dukes

The Eagle Ford Shale drilling rig count fell to 271 this past week. That's a drop of nine rigs over the past week. ConocoPhillips accounted for five of the nine rig decline. Smithbits data shows the company dropped from 16 to 11 rigs week over week. The company has not voiced plans to slow down significantly, so this could very well be a blip in the rig census. My suspicion is Conoco's rig count will recover in the coming weeks.

Eagle Ford operator Sanchez Energy provided an early second quarter operations update. The company increased its proved reserves estimate to 15 million barrels and expects total resource potential to reach 250-380 million barrels from 800-1,200 potential drilling locations. The company also plans to drill 3-4 additional vertical wells its Maverick Area in Zavala and Frio counties. The most recent vertical well produced more than 200 boe/d and vertical development just might provide superior economic returns in this area.

Eagle Ford Oil & Gas Rigs

The number of rigs targeting natural gas (Smithbits) slipped down to 63 this week, eight less than last week's count. The drop is also skewed by Smithbits reporting ConocoPhillip's drop in activity in La Salle and DeWitt counties. The only counties with over ten rigs targeting natural gas are Karnes and Webb.

Henry Hub futures were trading at just over $3.03 on Friday afternoon. It has been a while since gas prices traded above $3/mmbtu. Watch to see if prices hold at this level for long.

WTI was trading over $91/bbl Friday afternoon and is up almost $10/bbl over the past few weeks. LLS crude prices are just above $107/bbl. That's good news for Eagle Ford producers. Most oil and gas companies prepared for lower natural gas prices, but weren't expecting the sub-$3 we've had this summer. If oil prices were to go and stay much lower than $80/bbl, we would really start to see a pull back across the U.S.

There are 255 horizontal rigs running in the region as of Friday afternoon, down from last week's 263. There is one water well being drilled in McMullen County. The three counties leading development are Karnes at 40 rigs, and La Salle and McMullen at 33. Dimmit (29), Webb (25), DeWitt(17), Gonzales (17), Atascosa (12), and Live Oak (12) round out the top Eagle Ford counties.

News items this week included:

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Drilling Rig Count by Operator

What is the Rig Count?

The Eagle Ford Shale Rig Count is an index of the total number of oil & gas drilling rigs running across a 30 county area in South Texas. The South Texas rigs referred to in this article are for ALL drilling reported by SmithBits and not solely wells targeting the Eagle Ford formation. All land rigs and onshore rig data shown here are based upon industry estimates provided by the Baker Hughes Rig Count and/or Smith Service Co's (Schlumberger) Smith Rig Count.

Drilling Rigs by County

Eagle Ford Shale Regional Rig Count Up to 280 - July 13, 2012

July 13, 2012 R.T. Dukes

The Eagle Ford Shale drilling rig count hit 280 rigs over the past week. This marks the first week activity has reached 280 rigs since mid-May. The play was in the news several times this week as UTSA released an Eagle Ford Housing Study that outlined the needs for creative solutions in South Texas. Flexible design that allows for multiple uses and affordable options are important for the growing population.

Forest Oil made headlines by announcing the company would "Go it alone" in the Eagle Ford. The company has over 100,000 net acres in the play and had announced intentions of seeking a joint venture partner. A partner would have likely injected enough capital for Forest to develop most of its acreage position. Instead, the company has dropped plans of seeking a JV partner and will run two rigs, with a focus on developing 40,000 acres. The remaining acreage will either be sold or farmed out to another operator.

Eagle Ford Oil & Gas Rigs

The number of rigs directed at natural gas (Smithbits) remained steady at 71. Karnes and Webb counties are currently the only counties with over ten rigs targeting natural gas. Henry Hub futures were trading at $2.88 on Friday afternoon. Coal to gas switching is less favorable in summer months, but June and July have bucked the trend and natural gas demand has stayed seasonally high. Higher consumption will likely save the natural gas market from a train wreck as we head toward peak storage levels. Every day that passes at current levels of consumptions lowers price risks for operators.

WTI was trading at $87/bbl Friday afternoon, and is ending the week up almost 5% over last week. Thanks to Mr. Hammett who wrote in noting Eagle Ford prices are trading above WTI prices. He is exactly right. Eagle Ford crude trades at a variable premium to WTI that normally falls between WTI and Louisiana Light Sweet (LLS) prices. As of Friday, LLS was trading just over $100/bbl. The number of rigs targeting oil was unchanged this week at 207.

