Eagle Ford Regional Drilling at 271 Rigs - March 23, 2012

drilling rig
drilling rig 4

The Eagle Ford Shale drilling rig count fell 4 rigs to 271 active in the region. The region has held above 270 rigs for three weeks in a row and has added more than 100 rigs over the past 12 months. For reference, there are only 1,900-2,000 rigs running in all of the U.S.

Eagle Ford Oil & Gas Rigs

Natural gas directed rigs increased by 3 to 76 this past week. That's up week over week, but down from the 125 active rigs that were running in October of 2011. Over 95% of the active gas rigs are running in core Eagle Ford counties. Over half (40) are running in DeWitt and Webb Counties alone. Oil directed activity fell to 194 active rigs after spending two weeks above 200.

Natural gas prices are trading around 10-year lows at $2.27/mmbtu as of Friday afternoon. Oil prices fell a couple of dollars to $106 per barrel (WTI), on concerns higher prices are leading to changes in our consumption habits. With gasoline prices at record levels for this time of year, it seems likely the average American will drive less, possibly much less, this summer than normal.

Horizontal wells account for activity from 255 rigs and we have 1 storage well being drilled in La Salle County. Karnes County leads development with 41 rigs. La Salle (38), Webb (32), DeWitt (29), McMullen (25), Gonzales (22), Dimmit (21), Atascosa (10), and Live Oak (10) make up the top Eagle Ford counties.

News from the week included:

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.

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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

Cuero Gets First Major Housing Development in 20 Years - Cotulla Too

The city of Cuero is getting its first major housing development in more than 20 years. The founder of Four Points Development, LLC, out of Austin, lives in Cuero and will be leading development of the new subdivision. He's already sold a few of the 77 lots that will be available. My hunch is this won't be the last major sub-division announced in the Eagle Ford region. You can read more about the development at bizjournals.com The Cuero development isn't alone either.  In Cotulla, Eagle Ford Homes, Inc. is developing a sub-division named after the play itself - Eagle Ford Crossing. The development will include 45 new site-built homes and is scheduled for completion in Summer 2012.

Over the past two years, the Eagle Ford Shale development has increased the need for Apartments, Hotels, Man-Camps, RV Parks, and now its time for home builders and multi-family developments to come in. The Eagle Ford will be developed for many years to come and many of the workers moving to the area are here to stay. That means they'll need more than temporary housing.

For a full list of lodging solutions in South Texas, visit our Eagle Ford Shale Housing page.

Magnum Hunter's Eureka Hunter Subsidiary Deals For TransTex Gas Services - $58.5 million

Magnum Hunter Resources announced its subsidiary Eureka Hunter Holdings, LLC has entered an asset purchase agreement to acquire TransTex Gas Services. Eureka Hunter will pay $58.5 million, with both cash and equity, for TransTex Gas.  TransTex was started in 2006 and has quickly grow to the largest privately held contract gas treating company.  The company offers a broad range of midstream services and has over 50 amine plants that remove and treat CO2 and H2S from natural gas, as well as a fleet of dew point control plants.  TransTex's fabrication yard is conveniently located in Halletsville, TX, where the company can easily serve the Eagle Ford Shale. The company specializes in plants sized less than 60 GPM.

Magnum Hunter currently runs 4 rigs in the play and has plans to eventually spin off its midstream business into a MLP.

"The addition of the TransTex's group of assets and management team to Eureka Hunter is a another step in our overall business plan which makes for a very comprehensive and well rounded midstream services company. Eureka Hunter will now have immediate access and the ability to offer producers skid mounted wellhead treating and field processing plants ideally suited for specific customer needs. In addition, TransTex will broaden its footprint as Eureka Hunter continues to expand its gathering system in the Marcellus Shale of West Virginia and into the Utica Shale in eastern Ohio. We also believe the management team at TransTex will be able to identify additional business opportunities in the gathering and processing business for Eureka Hunter. With the acquisition of TransTex, we are significantly closer to the MLP objective we are ultimately seeking."

