Newfield Q3 2011 Operations Update - Well Results and Costs

Newfield Exploration announced its third quarter earnings along with an update on its Eagle Ford operations. The company has a 335,000 acre position in the Maverick Basin across Dimmit, Maverick, and Zavala counties. Drilling is currently focused in the southern portion of the company's acreage where infrastructure is accessible. The company also has a pilot program active in the West Asherton area in Dimmit County. The company has completed 16 wells that have produced 650 barrels of oil equivalent in the first 24 hours. The wells have expected EUR's of 300,000 barrels. Wells have been drilled in as little as 7 days at average costs of $6.6 million for drilling and completion.

The Eagle Ford is the primary drilling target for the company, but Newfield has completed 6 wells targeting the Georgetown formation and 2 wells targeting the Pearsall Shale. The company currently produces more than 7,000 barrels of oil equivalent per day from the area.

Read more at our Newfield Exploration Eagle Ford Profile

Truck Traffic and Pipeline Advice from the Eagle Ford Task Force

The Eagle Ford Task Force has released advice for truck traffic and pipeline developments. It is all pretty straight forward and will help in making sure pipelines are developed without any problems and our roads are maintained as best as possible. Pipelines:

  • Placement of pipelines should avoid steep hillsides and watercourses where feasible
  • Pipeline routes should take advantage of road corridors to minimize surface disturbance
  • When clearing is necessary, the width disturbed should be kept to a minimum and topsoil material should be stockpiled to the side for replacement during reclamation, accelerating successful revegetation
  • Proximity to buildings or other facilities occupied or used by the public should be considered, with particular consideration given to homes
  • Unnecessary damage to trees and other vegetation should be avoided
  • After installation of a new line, all rights-of-way should be restored to conditions compatible with existing land use.

Roads:

  • Trucking companies partnering with the Texas Department of Public Safety to develop a program that would alert companies when their drivers receive moving violations or drivers license suspensions
  • Creation of road use agreements or trucking plans between operators and local authorities, including parameters such as:
  1. Avoiding peak traffic hours, school bus hours, and community events.
  2. Establishing overnight quiet periods.
  3. Ensuring adequate off-road parking and delivery areas at all sites to avoid lane/road blockage.

 

Austin Exploration Spuds Eagle Ford Well in Burleson County, TX

Austin Exploration will spud an Eagle Ford Shale well in Burleson County, TX during the week of October 25, 2011. The company has assembled a 5,000 acre position in the county at a cost of $400 per acre. The company plans three vertical wells and then a thorough evaluation of reservoir properties. Austin Exploration expects to intersect a 300 ft section of the shale in this area. The Eagle Ford is the primary target at 8,700 ft and the Austin Chalk is the secondary target at 8,300 ft. The Taylor Sands, Buda Lime, and Georgetown Lime are also potential hydrocarbon bearing zones.

Austin's Eagle Ford Shale project is located in the oil/wet gas window of the play, which has proven to be the most productive area of the play, with an interpreted thickness of ~300 feet. Austin acquired its Eagle Ford Shale interests for an average of only ~$400 per acre, well below industry peers, following a detailed due diligence including an independent technical report and analysis of 12 nearby wells, all with production. The independent technical report prepared for Austin as part of its due diligence suggested potential initial production rates of >800 bopd and NPV per well of up to $7 million, with potential for 31 wells.

Read the full news release at abnnewswire.com

El Paso's Eagle Ford Assets on the Market

El Paso Corporation and Kinder Morgan announced a $38 billion transaction where the later will acquire all of El Paso's assets. The deal will create a pipeline and midstream company that is the 4th largest energy company in North America (Enterprise Value of >$90 Billion). El Paso had plans to spin off its exploration and production business at the end of the year, but those plans are delayed until Kinder Morgan has full control of the assets. The company still plans to divest the E&P assets, but is more likely to sell individual assets instead of spinning off a new entity. That means there are Eagle Ford wells and acreage on the market.

An international company like BHP or the Eagle Ford partnership between Talisman and Statoil are the most logical bidders. The proximity fits and both entities have the cash.

El Paso's Eagle Ford assets are located in La Salle County, TX where both Petrohawk (now BHP) and Talisman-Statoil operate. The El Paso assets would compliment other transactions by the same companies:

It's not Eagle Ford related, but Statoil announced the acquisition of Bakken focused Brigham Exploration on October 17, 2011. By becoming an onshore operator, I suspect the company's appetite for acreage will grow.

None of the three companies companies have been shy about acquiring U.S. shale assets. The El Paso acreage falls right in the middle of the Talisman-Statoil partnership and just west of BHP's Hawkville asset. It's a logical fit, but you never now how a company's appetite changes from day to day. With all of the bullish sentiment around the Eagle Ford, I doubt it will take long for someone to swoop in on this deal.

“On the PE side, the odds are that these assets would be sold separately,” said Adam Connors, a director in corporate finance group of boutique investment bank C.K. Cooper & Co. “There could also be another E&P company buying whole thing, but in terms of the odds of a PE firm picking up all of it and operating it effectively – they’re slim.”

The assets include El Paso’s “active drilling program” in the Eagle Ford Shale in South Texas, an emerging Wolfcamp position, as well as portions of its Gulf of Mexico and South Texas assets. It also includes Haynesville, Wilcox – a conventional gas play – and Altamont, up in the Rockies. Additional operations are in offshore Brazil and Egypt’s Western Desert.

Read more at wsj.com

R.T.

Water Availability Questions Create Worries About Fracking

Water availability in the hottest areas of the Eagle Ford will become an even greater concern if the drought continues. Water used in drilling and completing wells pulls on local water sources and decreases supply. Without aquifers being recharged, there will be areas that begin feel the effects of greater water use. That won't make for happy farmers.  The article mentions "fracking" and "frack sites" several times. The proximity of a well location or completion isn't the drain on the aquifers, it is the water wells that are pulling water up to the surface. Yes, there are millions of gallons used in fracking, but that water can be sourced from other places if the situation gets too bad. The real question will be how do economics change and can operators drill at the same pace if water is limited.

Two fracking sites are less than a half-mile west of Hedtke's front porch off Farm-to-Market Road 1144 near Farm-to-Market Road 99. Three others are located within sight of his favorite shade tree out back. Another is planned, he said, less than a quarter mile from his back door.

Water is in high demand throughout Karnes County, an area already ravaged by the state's worst drought in 50 years.

Twelve-inch, aboveground waterlines crisscross the county, pieced together in 20-foot sections. Signs advertise freshwater sources and well digging services needed to sustain the various fracking sites that, on average, require between 4 and 6 million gallons.

The Eagle Ford Shale formation is so dense that only a mixture of water, sand and a variety of chemicals applied at high pressure, can loosen the shale's grip long enough to free the trapped oil and gas.