Conoco's Eagle Ford Production Surpasses 100,000 boe/d in Q4 2012

January 31, 2013 R.T. Dukes

ConocoPhillips' Eagle Ford production hit a peak of 103,000 boe/d at one point during the fourth quarter of 2012. The company announced earnings on January 31st and highlighted the milestone on the quarterly call.

Annualized Eagle Ford production was 70,000 boe/d for 2012, but stretched to more than 100,000 boe/d in the fourth quarter (89,000 boe/d Q4 average). The company utilized a peak of 17 rigs early in 2012, but lowered its rig count in the face of operational improvements that increased drilling speed. The backlog of drilled yet not completed wells simply grew over the year. Completion crews and gathering pipelines simply weren't able to keep up with the rigs. ConocoPhillips (COP) has 11 rigs running as of January 2013.

In 2012, COP drilled 211 operated wells and now has over 310 wells producing. The company's current backlog of Eagle Ford wells is almost 90 drilled and waiting on completion, as well as almost 50 wells drilled and completed that are awaiting pipelines. Here's a direct quote from the company's operations update for the Lower 48 and Latin America:

Fourth-quarter production was 475 thousand barrels of oil equivalent per day (MBOED), an increase of 31 MBOED compared to the same period of 2011. Significant growth continues from the ramp up of core shale plays in the Eagle Ford and Bakken. For the quarter, these shale plays delivered approximately 113 MBOED, a 71 percent increase compared to the fourth quarter of 2011. During the quarter, Eagle Ford averaged 89 MBOED, achieving a peak daily rate of more than 100 MBOED, while Bakken averaged 24 MBOED....

Conoco's Eagle Ford Leases Held By Production?

[ic-r]COP's Eagle Ford leases should be held by production sometime after mid-year 2013. Once leases are held, the company expects to employ pad drilling. This more efficient method of drilling should be used across all of the company's Eagle Ford acreage in 2014.

Conoco is also working to establish quicker access to pipelines where the company can directly negotiate sales agreements. Also, stabilization facilities will be added in 2013 that allow the company to capture light ends of the hydrocarbon stream. Separating the light barrels will allow the company to meet pipeline specifications for a greater volume of Eagle Ford production. Both advancements should improve realized prices even further.

Even with all the good news, it wasn't ALL roses. Production could have been even higher if it weren't for higher than expected back pressure in natural gas gathering systems. Conoco expects the issue will be alleviated early in 2013.

Kinder Morgan - Copano Reach $5 Billion Deal

January 30, 2013 R.T. Dukes

Kinder Morgan and Copano Energy have reached a $5 billion agreement whereby KMP will acquire Copano. The transaction prices Copano at a 23.5% premium to its closing prices on January 29, 2013. The combined company has over 80,000 miles of pipelines and more than 180 terminals. The deal is expected to close by the third quarter of 2012

Richard Kinder, CEO stated, "The footprint we now control has never been paralleled........I'm absolutely convinced US natural gas is the future of energy......everything points to infrastructure being the biggest hurdle to continued growth.....We're seeing increased use of US hydrocarbons in every portion of the economy."

Copano's assets are centered around the South Texas Eagle Ford, Fort Worth Basin Barnett Shale, Oklahoma's Woodford Shale & Mississippi Lime plays, and the Powder River Basin in Wyoming. The company has more than $1 billion in identified growth projects and Rich Kinder expects that number will grow once the assets are under KMP control. Copano operates:

6,900 miles of pipelines with 2.7 Bcf/d of throughput capacity
9 processing plants with 1 Bcf/d of capacity
315 mmcfd of treating capacity

Kinder Morgan will now own 100% of the two companies' Eagle Ford Gathering JV. Eagle Ford Gathering comprises approximately 400 miles of pipelines (including its capacity rights in certain KMP pipelines) with capacity to gather and process over 700,000 mmbtu/d.

Kinder plans to retain the "vast majority" of Copano's 415 employees and the company's Tulsa office.

KMP's Analyst day call will be streaming at kindermorgan.com until 2 pm CST.