 

Eagle Ford Opportunities - Governor's Small Business Forum Highlights

Opportunities of the Eagle Ford Shale, part of the Governor's Small Business Forum, was the title of the event in La Vernia on March 20. It was a great opportunity for small businesses to hear directly from operators in the area and to get bits of advice for working with the industry.  If you're interested in future events, you can track future gatherings at our Eagle Ford Events & Conferences page. I've included a few highlights/notes from the various speakers below:

Thomas Tunstall, Ph D. UTSA

  • He will be surprised if there isn't significant development in Mexico
  • U.S. energy imports are falling
  • Wildcard for the Eagle Ford is the price of oil
  • Actual drilling and production numbers for 2010 and 2011 were double his initial forecast
  • Currently, modeling peak drilling at 2,500 wells per year (We expect the industry will get close to that this year)
  • 3-10 Billion barrels of recoverable oil are the common estimates he sees
  • Production will potentially surpass 1 million b/d before 2020 at current expectations
  • Fiscal discipline is very important for communities - too much money was wasted during the boom times in other areas

An Industry representative from Chesapeake and one from Marathon provided a panel discussion for those in attendance. The title of the panel was

Conducting Business with the Oil & Gas Industry

Adam Haynes - Chesapeake Energy

  • Hiring drivers, welders, and right-of-way agents
  • Midstream is a big portion of hiring - they have to move the products
  • Housing need is critical to the company's ability to grow its business in South Texas
  • Expecting a resurgence in manufacturing that hasn't been seen in the past 100 years
  • The industry has a BIG impact on local communities. The number one complaint he received a few months ago was about grocery stores not having milk and eggs.   CHK couldn't help, they're going to stick to drilling, but HEB is doing a great job
  • Contractors need $5 million in general liability insurance

Rick O'Brien - Marathon Oil

  • "Today is the slowest day for Marathon for the rest of the year." They're only increases their presence
  • They use the internet to find contractor, so a presence online is very important
  • Marathon doesn't own its subs like a Chesapeake, so contractors come through General Contractors
  • Contractors have to accept credit cards/wire transfers and be willing to only send 10-15 invoices per year
  • Recruiting 25 local operators
  • Starting first responder training for local fire departments soon

Special thanks to Carolyn Gibson of the City of Gonzales and Jennifer Kolbe of the La Vernia Municipal Development District. The ladies organized a great event.

Enterprise Products Adding NGL Fractionators 7 & 8 at Mont Belvieu

Enterprise Product Partners is the latest of many Eagle Ford midstream companies that are adding infrastructure to handle growing NGL production. Enterprise is already constructing its sixth fractionator at Mont Belvieu and the latest announcement comes after Dow and Shell announced plans to go forward with new petrochemical plants in the U.S. The additions will add 150,000 b/d of incremental capacity in the fourth quarter of 2013 when total capacity will be more than 610,000 b/d at the facilities. That's more than double the capacity of Enterprise's plant just two years ago. The plans are supported by growing volumes of NGL production in the Eagle Ford Shale, Rocky Mountains, and West Texas.

Expanding Enterprise's Eagle Ford Midstream Business

The company is also extending its Eagle Ford NGL pipeline (450,000 b/d ultimate capacity) to Anadarko's Western Gas Brasada Processing Plant (200 mmcfd) in La Salle County, TX. The expansion adds over 173-miles of pipe, with capacity of 140,000 b/d, that will connect to Enterprises infrastructure near the company's processing plant in Yoakum, TX. The extension gives access to the Western Gas Plant and seven other South Texas processing facilities.

As of the announcement, Enterprise had completed 375 miles of natural gas pipelines in the South Texas Eagle Ford. The company's Eagle Ford Mainline system is close to completion and will be able to deliver 900 mmcfd of rich gas to the Yoakum plant. The Yoakum plant will begin processing rich gas in May and will reach full capability by the first quarter of 2013. At that time, the plant will be able to process 900 mmcfd of gas, with capacity of 110,000 b/d of NGLs.

Including Enterprise’s seven other integrated South Texas processing facilities, the partnership will be able to offer approximately 2.4 billion cubic feet per day of processing capacity for the region when Yoakum is fully operational.

What is a NGL Fractionation?

Once NGLs are processed out of the natural gas stream, wet-gas, the individual products must be separated to be marketed and consumed. Fractionators take the NGLs to their various boiling points and separate out the individual products - ethane, butane, iso-butane, propane, pentanes, and natural gasolines. Ethane is a common feedstock for petrochemical plants and butane and propane can be used for heating or in your lighters and grills.