Eagle Ford Shale Regional Rig Count Up 1 to 279 - July 6, 2012

July 6, 2012 R.T. Dukes

The Eagle Ford Shale drilling rig count is up to 279 units as of July 6, 2012. The play is showing resilience at $80 oil prices. Economics are robust at $80/bbl, but capital budgets at companies like Chesapeake will determine whether or not activity will stay at levels we've seen during the first half of 2012.

Eagle Ford road issues were in the news again this week. A study commissioned for DeWitt County was released this week and suggests total road maintenance costs could soar to over $400 million dollars over the next 20 years. That's up from approximately $70 million expected before oil & gas development began in earnest. The Eagle Ford Road Maintenance to Require Millions in New Funding article also includes great comments from DeWitt County Judge Daryl Fowler. Share your thoughts and comments there.

Eagle Ford Oil & Gas Rigs

The number of rigs directed at natural gas (Smithbits) fell again this past week to 71. Karnes and Webb counties are currently the only counties with over ten rigs targeting natural gas. Henry Hub were done slightly to $2.77 on Friday afternoon. That's after trading near $3, an important coal to gas switching threshold, during the week. Many utilities and power companies are burning as much natural gas as possible due to low prices. If prices were to increase above $3/mmbtu, it is expected many would begin burning coal again and we'd see less natural gas demand. WTI was trading at $84/bbl Friday afternoon, and is ending the week with almost no change from last week. Oil directed activity rose from 204 to 207 rigs this week.

The number of horizontal rigs running in the region is up to 263. That's four more than last week's count of 259. One water well is being drilled in McMullen County and one disposal well in Atascosa County. Karnes County continues to lead development with 42 rigs and La Salle is up to 37 rigs this week. McMullen (31), Dimmit (27), Webb (27), Gonzales (23), DeWitt (19), Atascosa (13), and Live Oak (12) make up the top Eagle Ford counties.

News items this week included:

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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

Recycling Waste Water is Big Business

July 6, 2012 R.T. Dukes

About one-third of the water used to complete a well flows back when the well is brought to production. The rest is produced throughout the life of the well. Recycling waste water is a shift for the industry. Historically, waste water was disposed of through treatment plants, injection wells, and evaporation ponds.

Recycling Waste Water Answers Many Concerns

As the volume of water used in hydraulic fracturing has grown, operators have explored alternate solutions. The popularity of recycling water is growing as operators look for a cheaper solution to drilling deep injection wells, as they look for more environmentally friendly options, and as they combat concerns of scarce water.

You can read more at our Eagle Ford Water page and this mysanantonio.com article that details a few companies offering new solutions.

Trucking Accidents at Railroad Crossings - Don’t Be A Statistic - Stop, Look, Listen

July 5, 2012 Elizabeth Alford

Every year, an unfortunate number of trucking accidents occur at Texas railway crossings. Last year, a truck became stuck in ice while crossing railroad tracks and in another incident a freight train hit an 18-wheeler. Fortunately the vehicle drivers were not injured, but that wasn’t the case in a third railroad crossing accident which ended in a fatality. A man reportedly drove around a crossing gate and was hit by an oncoming passenger train. Many railroad crossing accidents occur in rural areas traveled to and from the oilfield.

Operation Lifesaver is a nationwide, non-profit public information program dedicated to reducing collisions, injuries and fatalities at highway-rail crossings and on railroad property.

Union Pacific launched an outdoor billboard campaign aimed at getting South Texas truck drivers to use railroad crossings safely. Reaching an estimated 1.3 million drivers between San Antonio and Laredo, the bilingual campaign pairs a visual of an 18-wheeler stopped or stuck on railroad tracks with simple phrases, such as, "Always expect a train" and “About Every 3 Hours, a Person or Vehicle is Hit by A Train.”

"Union Pacific is raising the rail safety message to remind professional truck drivers of their responsibility to cross the tracks safely," said Danny Valdez, Webb County judge. “The billboards will also reach the general public, which will make our community even safer."

Always expect a train because freight trains don’t travel at fixed times, and schedules for passenger trains can change.

Truck Accidents are Preventable

Follow the Rules. These accidents are preventable, with a little education and a little awareness. Abiding by railroad grade crossing regulations is a good place to start.

