Rosetta is Proving Eagle Ford Acreage - Growing Production

November 15, 2012 R.T. Dukes

Rosetta Resources tested a 8,100-acre tract for the first time in the third quarter of 2012. The Lasseter & Eppright 1 well is located in central Dimmit County (oil window). The well has a 5,404-ft lateral and was completed with 15 frac stages. In the first seven days online, the well produced 667 b/d of oil, 1.8 mmcfd of residue gas, 262 b/d of NGLs for an equivalent rate of 1,228 boe/d. I'll step out on a limb and say more than 1,000 boe/d is really good sign. We'll likely see the company attribute additional wells to its development program in this area in the coming months.

The promising well wasn't the only news for the company. The company spent a little more than $188 million during the quarter and increased its 2012 capex guidance to $660-680 million for the year (a $20-40 million increase). Otherwise, Rosetta reported good results across the board. The company drilled 25 gross operated wells, while completing 16 wells. Production grew 13% from the previous quarter to 36.5 mboe/d.

The company ran five rigs during the quarter. The bulk of the company's activity is at Gates Ranch (15 of 25 wells drilled in the quarter) where the company continues to see positive well results at 55-acre spacing. Rosetta will keep 2-3 rigs running in the Gates Ranch area and will move its other two rigs around its acreage in other areas. The company has almost 350 more drilling locations left to develop at Gates Ranch.

Texas Railroad Commission Eagle Ford Well Map - November 2012

November 14, 2012 R.T. Dukes

The Texas Railroad Commission's Eagle Ford Shale well map was updated with the most recent reported data through November 12, 2012.

Since July 3, the commission has issued 661 permits. That's a little more than 5 permits per day over a period of ~130 days.

A total of 3,107 wells had been reported producing as of November 12. That's 574 more oil wells and 133 more gas wells than we had as of June. Interestingly, that's a pace of more than 5 wells coming online per day.

Data from the RRC is always a little delayed, so I suspect we're closer 4,000 than 3,000 wells producing at year-end 2012.

Abraxas Petroleum Selling Eagle Ford Acreage for $20 Million

November 13, 2012 R.T. Dukes

Abraxas Petroleum has reached an agreement with an institutional buyer to sell 544 net acres in the Nordheim area for $20 million. The acreage is located in the wet gas and condensate window of the Eagle Ford in DeWitt County. The asset is producing 64 boe/d, with more than half attributable to natural gas and the other half split between NGLs and oil. Abraxas is also reserving rights to the Edwards formation and will not lose potential upside from other developments.

Abraxas also recently agreed to sell an overriding royalty interest in the Alberta Basin Bakken for almost $3 million. I suspect the money will be used to expand development in the company's core areas of the Bakken Shale, Eagle Ford Shale, and Permian Basin. As of 2012, about half of the company's capital budget was allocated to the Bakken.

In the Eagle Ford, Abraxas is expected to continue its focus in the WyoCross Area in McMullen County, where the company has 6,139 gross (999 net) acres. At 80-acre well spacing, the company has 77 gross (19 net) drilling locations. The first well completed in the area, the Cobra 1H, produced over 120,000 boe (95% oil and NGLs) in the first seven months of production.

NuStar Buying Eagle Ford Midstream Assets - Selling San Antonio Refinery

November 12, 2012 R.T. Dukes

NuStar Energy has agreed to buy Eagle Ford midstream assets from TexStar Midstream for $425 million. The deal will be completed in two pieces - crude oil assets then NGL assets.The crude oil system moves through La Salle, Frio, and Live Oak counties moving 60,000 b/d, with the potential to move as much as 100,000 b/d.

NuStar will also sell its San Antonio refinery and associated terminal in Elmnedorf, TX. The refinery refines a little more than 14,000 b/d of crude and is being sold as part of the company's strategy to move away from margin based businesses. NuStar has approximately $90 million invested in the refinery to date.

“The TexStar acquisition and refinery divestiture are the next critical steps in our strategic redirection of NuStar away from the margin-based refining and marketing business in order to further grow our fee-based pipeline and storage operations through internal growth projects and acquisitions,” said NuStar President and CEO Curt Anastasio. “NuStar was actually the first company to move Eagle Ford crude by pipeline, and we are fortunate to have extensive pipeline and terminal assets already in operation throughout the Eagle Ford region.

NuStar see's a very bright investment climate in South Texas. The company stated there are more high return opportunities in fee based transportation and storage projects than they have ever had in the history of the company. Expect to hear more from NuStar as the company builds additional pipelines in infrastructure in the region.

Eagle Ford Shale Regional Rig Count at 259 - Nov 9, 2012

November 9, 2012 R.T. Dukes

EOG Resources South Texas Eagle Ford Map 2012

Eagle Ford Shale drilling declined ten rigs over the past week to 259 rigs active. The bulk of the decline was attributable to La Salle (30 rigs) and Karnes (32 rigs) counties. Interestingly enough, November of 2011 was the last time the rig count in Karnes County was as low as 32. No one operator accounted for the change. A few rigs simply shifted out of the county into other areas.

We were in the heat of earnings season this week. The highlight was hearing more "Monster Well" results from EOG Resources and Marathon Oil. Marathon's Burrow 2-H well in Gonzales County produced at a peak 24-hour rate of 6,275 boe/d. Almost 75% (4,646 boe) was attributable to oil and condensate. EOG's Baker-DeForest Unit #4H well tested at 4,598 b/d of oil and 4 mmcfd of rich natural gas at normal choke rates. Truly amazing production rates.

Eagle Ford Oil & Gas Rigs

The natural gas rig count fell one rig to 54 running in the region. The stock market didn't have the best week after the election, but gas prices held relatively flat at $3.50 per mmbtu.

The oil rig count fell eight rigs to 205 running. That's the lowest level since the first week of September when we had 207 oil rigs running in the region. None of the bits drilling holes this week are drilling service wells.

Just like natural gas, WTI was relatively flat on the week as well. WTI crude futures were trading at approximately $86 per barrel on Friday. Eagle Ford crude priced at $97.50/bbl on the 9th of November. Light crude and condensate in the area traded at $82.50 and $81.50, respectively. Eagle Ford prices were up on the week. A first in over a month's time.

There are 247 horizontal rigs running in the region. Karnes County leads development with 32 rigs running. La Salle with 30 rigs, McMullen (30), Webb (26), Dimmit (22), Gonzales (22), DeWitt (18), Live Oak (12), Atascosa (10), and Fayette (8) round out the top Eagle Ford counties.

News items this week included:

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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 Oil & Gas Rigs

Eagle Ford Rig Count by Operator

What is the Rig Count?

Eagle Ford Shale Drilling by County