The number of horizontal rigs running in the region is still 263. One water well is being drilled in McMullen County. Karnes County holds its position as the leader of development with 42 rigs and La Salle is down to 36 rigs this week. McMullen (31), Dimmit (28), Webb (26), Gonzales (20), DeWitt (20), Atascosa (13), and Live Oak (12) make up the top Eagle Ford counties.

News items this week included:

Thank you to Cal Chapman, P.E., who contributed an article addressing Electric Power Consumption in South Texas – Growing Due to Eagle Ford Development. The growing industry and population in South Texas means a greater strain on our power infrastructure.

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Drilling Rig Count by Operator

What is the Rig Count?

Drilling Rigs by County

Eagle Ford Shale Regional Rig Count Up 1 to 279 - July 6, 2012

July 6, 2012 R.T. Dukes

The Eagle Ford Shale drilling rig count is up to 279 units as of July 6, 2012. The play is showing resilience at $80 oil prices. Economics are robust at $80/bbl, but capital budgets at companies like Chesapeake will determine whether or not activity will stay at levels we've seen during the first half of 2012.

Eagle Ford road issues were in the news again this week. A study commissioned for DeWitt County was released this week and suggests total road maintenance costs could soar to over $400 million dollars over the next 20 years. That's up from approximately $70 million expected before oil & gas development began in earnest. The Eagle Ford Road Maintenance to Require Millions in New Funding article also includes great comments from DeWitt County Judge Daryl Fowler. Share your thoughts and comments there.

Eagle Ford Oil & Gas Rigs

The number of rigs directed at natural gas (Smithbits) fell again this past week to 71. Karnes and Webb counties are currently the only counties with over ten rigs targeting natural gas. Henry Hub were done slightly to $2.77 on Friday afternoon. That's after trading near $3, an important coal to gas switching threshold, during the week. Many utilities and power companies are burning as much natural gas as possible due to low prices. If prices were to increase above $3/mmbtu, it is expected many would begin burning coal again and we'd see less natural gas demand. WTI was trading at $84/bbl Friday afternoon, and is ending the week with almost no change from last week. Oil directed activity rose from 204 to 207 rigs this week.

The number of horizontal rigs running in the region is up to 263. That's four more than last week's count of 259. One water well is being drilled in McMullen County and one disposal well in Atascosa County. Karnes County continues to lead development with 42 rigs and La Salle is up to 37 rigs this week. McMullen (31), Dimmit (27), Webb (27), Gonzales (23), DeWitt (19), Atascosa (13), and Live Oak (12) make up the top Eagle Ford counties.

News items this week included:

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Drilling Rig Count by Operator

What is the Rig Count?

Drilling Rigs by County

Eagle Ford Shale Regional Rig Count up to 278 - June 29, 2012

June 29, 2012 R.T. Dukes

The Eagle Ford Shale drilling rig count rose to 278 this past week. That is an increase of seven rigs from last week's count of 271 and is on par with the rig count two weeks ago. We talked about future rig activity in last week's note and we covered an announcement that Pioneer Drilling is Slowing Down in follow up. It is worth noting: Pioneer Drilling has experienced a slow down, but the overall rig count grew during that time period.

Anadarko Petroleum is the operator up for review this week. The company had operations in the Maverick Basin before the Eagle Ford boom took root and expanded its holdings as exploration proved the potential of the play. The company's most publicized development was when it received $1.55 billion ($12,000+/acre) in a joint venture agreement with Korean National Oil Company (KNOC). KNOC received a 33% interest in the company's Eagle Ford acreage in exchange. Anadarko now estimates resource potential across its acreage is greater than 1 billion boe (600 mmboe net to Anadarko). Anadarko has nine rigs running as of June 29, 2012, and has averaged more 10 rigs running over the past twelve months.

Eagle Ford Oil & Gas Rigs

The natural gas directed rig count (Smithbits) this past week fell to 73. Karnes and Webb counties are the only counties with more than ten rigs targeting natural gas. Henry Hub futures prices were up to more than $2.90/mmbtu and had held twenty cents higher last week at $2.82/mmbtu on Friday afternoon. WTI was trading around $84/bbl Friday afternoon, and looks to end the week up. Oil directed activity increased to 204 rigs this week. That's back up from last week when it fell below 200 for the first time since the beginning of April.

259 horizontal rigs are running in the region up from last week's count of 248. One water well is being drilled in McMullen County. Karnes County continues to lead development with 41 rigs and La Salle is up to 36 rigs this week. McMullen (31), Webb (28), Dimmit (26), Gonzales (23), DeWitt (20), Atascosa (13), and Live Oak (12) make up the top Eagle Ford counties.

News items this week included:

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