Plains All American - Enterprise Products Eagle Ford Crude Oil Pipeline Joint Venture

August 7, 2012 R.T. Dukes

Plains All American and Enterprise Products announced an Eagle Ford crude oil pipeline joint venture this past weekend. The deal provides that the two companies will consolidate portions of previously announced projects. Between the two companies, they have long-term commitments of 210,000 barrels per day.

The joint venture will include 140 miles of crude oil and condensate pipeline that will extend from Gardendale in La Salle County to Three Rivers in Live Oak County, then continuing on to Corpus Christi and an Enterperise Station in Wilson County. The pipeline is planned for potential capacity of 350,000 b/d.

In Corpus Christi, the pipeline will tie into a marine terminal with storage capacity of 1.8 million barrels. In Wilson County, the pipeline will tie into Enterprise's Eagle Ford crude oil system that continues on to Sealy, TX.

Read more from the Plains' press release at paalp.com

PXP Eagle Ford Production Grows Ten-Fold Year Over Year to 25.7 Mboe/d

August 6, 2012 R.T. Dukes

PXP Eagle Ford Production and Capital Plans

Plains Exploration & Production (PXP) delivered strong Eagle Ford production growth numbers. The company averaged more than 25,000 boe/d in the second quarter, up from just a little over 2,000 boe/d for the same period in 2011.

CEO James C. Flores commented:

"We had an impressive quarter with continued robust Eagle Ford expansion and solid California operating performance demonstrating the strength of the Company's underlying oil asset base.........In the short-term, PXP is providing stellar execution of its Eagle Ford growth plan. We are not only seeing strong production growth but also beginning to see efficiencies across all aspects of our Eagle Ford activity."

Plains plans to spend approximately $600 million per year through 2015 to develop its Eagle Ford properties, so don't expect this to be the last quarter you hear impressive growth numbers from the company.

PXP's Eagle Ford assets consist of approximately 60,000 net acres along the Wilson and Karnes county line. The company expects total resource potential will reach as high as 172 mmboe from 500 plus future locations.

Eagle Ford Shale Regional Rig Count at 268 - August 3, 2012

August 5, 2012 R.T. Dukes

Marathon Ealge Ford Spud to Spud Drilling Days

The Eagle Ford Shale drilling rig count fell two rigs to 268 this week. Operators are drilling wells faster than before and simply don't as many rigs to drill the same number of wells. Without a significant commodity price increase, the rig count will likely decline through the remainder of the year. If oil prices were to go well above $100 or if natural gas prices rose to $4, operators would likely increase the pace of development.

This week alone, we had three different operators highlight how fast they are drilling wells. EOG Resources and Marathon are both lowering their rig counts because they have dropped their drilling time significantly. Anadarko also announced a record drill time of just 6.8 days in the second quarter. As you can see in the chart above, Marathon has almost halved its spud to spud drilling time in the last ten months. I'm no math whiz, but that means they can drill the same number of wells with half the number of rigs they needed ten months ago. Wow.

You can read more second quarter highlights from each of these operators here:

Eagle Ford Oil & Gas Rigs

The number of natural gas rigs (Smithbits) fell to 58 this week, down two from last week. The only counties with over ten rigs targeting natural gas are still Karnes and Webb. For those keeping up with gas rigs, the region experienced a peak of 125 in October of 2011 and has been on a steady decline to the recent low. There are 209 oil rigs working, which is one shy of the record set in April.

Henry Hub futures were trading at ~$2.90 on Friday afternoon. That's a slight drop after trading above $3 over the past two weeks. Notably, spot prices (physical prices today) are $3.15. The severe heat as helped support prices at three dollars, but the heat will need to continue if we're going to lower the current natural gas storage surplus.

WTI was trading at ~$91/bbl Friday afternoon and LLS crude prices are just above $110/bbl. If we see prices rise throughout the remainder of the year, we'll likely see operators commit additional capital to the area.

