NextEra Energy Moves into the Eagle Ford

Eagle Ford Deals

NextEra Energy Partners LP will purchase NET Midstream to gain foothold in the Eagle Ford.

Related:  Oil & Gas Deals in the Eagle Ford

NextEra Energy Partners LP announced this month that they are moving forward with a deal to purchase NET Midstream, which will include seven natural gas pipelines in Texas.  The $2.1 billion deal will give the company future potential to ship 1billion cubic feet of shale gas a day. The largest asset in NextEra’s acquisition will be pipelines that deliver gas to Mexico under a 20-year contract with Pemex, the state-owned energy company.

Related:Eagle Ford Shale and Mexico: An Important Partnership

“Natural gas demand in Mexico has been growing substantially. At the same, time Mexico-based natural gas supply has been declining, which we believe increases Mexico’s need for U.S. gas.”

— NextEra Chief Financial Officer Moray Dewhurst

Through this deal, NextEra will move into the Eagle Ford by purchasing a pipeline that connects to U.S. and Mexican markets and the Monument Pipeline, along with four smaller lines that supply power plants and households.

Mexico has been anxious to increase its imports for natural gas and has been working lots of deals since the country’s energy reforms were passed last year. Mexico’s current demand for the commodity is currently outstripping its ability to provide the demand.

Read more at nexteraenergyresources.com

Mexico Oil Swap Not Significant

Oil Exports

Last week's buzz surrounding the U.S. swapping oil with Mexico may end up being more hype than reality.

Read more: Swapping Oil with Mexico

The U.S Commerce Department opened the door last week for a limited amount of oil to be exported to Mexico when it approved an application from Pemex that would allow for the U.S. to exchange our light crude for Mexico’s heavy crude.

Many were hoping this signified a shift in opinion about the oil export ban that has been in effect since the 1970’s, but some analysts are now saying that the effort may be mostly symbolic.

“Mark Broadbent, an analyst at Wood Mackenzie told FuelFix that there’s little evidence that regulators are prepared to offer a similar exception for crude exports to more far-flung countries. “In terms of the actual impact on the U.S. refining, it’s a small step.”

Despite the ban on oil exports since the 1970s, the U.S. still imports a large amount of heavy oil from Mexico and Canada. Between January and May 2015, it is estimated that U.S. refineries imported about 700,000 barrels per day of Mexican crude.

Mexico wants our lighter crude oil because it allow their refineries to shift their output toward valuable gasoline and away from less valuable fuel oil. Wood Mackenzie estimates that Mexico uses about 300,000 barrels per day of gasoline more than it produces.

Read more at fuelfix.com

Eagle Ford Production up 1%

Eagle Ford Oil

Eagle Ford oil production increased slightly during July, according to Bentek Energy. 

After peaking in April are the highest levels since 1971, analysts predicted that U.S. oil production would continue to decline through the early part of next year bringing supply and demand back into balance.

Related:EIA: U.S. Oil Production Has Peaked

Eagle Ford production fell in May by 50,000 barrels per day and then increased10,000 barrels a day, a slight 1% from June to July. Average production throughout the region was 1.6 million b/d, about 17% higher than July 2014.

“Initial production (IP) rates have been improving, especially in the oily window of the Eagle Ford Basin. As well, producers in the Eagle Ford are currently drilling 2.5 wells per rig per month, which is higher than the national average of 1.5 wells. Drill times have been improved from an average of 15 days per well in 2014 to roughly 11 days per well in 2015.”

— Analyst, Sami Yahya

The Eagle Ford continues to lead other shale basins in efficiency gains and internal rates of return of around 18%. Bentek reports that the Bakken formation is just behind the Eagle Ford with drilling decreasing from about 15 days per well in late 2014 to about 13 days per well during the second quarter of this year.

David Porter: EPA Rulings Will Kill Jobs

EPA to Limit Emissions

New federal regulations designed to cut methane emissions in the oil and gas industry have the Texas Railroad Commission up in arms.

Related: New Ruling to Slash Methane Emissions

President Obama revealed the latest regulations as part of his broader plan to fight climate change. The plan requires oil and gas companies to cut methane pollution from drilling sites, distribution systems and in other areas of operation by 32 percent from 2005 levels by 2030.

Oil and gas producers are already fatigued from months of low crude prices and new regulations may be more than most can handle. The EPA estimates that the ruling might cost the industry as much as $420 million.

“Like the Clean Power Plan, these burdensome rules will be used by the EPA as a weapon in President Obama’s war on fossil fuels. These excessive regulations are another blatant attack on the oil and gas industry that will further impede America’s energy security, kill jobs and put even more stress on our national and state economies.”

— Texas Railroad Commission Chairman, David Porter

Methane is the key component of natural gas and has a high impact on global warming — up to 25 times that of carbon dioxide. In April, a nationwide study showed that methane emissions across the United States had dropped significantly in the past two decades and are much lower than current Environmental Protection Agency estimates.  Read more here

Is it "Doomsday" in the Eagle Ford?

Oil Prices Fall to Six Year Low

The oil bust is taking its toll on the Eagle Ford.

Since June 2014, crude oil prices that have plunged from over $100 down to new lows of under $43. The U.S hasn’t seen these types of prices in almost seven years and the effects of the prolonged pricing is being seen, especially in the small towns of the Eagle Ford.

Related: Summary of the Oil Bust

Hydraulic fracturing literally changed the landscape of many rural areas in the Eagle Ford. As the surge in oil production it unleashed a whirlwind of growth, construction and population explosions. But as the low oil prices hang around, the bankruptcies, mergers and layoffs are affecting these towns the most.

“Everybody is waiting for doomsday. Everything was good, and everybody was getting these big checks, and everybody waited for their land to be leased, and then it all came to a screeching halt around the beginning of the year.”

— Vi Malone, Karnes County Treasurer

Producers have been forced to tighten their budgets and change their strategies in order to stay competitive. And while these tactics have worked for some, the prolonged low prices are forcing many to resort to extreme measures to save their bottom line.

Related: Fierce Competition in the Eagle Ford

In a recent study of 66 companies, the IHS found that in the first quarter of the year alone they had to write down nearly $29 billion in the value of their assets, which exceeded the total for the full year of 2014. These measures by big producers are squeezing out many local service companies who are being forced to drastically reduce their prices and fees, causing a ripple effect that negatively impacts all parts of small local economies. 

The future is unclear and uncertainty and predictions of doom are now commonplace. Some analysts forecasted possible economic ruin for oil-dependent states and others warned of the crippling of the industry. But many seasoned oilmen saw the downturn as a wake up call of sorts and an opportunity for producers to take a hard look at their systems, processes, personnel, technology and strategies outside of the frenetic pace the boom required.