Heard at DUG Eagle Ford 2012

DUG Eagle Ford 2012 Exhibit Floor
DUG Eagle Ford 2012 Exhibit Floor

DUG Eagle Ford 2012 looks to be the success it was just a year ago. In the first day of hte conference, operators touted the play's ultimate potential and detailed just how well their assets are performing.

Here are a few highlights from the presentations:

  • The Eagle Ford was a gas play until 2011, but as natural gas prices fell, operators shifted to oil and condensate
  • For Marathon Oil's water needs, only 3% is potable water. Polymer gels lower the amount of water needed
  • Marathon plans to sell 96,000 acres of its 300,000 acre position. The company will focus on a core area of 200,000 acres
  • Eagle Ford royalty rates peaked at a rate of 22% and have come back down to 20%
  • Drilling Info says estimated EURs across the Eagle Ford point to 500,000 boe
  • The number of frac stages used in the Eagle Ford is up 20% in 2012, costs are down 25% = net gain for the industry
  • Pioneer said petrochemical plants are paying WTI plus for oil and refineries are paying WTI minus
  • EP Energy spends $8-8.4 million on each Eagle Ford well and expects to recover 500,000-600,000 boe
  • 4,000 plus wells have been drilled in the play to date
  • Pioneer is using white sand in completions everywhere it can. 50% + of its wells in 2012.
  • Pioneer's restricted choke program (12/64ths) is proving successful. Wells profiles are outperforming after six months
  • Real time micro-seismic is the Holy Grail for the industry right now. It would allow operators to quickly judge the effectiveness of a frack stage.
  • Operators are drilling between 15 and 20 wells per rig per year

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Eagle Ford Rig Count at 274 | Oct 12, 2012

Smith Bits Spear PDC Bit
Smith Bits Spear PDC Bit

Eagle Ford Shale drilling settled at 274 rigs running over the past week. Natural gas prices held above $3 for the second week in a row. That's a good sign for operators, but not enough of an increase to alter plans for 2013. We've mentioned the potential in the natural gas window of the Eagle Ford before. A sharp increase in prices could motivate even more drilling in the area, but it doesn't look like prices are going to rise fast enough to change capital budgets for 2013. Most companies are planning their capital budgets for next year right now and $3.30 isn't enough incentive for operators to make big changes in how capital dollars are spent. Expect even more companies to announce activity shifting to oily areas of plays like the Eagle Ford.

On a technical note, Schlumberger's Smith Bits released its second generation spear PDC bit. The bit is cased in steel and set an Eagle Ford Rate of Penetration Drilling Record of 79 feet per hour during testing. The bit allows operators to drill horizontal laterals in one pipe trip.

Eagle Ford Oil & Gas Rigs - New Oil Rig Count Record 217

The natural gas rig count in the area hit a new Eagle Ford era low this week with just 38 rigs running. The record low is 75% lower than the peak of 120+ gas rigs that were running in the area just a year ago.

As you might expect, the record low in gas rigs mean rigs moved to oil prospects and we hit a new record of 235 rigs in the region.  It is worth reiterating again this week.  Over 130 oil rigs have been added in the region since June of 2011.

Just one service well is currently being drilled and it is a water well in Bastrop County.

Henry Hub futures were up again week over week to $3.58 on Friday. Spot prices were almost unchanged at $3.28.

WTI was up almost two dollars on the week, trading at ~$92/bbl Friday. Eagle Ford crude priced at $100.93/bbl on the 11th of October. Light crude and condensate in the area traded at $88.50 and $87.50, respectively.

There are 259 horizontal rigs running in the region. La Salle County still leads development with 39 rigs running. Karnes with 37 rigs, McMullen (26), Dimmit (25), Webb (25), Gonzales (22), DeWitt (19), Atascosa (14), Frio (10), and Live Oak (10) round out the top Eagle Ford counties.

News items this week included:

Devorah Fox also contributed an article titled Tied Down Cargo and Load Securement.

Be sure to visit our South Texas Oilfield Job Listings to search openings and come back weekly for updates.

Eagle Ford 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.

Eagle Ford Shale Drilling by County

Forest Oil Sells Some Eagle Ford Acreage & South Louisiana Properties

Forest Oil Eagle Ford Core Acreage Map
Forest Oil Eagle Ford Core Acreage Map

Forest Oil has sold 5,600 net acres in the Eagle Ford for $15 million. The deal and others are expected as the company focuses on its core area of 40,000 acres. The company also announced it sold South Louisiana properties for $220 million.

In total, Forest now has $277 million in asset sales under agreement. The CEO Patrick McDonald commented:

“We are pleased to announce continued progress in our deleveraging plan with the sale of our non-core South Louisiana properties. Our team has made meaningful strides in improving the Company’s financial position, and we will continue to focus on other non-core divestitures to improve our balance sheet and increase our financial flexibility as we maintain focus on the development of our core oil properties.”

When Forest abandoned plans to seek a JV partner in the Eagle Ford, the company had a little more than 100,000 net acres targeting the play. The company's core acreage is comprised of 40,000 net acres, so expect to see additional announcements in South Texas. The company will either seek farm outs or additional divestitures in the area.

Smith Bits Spear PDC Bit Sets Eagle Ford ROP Record

Smith Bits Spear PDC Bit
Smith Bits Spear PDC Bit

Smith Bits, a subsidiary of Schlumberger, released its next generation spear polycrystalline diamond compact (PDC) bit optimized for shale plays. Spear PDC bits have provided for more effective and quicker drilling in the lateral portions of horizontal wells. In the Eagle Ford, the first generation steel bodied PDC bit allowed operators to drill laterals in one pipe run. In the same application, the second generation bit set a new record for speed. The bit was able to drill a lateral run at a rate of 79 feet per hour compared to median performance of 65 feet per hour with the first generation bit.

The test was done in South Texas, but the bit will be used in other shale plays as well. At the rate of penetration achieved in the test well, a 6,000 ft lateral can be drilled in just over three days.

“With experience of more than 6,000 Spear bit runs to date, we incorporated specific design elements into the next-generation bit to deliver even more rate of penetration (ROP), further lowering drilling costs in unconventional wells.”

A range of application-specific features were incorporated into the next-generation Spear bit, including improved body geometry and hydraulic enhancements, engineered to minimize blade packing, improve cutter cleaning and increase ROP. Cutter layouts were fine-tuned with IDEAS* integrated drillbit design platform to deliver improved ROP while ensuring smooth directional control.

Read more about the bit at slb.com