A driver approaching a railroad crossing must stop not closer than 15 feet or farther than 50 feet from the nearest rail under the following conditions:

a clearly visible railroad signal warns of the approach of a railroad train;
a crossing gate is lowered, or a flagger warns of an approach;
a railroad engine approaching within approximately 1,500 feet of the highway crossing emits a signal audible from that distance and the engine is an immediate hazard because of its speed or proximity to the crossing;
an approaching railroad train is plainly visible and is in hazardous proximity to the crossing; or
the driver is required to stop by a traffic-control device or signal. A driver must remain stopped until permitted to proceed and it is safe to proceed.

The driver of a vehicle who approaches a railroad crossing equipped with railroad crossbuck signs without automatic, electric, or mechanical signal devices, crossing gates, or a flagger warning of the approach or passage of a train must yield the right-of-way to a train in hazardous proximity to the crossing, and proceed at a speed that is reasonable for the existing conditions. If required for safety, the driver must stop at a clearly marked stop line before the grade crossing or, if no stop line exists, not closer than 15 feet or farther than 50 feet from the nearest rail.

Helpful Tips Regarding Railroads

Always expect a train because freight trains don’t travel at fixed times, and schedules for passenger trains can change.

Trains are no more able to stop on a dime than tractor-trailers
Trains can move in either direction, backwards as well as forwards, at any time
An approaching train is closer and moving faster than you might think
Stay alert around railroad tracks. Don’t text or wear headphones. Minimize distractions that could prevent you from hearing an approaching train. Be aware that today’s trains are quieter than ever, and may not make a “clickety clack” sound.

Find more helpful safety tips, including what to do if you do get stalled on the tracks, at the Operation Lifesaver Website

Happy 4th of July 2012

July 4, 2012 R.T. Dukes

Have a happy Independence Day holiday. We wish you a wonderful day and safe travel. Don't forget the significance of July 4, 1776, in our history. Many of the freedoms we enjoy were set in motion that day.

Private property ownership and a free market that drives competition, has pushed America to the forefront of energy development.

Eagle Ford Road Maintenance to Require Millions in New Funding

July 3, 2012 R.T. Dukes

Road maintenance in South Texas is in the news almost daily and a recent study details the needs in DeWitt County. The study estimates the county needs $432 million to construct and maintain heavily trafficked oilfield roads over the next 20 years. That's $350 million more than the county would have allocated before the discovery of the Eagle Ford Shale and millions more than the $112,000 the county received from the state last year.

Is $432 Million a Realistic Estimate for Road Repairs?

While the need shouldn't be a huge surprise, it is likely a high estimate. High in regards to the basic assumptions and multiples higher than local or state officials have planned for.

The study is based on 65-acre spacing across the entire development area and uses an expected number of truck trips for each well. While there will undoubtedly be lots of trucks moving through the area, there will not be the same number of truck trips for every well. As companies begin infill development drilling, there will be multiple wells drilled from single locations. That means fewer trucks and less road damage.

Drilling two wells per pad will drive down traffic significantly. Not quite 50%, but it would be close. The rig move is eliminated completly on multi-well pads and development in other shales indicates that more than two wells/pad will be normal.

Even if needs end up being half of that estimated by the study, road repair costs will be three times prior expectations and millions more than what is allocated from the state.

Eagle Ford Road Maintenance Needs in DeWitt County

Here are the highlights from the study:

The county maintains 342 miles of roads in the Eagle Ford development area
Expects almost 3,700 equivalent single axle load (ESAL) trips over the life of a well
45 miles of road maintenance per year at 80,000 per mile ($3.6 million/year or $72 million total)
187 miles of road reconstruction at $920,000 per mile ($172 million)
99 miles of major reconstruction at $1.9 million per mile ($188 million)
If we attribute ALL of the costs to the oilfield and no other purposes, it equates to $133,000 per well in the development area.

Consider the potential of drilling 3-5 wells from a single pad site and the per well road maintenance costs could fall below $50,000 (60% less). Consider the same number of wells to be drilled and total costs could easily fall as low as $200 million dollars over the next 20 years.

Get the full DeWitt County Road Damage Cost Allocation Study HERE

Share your thoughts and comments below.