BP - Kinder Morgan Sign Long-term Eagle Ford Processing Agreement

Kinder Morgan Galena Park Terminal Photo

Kinder Morgan announced on July 19, 2012, the company will provide long-term condensate processing services and storage at terminals located in the Houston Ship Channel. BP will lease 750,000 barrels of storage and has committed 40,000 barrels per day of condensate that will be split into its light and heavy napthas, as well as kerosene and gas oil.

To accommodate, Kinder Morgan will spend $75 million to add storage at its Galena Park Terminal. Five tanks that connect to the condensate facility, new pipes and pumps will will be part of the expansion.

While the agreement was described as long-term, the actual length of the contract was not released. You can read the full press release at KinderMorgan.com and can read more at our BP Eagle Ford Shale page.

Sanchez Energy Eagle Ford Reserves Hit 15 mmboe - Vertical Well Tests Coming

Sanchez Energy Eagle Ford Shale Map

Sanchez Energy's Eagle Ford reserves have grown by 125% since the end of 2011. The company reported 15 million barrels of proved reserves with 87% being attributable to oil. An internal estimate pegs total resource potential at more than 250 mmboe from 800-1,200 wells.

Sanchez has approximately 95,000 acres stretched across portions of the black oil and volatile oil windows of the Eagle Ford. The company's prize asset is its 9,400 acres in the Palmetto area of Gonzales County. Sanchez has two rigs running in the Eagle Ford and plans for an additional rig in the Palmetto area in August. The company just completed a seismic study in the Palmetto area and has started a development program that will include 8-9 gross wells in the second half of 2012.

Current Eagle Ford production is 1,200 boe/d, with guidance is for 4,000-5,000 boe/d by the end of 2012. In addition to the Palmetto area, watch for vertical well results from the company's Maverick Area in Zavala and Frio counties. A vertical well test performed similarly to horizontal wells (264 boe/d IP) in the area and the company plans to test an additional 3-4 vertical wells. There's a possibility vertical wells will provide competitive initial production rates at much lower wells costs.

Find additional detail on individual well results at sanchezenergycorp.com

Drug Smugglers Using Location Roads to Bypass Border Patrol

Southwest Dimmit County Location Roads

The Eagle Ford Shale's network of private roads is being exploited by drug cartels. In March, two trucks were stopped on Briscoe Ranch and almost 19,000 pounds of marijuana was confiscated. That's a record for the Border Patrol's Del Rio Sector.

Don't expect this to be the last time you hear about drugs in South Texas. The amount of truck traffic and the sheer population growth make the Eagle Ford area a prime target for smugglers. The area simply isn't as remote as it once was.

In some cases, vehicles have been stolen and believed to have been used by smugglers.

As Border Patrol steps up its efforts, you can bet on the cartels getting more creative. The largest load that has been confiscated was being stored in a tanker truck. Larger trucks on the roads mean the smugglers can use larger trucks to bring drugs into the country. If you're working in South Texas, keep an eye open for suspicious activity. It's imperative we protect our border from cartels and terrorist.

Read more at chron.com

Eagle Ford Shale in Mexico Needs Private Investment

The Eagle Ford Shale in Mexico is still years away from development even though over 5,000 wells have been permitted and more than 2,000 wells are producing on the U.S. side of the border. The difference is a nationalized oil monopoly versus the free market north of the Rio Grande. Literally hundreds of companies have competed for the right to develop the Texas Eagle Ford, while PEMEX (the national oil company in Mexico) has been forced to standby and wait until the organization has a better understanding of hydraulic fracturing. Only FIVE wells have been drilled to date and 170 wells are planned over the next four years. For reference, there are more than 200 wells being drilled each month in the Texas Eagle Ford.

What will spur Eagle Ford development in Mexico?

Mexico's president elect, Enrique Pena Nieto, has proposed energy reforms that will allow private investment into the country, but he faces a strong headwind. Both houses of congress are controlled by his opponents and constitutional reforms require a two-thirds vote for approval.

Read more at Chron.com.

Eagle Ford Shale Regional Rig Count Up to 280 - July 13, 2012

Forest Oil Eagle Ford Acreage Map

The Eagle Ford Shale drilling rig count hit 280 rigs over the past week. This marks the first week activity has reached 280 rigs since mid-May. The play was in the news several times this week as UTSA released an Eagle Ford Housing Study that outlined the needs for creative solutions in South Texas. Flexible design that allows for multiple uses and affordable options are important for the growing population.

Forest Oil made headlines by announcing the company would "Go it alone" in the Eagle Ford. The company has over 100,000 net acres in the play and had announced intentions of seeking a joint venture partner. A partner would have likely injected enough capital for Forest to develop most of its acreage position. Instead, the company has dropped plans of seeking a JV partner and will run two rigs, with a focus on developing 40,000 acres. The remaining acreage will either be sold or farmed out to another operator.

Eagle Ford Oil & Gas Rigs

The number of rigs directed at natural gas (Smithbits) remained steady at 71. Karnes and Webb counties are currently the only counties with over ten rigs targeting natural gas. Henry Hub futures were trading at $2.88 on Friday afternoon. Coal to gas switching is less favorable in summer months, but June and July have bucked the trend and natural gas demand has stayed seasonally high. Higher consumption will likely save the natural gas market from a train wreck as we head toward peak storage levels. Every day that passes at current levels of consumptions lowers price risks for operators.

WTI was trading at $87/bbl Friday afternoon, and is ending the week up almost 5% over last week. Thanks to Mr. Hammett who wrote in noting Eagle Ford prices are trading above WTI prices. He is exactly right. Eagle Ford crude trades at a variable premium to WTI that normally falls between WTI and Louisiana Light Sweet (LLS) prices. As of Friday, LLS was trading just over $100/bbl. The number of rigs targeting oil was unchanged this week at 207.

The number of horizontal rigs running in the region is still 263. One water well is being drilled in McMullen County. Karnes County holds its position as the leader of development with 42 rigs and La Salle is down to 36 rigs this week. McMullen (31), Dimmit (28), Webb (26), Gonzales (20), DeWitt (20), Atascosa (13), and Live Oak (12) make up the top Eagle Ford counties.

News items this week included:

• Port Aransas Housing Boom Supported by New Wealth in South Texas – Video
• Eagle Ford Shale Housing Solutions Need to Be Creative
• Forest Oil Plans to “Go It Alone” in the Eagle Ford – No JV Partner Identified

Thank you to Cal Chapman, P.E., who contributed an article addressing Electric Power Consumption in South Texas – Growing Due to Eagle Ford Development. The growing industry and population in South Texas means a greater strain on our power infrastructure.

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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