Copano Energy Eagle Ford Assets Add to Earnings

Copano Energy's Eagle Ford pipeline and midstream assets boosted the company's bottom line in the fourth quarter of 2011. The Texas segment of the company reported growth of 27% in gross margins from Q4 2010 to Q4 2011. The primary boost was from increased pipeline throughput in the Eagle Ford Shale and Barnett Combo plays.  Throughput volumes in the South Texas shale play were up 657%. How's that for volume growth.....

Eagle Ford Gathering, LLC also completed its 117-mile pipeline in December 2011. The separate entity, which is partnership between Copano and Kinder Morgan, provided gathering services for an average of 145,551 mmbtu/d in the quarter.

The quarter results also followed an announcement that the company will begin a DK Pipeline expansion that will extend the pipeline 65-miles into McMullen County.

Apollo Buys El Paso's E&P Unit Before Kinder Morgan Closes on the Pipeline Segment

El Paso Corp Eagle Ford Shale Map

Apollo and El Paso reached a $7.15 billion agreement for El Paso's E&P segment. The deal is subject to the closing of the El Paso-Kinder Morgan pipeline merger.

El Paso's exploration and production segment has been on the sales block since the Kinder Morgan deal was announced, but the question remained whether the assets would be sold in pieces or all together.

While Apollo has been rumored to be considering the deal, it comes as a bit of a surprise that the private equity group acquire El Paso E&P. Most industry experts thought El Paso would be a great fit for an international company looking to expand its footprint in the U.S. (e.g. Statoil-Brigham). Low natural gas prices that are limiting many companies' upstream budgets might have opened a window for the Apollo group to step in.

Apollo Global Management is leading a group that includes Riverstone Holdings, Access Industries, as well as others in buying the E&P unit. The deal will have almost no tax consequences for Kinder Morgan and the company will use the proceeds to pay down debt taken on to finance the purchase El Paso Corp.

El Paso's assets are attractive even at low natural gas prices because the company has significant oil/liquids producing acreage positions in the Uinta Basin in Utah, the Niobrara in the Rockies, the Wolfcamp in West Texas, and the Eagle Ford Shale of La Salle and Dimmit counties.

Apollo will likely increase the pace of development in the oil & gas areas of the company's portfolio. Private equity firms do not practice a long-term buy and hold strategy. El Paso will be held for a period and later re-offered to the market. Typically, private equity firms hold investments for a 3-7 year period and target a return of 2-3 times their investment.

Eagle Ford Regional Drilling Rig Count Adds 6 - Crosses 260 Rigs - Feb. 24, 2012

drilling rig 8

The Eagle Ford Shale drilling rig count passed 260 for the first time in a month. 6 rigs were added to bring the total to 263. That's getting close to the 265 rig record we set in January. We've had several operational updates in the past week and all point to increased activity in 2012. Add the number of Eagle Ford Pipeline and Midstream expansion announcements we've had in the past couple of months, and it's easy to be confident about the long-term sustainability of the play. Midstream companies aren't willing to take the risks an upstream company might, so big expansions plans mean confidence.

Eagle Ford Oil & Gas Rigs

The natural gas rig count fell 3 to 78 this week. That matches the lowest level seen in the past year. The oil rig count jumped 9 rigs to 184 working. That puts us right back at the record 185 oil rigs we had working the second week of January.

Natural gas feel back to approximately $2.50/mmbtu this week and oil prices rallied over $109 per barrel (WTI). Higher oil prices will only attract more Eagle Ford development. Horizontal wells account for activity from 245 rigs and we have 1 disposal well being drilling in Leon County (not a core Eagle Ford area) by GSI Oil & Gas.

La Salle County's lead stayed at 1 with 39 rigs working. Karnes (38),Webb (35), DeWitt (25), Gonzales (25),McMullen (22), Dimmit (16), and Live Oak (11) make up the top Eagle Ford targeted counties.