Blue Dolphin's Nixon Refinery Revived by the Eagle Ford

January 29, 2013 R.T. Dukes

Blue Dolphin's Nixon refinery is reaping the Eagle Ford harvest. It's a real estate thing - "Location, Location, Location".

The Nixon Refinery was originally purchased in June of 2006 for $16 million, but Blue Dolphin has been investing to get the plant back to spec after being idled for years.

The refinery began taking Eagle Ford crude early in 2012 and has capacity for 15,000 b/d. As of the third quarter of 2012, Blue Dolphin was running the refinery at about 70% of capacity or 10,500 b/d. The refinery's location in the heart of the Eagle Ford provides local feedstock that doesn't need to be transported hundreds of miles. The plant's inland location also positions it well for getting premium product prices. It's a win-win for Blue Dolphin.

Here are a few more details related to the Nixon Refinery:

15,000 b/d of capacity
40-48 degree API crude
Transport in and out is by truck
The facility is further inland than most Gulf Coast refineries and can get better product prices
130,000 bbls of crude storage
135,000 bbls of product storage
56-acre facility has room for expansion

This isn't Blue Dolphin's only stake in South Texas - Blue Dolphin Purchased An Option to Buy the Ingleside Refinery - Jan 2012. The Deal is still being negotiated, but growing Eagle Ford crude production only makes the refinery more attractive.

You can also read more from an article published by Vicki Vaughn at MySA.com

Rosetta Resources Eagle Ford Well Costs Coming Down

January 28, 2013 R.T. Dukes

Rosetta Resources grew proved reserves by 25% and production by 35% in 2012. All while the company was driving Eagle Ford well costs down by $1 million per well.

The company shifted its focus to liquids resources in the Eagle Ford over the past few years and the company's production mix reflects the change. Production in the fourth quarter of 2012 was 62% liquids versus just 49% a year earlier.

The company spent $514 million drill 80 Eagle Ford wells and complete 62 in 2012. Over the past few quarters, the company has driven its well costs down to $6.5-7 million per well. That's approximately $1 million less than prior guidance.

"During 2012 we ramped up our development efforts in the Eagle Ford shale expanding our drilling program into four areas," said Randy Limbacher, Rosetta's CEO.......Our results were favorably impacted by rapidly decreasing well costs during the second half of the year that further enhanced asset values and will provide greater flexibility in implementing our 2013 capital program."

Rosetta plans to spend approximately $600 million in the Eagle Ford in 2013 to drill 75 wells and complete 62 wells. $55 million of the $600 will be spent on facilities in the area.

Eagle Ford Rig Count Holds Steady In January - Jan 25, 2013

January 25, 2013 R.T. Dukes

Production Growth — Growing Production Image

The Eagle Ford Shale drilling rig count increased by 3 rigs to top out at 255 running this past week.

The two most publicized events of the week were reports of UFO's in the Eagle Ford (Pictures included) and news that Oil Production Likely Surpassed 400,000 b/d.

Yes, multiple media outlets reported sightings of strange lights moving in the sky and a well location camera caught what MUFON has authenticated as a flying object. In the news of this world, November production numbers reported by the TX RRC have crude oil rising to more than 350,000 b/d. If revisions over the next two months hold consistent, that indicates more than 400,000 bbls were produced per day. Prior months have been revised up by an average of 50,000 b/d as operators who report late get data into the commission.

Eagle Ford Oil & Gas Rigs

[ic-r]The natural gas rig count was down to 38 rigs running this past week. That matched the Eagle Ford era low hit in October of 2012. Natural gas prices fell from highs last week to settle near $3.46/mmbtu on Friday afternoon.

The oil rig count climbed to 215 rigs working this past week. That's also a level that hasn't been matched since October of 2012. WTI crude futures were trading at $96 per barrel to end the week. Eagle Ford crude priced at $109.03/bbl on the 24th of January. Eagle Ford light crude and condensate in the area traded at $92.50 and $91.50, respectively.

South Texas Oil & Gas News:

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Eagle Ford Drilling by Operator

Eagle Ford Shale Drilling by County

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.