Eagle Ford Region Rig Count Steps Back from Record - 279 Running May 25, 2012

May 25, 2012 R.T. Dukes

The Eagle Ford Shale drilling rig count stepped back from records the past two weeks to settle at 279 units running. If oil prices remain at $90 or below, it will be interesting to see how operators respond in the coming months. It's common sense, but there is nothing that affects the economics of a well more than the oil price.

This week, we're highlighting Marathon Oil's Eagle Ford position. The company made a splash with the $3.5 billion acquisition Hilcorp Resources last year and recently added acreage through a $750 million acquisition of Paloma Partners. Marathon has added six rigs since the beginning of the year. The company has 6 rigs drilling in Karnes County, 4 in Atascosa, 4 in DeWitt, 2 in Gonzales, 2 in McMullen and one in Live Oak County.

Eagle Ford Oil & Gas Rigs

The natural gas directed rig count (Smithbits) rose to 75 rigs. With 9 gas rigs active in Karnes County, only three counties have more than 10 rigs active - DeWitt, McMullen, and Webb. Henry Hub futures prices lost some of the ground it had recovered. We're trading at $2.53 at lunch on Friday. It's hard to get bullish natural gas at current production levels, but hopefully prices hold at sustainable levels through the summer. The oil price remained relatively flat week over week. WTI is trading at a little less than $91/bbl. It is worth noting that Eagle Ford crude is getting a premium to WTI, so prices over the last week for high quality crude have ranged anywhere from $5-10 better than WTI. During the week, oil directed activity fell to 202 rigs.

252 horizontal rigs are running in the region, with 2 disposal wells being drilled in Atascosa County. Karnes County leads development with 39 rigs and La Salle has 36 rigs. Dimmit (31), McMullen (29), Webb (27), DeWitt (24), Gonzales (20), Atascosa (13), and Live Oak (12) make up the top Eagle Ford counties.

News items this week included:

Come back weekly for updates or sign up for alerts.

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

How Long Before New Neighborhoods are Built in South Texas?

May 25, 2012 R.T. Dukes

The Eagle Ford housing market has driven investment in hotels, man-camps, RV parks, and to some extent apartments. The one thing missing is permanent homes. An article addressing the topic was published yesterday in the Chronicle.

Eagle Ford Task Force Turns to Natural Gas Flaring

May 24, 2012 R.T. Dukes

The Eagle Ford Task Force is turning its attention to natural gas flaring. Texas set a record for flaring permits earlier in the year and the trend will continue until pipelines and gathering systems catch up with drilling.

In oil producing areas like the Eagle Ford, drilling and first production is reached weeks and sometimes months before pipeline companies get natural gas infrastructure to the area. Oil can be moved with a truck, but natural gas needs pipelines.

Flaring is commonplace in oil producing areas and is very rarely abused. More often than not, flaring lasts only a few days or weeks. It is in the operators best interest to get paid for natural gas they're producing.

The task force plans to work with companies to increase the use of natural gas generators on location. On-site generators can power electric machinery and will help limit the amount of flaring.

A main concern for the region is whether or not the Eagle Ford will push the San Antonio Metro Area over the federal limits for ozone standards. The ozone issue alone will have politicians anxious.

Comments from David Porter indicate the TX RRC is going to review its rules to make sure they are relevant in the modern shale era. I suspect there won't be major changes. Even if big changes come, infrastructure in the Eagle Ford will be catching up and flaring won't be near as prevalent by the time any legislation is enacted.

Updated Texas Railroad Commission Map of the Eagle Ford Shale

May 23, 2012 R.T. Dukes

The Railroad Commission released an updated well map in May. Since the March 15, 2012 version, the number of gas wells on schedule has only grown by 25, but the number of oil wells on schedule has surged by 422 to 1,376.

We're close to having 2,000 producing wells on record. Take into account the delays in reporting and we're likely well past 2,000.

The number of permits issued in the play jumped 381 to more than 4,000 over the past two months as well.

We're running at a blistering pace. 400+ oil wells in two short months is a substantial feat and with ~250 rigs running, we'll likely replicate the growth of the past two months many times over.

The increased pace of drilling and permitting is exactly why we're seeing higher future production estimates almost weekly.

Eagle Ford Catering is Big Business in South Texas

May 22, 2012 R.T. Dukes

With an influx of almost 50,000 workers related to the Eagle Ford Shale, South Texas catering is becoming big business. Delivering and serving food isn't quite as visible as a rig that breaks the horizon, but many would say it's just as important. Twelve hour shifts mean there isn't much time spent away from the job, so many companies are happy to cater meals as often as budgets allow.

This, not so visible, portion of the restaurant industry is often the cash cow that keeps the doors open. I knew several restaurants when the Haynesville Shale was booming that broke even in the brick and mortar store and made all of their margin in the field catering events.

It's also the reason many specialty caterers are serving the area. They aren't what you'd expect either. Many run mobile kitchens just as nice or nicer than the typical restaurant and have certified chefs working the stove top. There's no microwave keeping the food warm. It's just plain good cooking.

If you're looking for a caterer in South Texas, you'll find just what you need in the Restaurants and Catering Category in the Eagle Ford Shale MarketPlace. Our preferred caterers include:

TJ's Chuck Wagon (210.262.4200)
Boathouse Bakery & Bistro (210.896.6506)
Monster BBQ & Kitchen (210.392.4058)

Catering for big corporate clients is luring businesses from San Antonio. My SA published an article detailing developments of the General Store in Pearsall. I've included a few quotes and a link to the article below:

..the company currently has two contracts along Interstate 35 with two different oil companies. He expects to have as many as 12 contracts within a year, which would mean providing meals to thousands of workers.
Strange did not say how much the contracts were worth, only that it was “a lot of money.”
He said each catering contract will require six employees, who will be current staffers of Don Strange of Texas in San Antonio and will stay in the contracted area. Strange said the company will provide pull-behind trailers for those workers to live in while catering on the oil fields.
The demand for food in the Eagle Ford is benefiting other caterers in San Antonio, as well.