We had several operators announce earnings and we'll be adding to the list we've covered so far in the coming days. Major news this week included:

News

• Teak Midstream Plans Adding 200 mi of Gathering & a 200 mmcfd Plant - $280 million
• Escondido Resources II Announced 2011 Eagle Ford Well Results
• Carrizo Announced Eagle Ford Reserves Were Up 90%  
• UT Energy Institute Says Fracking Does Not Contaminate Drinking Water
• Cheniere Energy Plans a LNG Open House in Portland, TX

If you're traveling to San Antonio soon, be sure to visit our Eagle Ford Hotels page.  We've negotiated discounted rates with hotels that are welcoming the Oil & Gas Industry.

Come back weekly for updates on the South Texas drilling rig count.

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

Teak Midstream Adding 200 Miles of Pipe & a 200 mmcfd Processing Plant - $280 Million

TEAK-Eagle-Ford-Shale-Map

Teak Midstream joins the list of Eagle Ford pipeline and midstream companies that are making major expansion in South Texas. Teak plans to add more than 200 miles of pipelines to its gathering system and residue delivery system.  The company will also add Silver Oak Plant, a 200 mmcfd of cryogenic processing plant, in Bee County, near Pettus.

The project is supported by 10-year firm gathering and processing agreements with both Talisman Energy and Statoil Natural Gas. The gathering system will consist of two high pressure systems.

• 125 miles of 24 inch pipe with 600 mmcfd of capacity - Two segments named the La Salle Lateral and the Bee Express
• 20 miles of 20 inch pipe with 400 mmcfd of capacity - Karnes Lateral

The 125 miles system will originate in La Salle County and move gas to Teak's new Silver Oak Plant in Bee County. Teak will own 100% of the first 50 miles and the next 75 miles will be jointly owned with Texstar Midstream.

Teak Residue Gas and NGL Pipelines

51 miles of 20 inch pipe will be used for residue gas coming from the Silver Oak Plant for delivery on major natural gas pipelines - Tennessee Gas, Texas Eastern, and NGPL.

The company will also construct a 12-inch NGL pipeline that will deliver liquids to DCP's Sand Hills NGL Pipeline

“We are extremely pleased to have negotiated agreements with Talisman and Statoil, whose commitments fully support our project. We look forward to a long-term working relationship with these outstanding energy companies as we build our asset base in the Eagle Ford,” said TEAK Co-Chief Executive A. Chris Aulds. “

Chesapeake's Eagle Ford Shale Production Tops 20,000 boe/d

Chesapeake's Eagle Ford Shale asset is garnering much of the company's attention in 2012. To the tune of almost 25% of the company's capital, with 33 of the company's 161 rigs focused in the Eagle Ford. Total net production averaged a little less than 18,000 boe/d net in the fourth quarter of 2011 and current production stands at 22,600 boe/d net. Production was up 60% quarter over quarter and 370% year over year. (You can get pretty amazing growth rates running 33 rigs) Gross operated production is close to passing 50,000 boe/d and stands at a little over 45,000 boe/d. CNOOC owns a 33% interest in Chesapeake's acreage, so net will always be a close to 50% when you account for royalties and other WI owners.

The production mix is 50% crude, 20% NGLs, and 30% natural gas. That will likely stay the same for some time unless the company begins to target the natural gas rich Pearsall Shale......and that's not happening at sub-$3 gas prices.

Well performance in the Eagle Ford continues to improve.

108 wells tested with peak oil rates of 500 barrels of oil or more

The company has drilled and is producing from 178 wells and has 200 additional wells close to coming to production. That is the main reason for adding almost 350 miles of pipelines in 2011 and plans for further expansions in 2012. It will be needed for the volumes of oil and gas the company plans to bring online.

Chesapeake will also add frack crews during 2012. 7 company crews are running now and that will grow to 11 by March and 13 by year-end. That should make them virtually self sufficient when it comes to fracking Eagle Ford wells.

Chesapeake has more than 400,000 net acres in the Eagle Ford primarily located in the oil window of the Maverick Basin.

Read the company's press release at chk.com