PXP Pushes Eagle Ford Spending & Production Estimates Up

PXP Eagle Ford Map

PXP is increases its spending in South Texas by $110 million in 2012 in response to operational efficiencies that have led to significantly more Eagle Ford drilling than planned. Original plans for 2012 called for the drilling of 83 Eagle Ford wells, but Plains is on pace for 148 wells. I'd say they might have been a tad bit conservative in their early projections.

Higher spending in the Eagle Ford Shale is leading to an approximate 78% increase in wells drilled and a 25% increase in average daily sales volumes over the 2012 base plan.

PXP plans to drill 124 wells next year, but don't be surprised if they outperform that number too. The company is already planning for cost savings of $500,000 per well on the service side. That will drive well costs down to ~$8 million. Any additional savings in costs will allow the company to invest more heavily in development. Operational efficiencies don't really ever hit a limit. Operators might start measuring hours instead of days, but there are always improvements that can be made. Shave 10% more off their drill time and PXP could drill closer to 140 wells next year.

In the Eagle Ford Shale, third-quarter daily sales volumes averaged 30.4 mboe/d net to PXP compared to third-quarter 2011 average daily sales volumes of 5.2 mboe/d net to PXP. At the end of October, PXP had 7.1 net drilling rigs operating on its acreage and 35 wells drilled but waiting on completion or connection to pipelines. PXP expects to exit the year producing between 32 – 36 mboe/d net.

Anadarko's Eagle Ford Drilling Time Continues to Fall

Anadarko's Third Quarter Production - Southern Region

Anadarko Petroleum's average drilling time in the Eagle Ford continues to fall. In the third quarter, the company drilled 28 wells that had a spud to rig release time of less than 10 days. The company's record still stands at near 6 days, but the overall fleet is getting more efficient and company averages are approaching old records.

Anadarko has nine rigs, one spudder rig, and three completion crews dedicated to Eagle Ford development.

During the quarter, Anadarko's production from the area grew to 36,400 boe/d net. That's more than 100,000 boe/d on a gross basis! Daily gross processed production averaged 112,000 boe/d for the quarter. That's impressive considering Eagle Ford production was near ZERO two years ago.

Anadarko also installed booster turbines at primary delivery points in its gathering system and has increased its ability to deliver sales volumes uninterrupted.

Forest Oil Adds Walking Rig - Expects to Save 8-15%

Forest Oil Eagle Ford Core Acreage Map

Forest Oil added a rig walking system to one of its rigs in the Eagle Ford and plans to start multi-well pad drilling on its central fairway acreage. A four well pad site is expected to be drilled in 65 days compared to 85 days of drilling for four wells on separate pads. Costs savings are estimated at 8-15% depending on the lateral length and completion design. Currently, the company estimates cost at $5.5-6 million per well.

During the quarter, two wells were completed at unrestricted average rates of 638 boe/d and four wells were brought online in the company's restricted rate program at an average rate of 542 boe/d. 

Third quarter production volumes increased to 1,800 boe/d net to Forest. The company has 100,000 gross (91,000 net) acres in what the company characterizes as the "oil bearing" portion of the play. Current development plans will hold approximately 40,000 net acres in the coming years.

Marathon's Eagle Ford High-Grading Means Buy Here, Sell There

Marathon Eagle Ford Acreage Map Q2 2012

Marathon Oil announced just two weeks ago that it plans to sell almost 100,000 non-core acres in the Eagle Ford Shale, but this past week the company announced it has spent $227 million on 4,300 net acres in its core area. Associated production wasn't released, but this will easily go down as the highest multiple the company has paid for any sizable tract of acreage. $227 million for just over 4,000 acres works out to be more than $50,000 per acre.

Don't let the assets sale fool you. The latest acquisition is the perfect example how committed Marathon is to the area.

Marathon has spent approximately $4.5 billion on Eagle Ford assets in the past 18 months.

• $3.5 billion for Hilcorp's Eagle Ford Acreage
• $750 million acquisition of Paloma Partners
• $227 million for the latest deal announced in late October 2012

The planned asset sale in the Eagle Ford is part of a larger plan to sell $1.5-3 billion in assets between 2011 and 2013. The company has completed $1 billion in deals so far and will add to that total selling a portion of its oil sands and Eagle Ford assets. Marathon will have approximately 225,000 net acres once current deals on the table are completed.

Cabot's First Pearsall Well Impresses - Eagle Ford Prices Improve

Cabot Oil and Gas Pearsall Shale Target Area Map

Cabot Oil & Gas announced results from the company's first horizontal well in the Pearsall Shale and the short lateral yielded promising results. The well, drilled in Frio County,  produced 1,400 boe/d, with 50% of production attributable to oil. One additional Pearsall well is being completed and three others are at some stage of being drilled. A total of 6 wells will be drilled targeting the play in 2012. The first well came in at a cost of just over $10 million, but the company is targeting $9-$9.5 million for its early wells.

In the Eagle Ford, the company completed one well in the quarter that came online at more than 1,000 boe/d, 95% oil. There are now 38 producing wells in the Buckhorn area in Frio County, TX. Well costs have fallen to $6.5-$7 million.

Eagle Ford oil price realizations improved to more than $8 per barrel better than NYMEX pricing in the quarter. Oil is moving by pipe instead of truck to Corpus Christi, where the company is able to get LLS prices.

For 2013, approximately 30% of the company's capital budget will be allocated to the Pearsall and Eagle Ford shales of South Texas. Impressively, Cabot expects to drill into 2013 targeting gas wells in the Marcellus and Pearsall that keep the company cash flow positive at a $3.50 gas price.

"This year has seen many new ideas and ongoing efforts come to fruition, including a joint venture with an international company and innovations with well and frac spacing in key plays, that have translated into continued industry-leading production growth," said Dan O. Dinges, Chairman, President and Chief Executive Officer.