Eagle Ford Shale Regional Rig Count at 271 - May 4, 2012

Oil Drilling Rig
Oil Drilling Rig

The Eagle Ford Shale drilling rig count fell seven rigs to average 271 working units this past week. That's below the April average of 274 rigs, but not large enough to think it is a trend. Marathon will have at least two more rigs coming into the area, so the ramp up in drilling isn't over yet. The most active operator in the play has led the region for over 8 months now. Chesapeake has 34 rigs active with 12 in Dimmit County, 10 in La Salle, 6 in McMullen, and one in each of DeWitt, Frio, Webb, and Zavala counties. We'll breakout each of the top operators in the coming weeks.

Eagle Ford Oil & Gas Rigs

The natural gas directed rig count rose two rigs this week to a total of 70. Henry Hub futures prices were trading at $2.29/mmbtu as of Friday afternoon. Natural gas storage numbers were more positive this week and the market responded. Oil directed activity fell 9 rigs to 201 as oil prices took a licking on the back of bad economic news on Friday. Prices fell below $100 and were trading around $98.50 per bbl at the end of the day.

254 horizontal rigs are running in the region. Karnes County leads development with 43 rigs. La Salle (39), McMullen (28), Dimmit (28), Webb (26), DeWitt (24), Gonzales (23), Live Oak (11), and Frio and Zavala counties with 8 rigs each make up the top Eagle Ford counties.

Many companies began reporting earnings this week and we'll have more news for you in the coming days.  Here are the highlights from this past week:

If you are headed to San Antonio/South Texas, 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

Valero Says Eagle Ford Crude Production to Reach 500,000 b/d by Year-End

Valero's CEO says Eagle Ford "crude" production will likely surpass 500,000 b/d by year-end 2012. He went on to say producers have told him that production will likely reach 1 million b/d in the next few years and will back out sweet crude imports from other countries. The industry is getting more confident that 1 million b/d of Eagle Ford production will be here sooner than later. The projection for 500,000 b/d of crude by year-end comes just a week after the EIA projected production of 500,000 b/d of crude and condensate in April. From speaking with industry professionals, I'm confident the EIA's numbers were higher than actual production and might have included NGLs. Either way, we're on a quick path to half a million barrels per day. I'm digging a little deeper and will have more for you in the coming weeks.

The EIA provides a great service, but I trust Valero's projections as they are one of the largest crude buyers in the world. It's their business to know what is going to feed their refineries.

Eureka Energy's Board is Rejecting Aurora Oil & Gas' Offer

Eureka Energy Sugarloaf Map
Eureka Energy Sugarloaf Map

Eureka Energy is advising shareholders not to accept the US$110 million offer that was made for the company by Aurora Oil & Gas on Monday.

Eureka asserts the offer is lower than their valuation of the company's flagship asset in the Sugarloaf Field and does not attribute any value to its Pan De Azucar/Black Jack Springs, or Bioche assets.

Eureka owns a 6.25% working interest in 24,743 gross (1,521 net) acres operated by Marathon Oil in Karnes County. In U.S. dollars, the offer is for $0.46 per share and Eureka believes the Sugarloaf field alone is worth US$0.56 per share or US$132.7 million.

If I'm doing the math correctly, that's $132,700,000/1,521 net acres = a valuation of $87,245.23/acre.

Read the entire recommendation at eurekaenergy.com.au

Hot Shot Drivers Are In Demand in the Eagle Ford Shale

The Eagle Ford Shale has brought a lot of opportunities for the oil and gas industry. There is plenty of work for everyone - especially Hot Shot truck drivers. Hot Shot drivers in South Texas are called by oil and gas companies to pick up loads from the drilling rig and deliver them somewhere else, or to bring much needed supplies to the rig to keep drilling and fracking productive. If a tool breaks, the crew is forced to stop drilling or producing until another one is delivered. Time is money and a crew sitting around waiting for a tool is not productive, so Hot Shot drivers that are reliable are a crucial part of the business. Good drivers build great relationships with crews to ensure they get more loads to keep busy.

Hot Shot Drivers Have Unpredictable Schedules

Hot Shot drivers are a different breed. Unlike regular drivers whose runs and loads are scheduled days, weeks and even months at a time in advance, Hot Shot drivers must be ready to go in a moment’s notice. They have to be skilled and flexible, ready to haul thousands of pounds of pipe one day, a small one-pound express package the next. Runs can range from across town to halfway across the state of Texas.

Unfortunately, drilling crews can be very demanding. Drivers can be put in very awkward situations to take loads even if they are over their hours, and more driving would put them in violation of Federal Motor Carrier Safety Regulation (FMCSR) hours of service rules.

Don't Risk Your License

As a Hot Shot driver you can either be the hero or the goat to these drilling crews. If you refuse a load, they have to call someone else and if that person is more available than you, you may think that's the one who will get more calls. Turning down work in order to stay within hours of service limits may seem risky, but driving past your allowed hours in a 24 hour period is riskier. It’s foolish and unsafe. All drivers, even Hot Shotters, are responsible for their log books being up-to-date and that they comply with FMCSR regulations. Remember, if you’re running illegally it’s your driving record and reputation that is at stake. It may seem you are making more money but all it takes is one DOT audit with a couple of log book violations on your Compliance Safety Accountability (CSA) status to take that away.

Let your customers know you are a safe and competent driver who follows the rules. If you set that standard from the beginning they will respect you and recognize you as a real professional. And who do you think they’d rather work with to transport their expensive equipment, or to meet their critical deadline?

Comstock's Restricted Choke Program Proving Successful

Comstock Resources' restricted choke program is showing early success in the Eagle Ford Shale. The company's first 19 wells tested came online at 24-hour peak production rates of 782 boe/d and averaged 584 boe/d for the first 30 days and 514 boe/d for the first 90 days. That's a drop of less than 35% from the peak 24-hour rate to the 90 day rate. Read more at our Comstock Resources Eagle Ford page.

FYI - Restricted Choke means the company isn't producing the reservoir as quickly as it could. They are literally choking back production. This is common practice in high pressure formations. The hope is that reservoir integrity will hold at a higher level, longer. The end game they're shooting for is higher production over the lifetime of the well.