Aurora Oil & Gas Buys Eagle Ford Acreage for $117 Million

March 4, 2013 R.T. Dukes

Aurora Oil & Gas announced on Friday March 1st the company has acquired 2,700 net acres near the Sugarkane Field for $117 million.

Aurora will operate the acreage and now has over 21,800 net acres in the area. The company estimates the properties hold 6.7 mmboe of proved reserves of 14 mmboe of probable (2p) reserves. The Austin Chalk and Pearsall formations provide additional upside to those estimates.

The assets include average December 2012 production of approximately 1,620 boe/d net of royalties from 11 wells and associated interests in field infrastructure and related assets. The production comprises 84% liquids (70% oil), and represents a 12% increase to Aurora’s 2012 exit production.

Approximately 1,580 acres are located in the Heard Ranch in Atascosa County and a little more than 1,100 acres are part of the Axle Tree prospect that straddles Karnes and Live Oak counties.

Eagle Ford Rig Count at 245 - Mar 1, 2013

March 1, 2013 R.T. Dukes

The Eagle Ford Shale drilling rig count settled at 245 units running this past week. La Salle County still leads with 33 rigs running.

Judging by announcements from operators, we should expect to see the rig count decline throughout 2013. Operators have dropped the average drilling time from 33 days to just 16 days currently. That would indicate the same number of wells could be drilled with less than half the number of rigs that were active at the peak (260+). To date, smaller operators have stepped in and increased their drilling efforts as the largest players have dropped rigs. We'll see more of the same in 2013, but I suspect we'll see a rig count closer to 200 than 250 in the coming months.

The biggest announcement of the week came from Net Midstream. The company plans to build a 124-mile, 42-inch natural gas pipeline from the Agua Dulce Hub in Nueces County to the border near Rio Grande City in Starr County. The pipeline will potentially export up to 2.1 Bcf/d, which would more than double current exports to Mexico. Read more in the article Net Midstream Plans Eagle Ford Pipeline to Mexico.

Eagle Ford Oil & Gas Rigs

[ic-r]The natural gas rig count was 28 this past week. That's one above the Eagle Ford record low set last week. Natural gas prices traded up during the week to $3.47/mmbtu on Friday afternoon. Colder weather and more recent outages at nuclear plants have helped support natural gas prices.

The oil rig count fell three to 216 running in the area. WTI crude futures traded down on the week to a little more than $90 per barrel. Eagle Ford crude prices traded at $101.12/bbl on the 28th of February. Eagle Ford light crude and condensate in the area traded at $88.50 and $87.50, respectively.

There are 201 horizontal rigs running in the region. Ten rigs in Webb County were reclassified this week from horizontal to directional. That change almost accounts for the entire drop in horizontal drilling this past week.. An injection well is being drilled in Karnes County.

La Salle County leads development with 33 rigs running. DeWitt (26), Gonzales (25), Karnes (25), Webb (25), McMullen (24), Dimmit (21), Live Oak (15), Atascosa (9), Leon (7), Wilson (7) and Lavaca (5) round out the top counties in the region.

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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 Shale Drilling by County

Karnes City Changed By The Eagle Ford

February 27, 2013 R.T. Dukes

To say Karnes City has changed over the past few years is an understatement. The Houston Chronicle conducted an interview with a local farmer who owns the land where ConocoPhillips drilled its first Eagle Ford well.

Change started with the growth in oilfield jobs and booming royalty checks. Today, cash is being poured into the area.

"It's been good to me. I miss that pasture, but I could have ranched here for 300 years and not have the income we do now," he said. "Anyone who owns property should be benefiting."

A few takeaways:

Karnes City was once the poorest non-border town in the state
1,200 permits have been issued in the county over the past four years
2,000 miles of pipe have been laid
As much as $70 million/month is being paid to royalty owners in the county
Traffic counts are up as much as 300% on local roads
County's tax base has jumped from $562 million to $3.1 billion in 3 short years

"A kid can leave a $40,000 overtime job at the prison and make over $100,000 in the oil field. You've got kids coming home to work here who haven't lived here in a long time," he said.

Read the full article at chron.com

SM Energy Increases Eagle Ford Reserves Estimate - Downspacing

February 26, 2013 R.T. Dukes

SM Energy Operated Eagle Ford Acreage Map

SM Energy has increased its estimate of net recoverable resources in the Eagle Ford by 500 bcfe to 5.8 Tcfe. SM still only has 2 years of drilling booked as proved reserves. The company attributes the increase in reserves to better EURs (4.5 Bcfe per well) and expectations for tighter well spacing in portions of the play. Briscoe Ranch will be developed on 52-acre spacing compared to guidance of 72-acres per well previously.

The company completed 77 operated wells in 2012. At year-end, SM had 154 wells producing and 29 wells waiting to be brought online. Operated production grew to 271.3 mmcfed in the fourth quarter and non-operated production grew to 15,500 boe/d (93 mmcfed). That's growth of more than 10% over the third quarter of 2012.

SM is currently running 5 rigs and 2 frac spreads in the play. In it's non-operated position, SM expects Anadarko will drop down to 8 rigs in 2013, but believes the number of well completions will hold steady due to efficiency gains in drilling.

SM Energy operates 145,000 net acres in the Eagle Ford. Leases on 4,000 acres prospective for dry gas at Apache Ranch were allowed to expire in 2012.

Read the full press release at sme.com

Net Midstream Plans Eagle Ford Pipeline To Mexico from Nueces County

February 25, 2013 R.T. Dukes

Net Midstream announced plans for a 42-inch, 124 mile pipeline from Nueces County to Starr County in South Texas. The pipeline is backed by a 2.1 Bcfd transportation contract with MGI Supply ltd (PEMEX Subsidiary). If the pipeline runs at capacity, it will more than double current exports to Mexico.

The natural gas will be transported from the Agua Dulce hub in Nueces County to a point near Rio Grande City in Starr County.

“If the Net Mexico Pipeline moves 2.1 Bcfd, it will more than double current natural gas exports to Mexico. ”

In the past two years, US natural gas flows into Mexico have increased to approximately 2 Bcf/d. That's up from less than 1 Bcf/d at the beginning of 2010. Demand for natural gas in Mexico is rising as natural gas production is falling. Compare US natural gas prices to LNG prices and you begin to see why Mexico is after US natural gas. It's cheap! An $8 billion pipeline expansion of Mexican infrastructure is already planned. More than $3 billion will be spent expanding pipelines in Northern Mexico where the Net Mexico Pipeline will connect.

“NET Mexico Pipeline will be an important source of supply to meet Mexico’s growing demand for natural gas” said Joe Gutierrez, Co-President of NET. “Welook forward to this exciting new partnership with MGI and PEMEX Gas. NET Mexico is a natural next step in our pipeline system, as we connect abundant gas supply from the Eagle Ford Shale to expanding power generation and industrial markets in Mexico."

Net Midstream already operates a 30-inch, 150 mile pipeline that originates at the Brasada Processing Plant (operated by Western Gas) in La Salle County Texas. That is one Eagle Ford source and I bet we'll see others as gas production grows. Natural gas prices in Mexico are more favorable (higher), so producers will enjoy a transportation route that avoids Henry Hub.

Net Midstream also operates a pipeline that delivers gas to a 200 MW power plant in La Salle County and a 30-mile pipeline that serves the City of Corpus Christi.

Read the full press release here.