There are 242 horizontal rigs running in the region. The three counties leading development are Karnes with 37 rigs, McMullen with 34 and both Dimmit and La Salle with 31 each. Webb (22), DeWitt (16), Gonzales (15), Atascosa (12), and Live Oak (11) round out 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

EOG's Best Eagle Ford Well Produces 6,500 boe/d - Ups Production Growth Outlook

August 3, 2012 R.T. Dukes

EOG Resources' Eagle Ford assets continue to deliver. The company brought on the largest producing well in the play to date in the second quarter. The Gonzales County Boothe Unit #10H came on line at 4,820 bpd of oil, 972 bpd of NGLs, and 4.5 mmcfd of natural gas. That's more than 6,500 boe/d from one well. Better yet, the Boothe Unit #9H, an offset well in the same unit, produced over 4,600 boe/d when it came online.

Drilled from the same pad as the Boothe wells to minimize costs, the Dreyer Unit #19H and #20H were turned to sales at initial rates of 3,703 and 2,650 Bopd with 460 and 300 Bpd of NGLs and 2.1 and 1.4 MMcfd of natural gas, respectively. EOG has 100 percent working interest in these four wells.

Enterprise Expansions Add Marketing Options for EOG

The company expanded its marketing options when the Enterprise's Eagle Ford Crude Oil System came online over the summer. The 24-inch oil pipeline gives the company direct access into the Gulf Coast refinery market. Enterprise also commissioned a natural gas processing plant being utilized by EOG.

EOG is the Largest Oil Producer in the Eagle Ford

EOG's net production in June 2012 averaged more than 103,000 boe/d. The company is largest oil producer in the play. With wells coming online at more than 4,000 b/d, the Eagle Ford is driving production growth for the entire company. EOG increased its crude oil production growth target from 33% to 37%. A few other highlights include:

EOG will also continue to test down spacing across the play. 65 to 90-acre test have had very strong results and tighter spacing tests are in the works.
Self-sourced sand and frac crews are also providing a strategic advantage. The company estimates it is making an 80% after tax rate of return on its investments in this arena
330 net wells will be drilled in 2012
20 rigs will run through the remainder of the year - Down from an average of 26 in the first half of the year
Average number of drilling days per well has dropped to 14

Read more quotes from the company's press release at our EOG Resources page.

Marathon's Eagle Ford Production Grows 50% in Three Months

August 2, 2012 R.T. Dukes

Marathon Oil's second quarter production levels in the Eagle Ford grew 50% from the first quarter of the year. 50% quarter over quarter. In the second quarter, Eagle Ford production averaged 21,000 boe/d, with 75% attributable to crude/condensate and 11% attributable to NGLs. By the end of July, production had stretched to more than 31,000 boe/d. Marathon is on pace for 50% quarterly growth again.

2012 will be marked as the year in which the company hit its stride in development of the play. Through the first half of the year, the company has started drilling on 107 wells and brought 72 to production. The company has completed more than 210 miles of gathering lines and five central battery plants, with five more in progress. As of the second quarter, the midstream build out had allowed the company to move 60% of its crude production through pipelines.

Marathon Testing Down Spacing at 40-acres

Marathon is also testing optimal well spacing. The company has ten spacing pilots planned and active. Five of the pilots are producing at 40 to 100-acre spacing and five more are planned at 40 to 80-acre spacing. A few things happen when wells can be drilled at tighter spacing intervals:

Recovery rates rise
More wells can be drilled from a single pad, lowering total surface disturbance
Well costs fall with the efficiencies of more centralized operations

Expect to hear more at the end of the year from Marathon and others in regards to acreage spacing. Also listen for results from other tests involving lateral placement, stimulation design, and toe placement of the well.

Marathon Drilling Times Drop to 23 Days

By our count, the company averaged 18 rigs running in the second quarter and reported drilling 61 gross wells, with 50 brought to production. The company plans to lower its rig count for the remainder of the year, but will still meet its well targets. Marathon can lower the rig count and drill the 230-240 wells planned because the company has lowered its spud to spud drilling time to 23 days from more than 40 days less than a year ago. At the end of July, the company was running 22 rigs, but plans only call for only 18 rigs to run through the remainder of the year.

The company also closed the $750 million acquisition of Paloma Partner's Eagle Ford Assets on August 1st.