Eagle Ford Regional Rig Count at 240 - March 8, 2013

March 8, 2013 R.T. Dukes

The Eagle Ford Shale drilling rig count settled at 240 units running this past week. La Salle County is leading the way with 34 rigs running.

We spent most of the week at IHS CERAWeek, where the industry's top executives converge to talk about the future of the energy industry. We came away even more convinced that plays like the Eagle Ford are the building blocks for a very bright future in the US.

While at the conference, we wrote on the breakeven oil price needed in the Eagle Ford. A representative from Baker Hughes noted that an oil price of $50-57 is needed to sustain a reasonable rate of return for operators. That number varies substantially across the play, but it's one more vote of confidence in South Texas.

Eagle Ford Oil & Gas Rigs

[ic-r]The natural gas rig count was 24 this past week. That's a NEW record low. Natural gas prices traded up during the week to $3.63/mmbtu on Friday afternoon. Cooler weather and the chance of US gas production actually declining have supported prices...

The oil rig count fell one to 215 running in the area. WTI crude futures traded below $90 per barrel during the week, but recovered to more than $91/bbl Friday afternoon. Eagle Ford crude prices are a little harder to track these days. Plains All American has stopped posting Eagle Ford prices except Eagle Ford light crude prices. Eagle Ford light traded at $88/bbl on March 7th. The majority of Eagle Ford crude is very light or condensate. Those that produce a crude close to 40 degrees API gravity will continue to fetch a premium.

There are 197 horizontal rigs running in the region. This marks the first time we've had less than 200 horizontal rigs running since June of 2011 and is likely the result of operators pulling back their rig count as drilling speeds have improved. An injection well is being drilled in Karnes County.

La Salle County leads development with 34 rigs running. DeWitt (30), Karnes (26), Webb (24), Gonzales (23), McMullen (23), Dimmit (17), Live Oak (14), Atascosa (11), Leon (7), Madison (5), Wilson (5) and Frio (4) round out the top counties in the region.

South Texas Oil & Gas News:

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

Opportunities & Challenges in the Eagle Ford - Video

March 8, 2013 R.T. Dukes

The Eagle Ford has provided billions in economic stimulus in South Texas and much is yet to come. The changing economy faces both opportunities and challenges. The PBS special below discusses many of the biggest issues faced in the play.

Watch Eagle Ford: Opportunity and Challenge in South Texas on PBS.

See more from KLRN Specials.

The panel discussion includes:

Curtis Anastasio - NuStar Energy
Henry Cisneros - Cityview
Kirk Spilman - Eagle Ford Asset Mgr - Marathon Oil
Drew Nelson - Envrinomental Defense Fund
Kent Wilkinson - VP Gas Ventures - Chesapeake
Les Shephar - UTSA
Leodoro Martinez Jr. - Eagle Ford Consortium
David Blackmon - Dir. Gov't Affairs - El Paso Corp

BP's Bob Dudley Shares His Energy Thoughts - IHS CERAWeek

March 7, 2013 R.T. Dukes

BP's Bob Dudley addressed the crowd at IHS CERAWeek to share the company's view of the industry industry. Mr. Dudley described the global energy journey and his view of the role of the US & Russia in the energy future. [ic-l]The global energy journey includes demand growth that is driven by Asian countries through 2030. Non-fossil fuels that will account for 1/5th of energy in 2030 and global oil demand is expected to rise by 16 mmbbls/d. The projected increase in oil demand is more than Canada, Russia, and the UAE produced in 2011.

Mr. Dudley stated "Turning to supply, many in the industry used to worry about whether demand on this scale could be met......but there hasn't been much talk of "peak oil" lately."

Shale and deepwater plays have driven oil and gas production higher to a point where we believe we have 54 years of proved oil reserves and 64 years of proved gas reserves.

“North Dakota is only second to Texas in terms of production and has surpassed OPEC member Ecuador over the past few months.”

Russia and the US are two energy giants who are driving supply. The US produced 5 mmbbl/d in 2008 and has recently eclipsed 7 mmbbls/d. The deepwater accounts for 18% of US daily production and plays like the Bakken and Eagle Ford has supported onshore production. Along with growing production, the country's import dependency is declining significantly.

Oilfield jobs are open across South Texas and much of the US. High paying oil and gas jobs have helped pull the economy out of the recession. BP is now positioning itself to invest significantly in downstream expansions. The Whiting refinery is expadning to handle growing volumes of Canadian crude. The expansion will be the largest economic investment in the history of Indiana. That will be followed by a $400 million reformer that is being added to the company's Toledo Refinery.

Mr Dudley ended his speech noting that recoverable reserves have grown considerably over the decades:

"...the world's energy companies have produced more oil in the last 40 years than was thought to exist on the entire globe in 1979."

You can follow @EagleFord_Shale on twitter for live updates from the conference.

Rosetta's Budget Falls With Eagle Ford Well Costs - CEO Resigns

March 6, 2013 R.T. Dukes

Rosetta Resources is undergoing significant change. The company is hitting its stride in development and driving down well costs. 2013 should be a year of continued growth, but it will be done with a new boss at the helm. Randy Limbacher announced his retirement while releasing year-end results.

The company had completed 126 horizontal Eagle Ford wells as of the end of 2012. Currently producing wells represent less than 13% of the companies drilling inventory in the play. Approximately 332 locations are left to be drilled at the company's Gates Ranch properties in Webb County, TX.

The company has reset it's capital budget to a range of $640-700 million compared to initial plans of $700 million. The revised budget reflects expected savings of $1 million dollars on Eagle Ford wells in 2013 compared to 2012. Plans call for drilling of 75-80 Eagle Ford wells and completion of 60-65 wells. Rosetta will continue to run 5-6 rigs in the area.

"The momentum of our Eagle Ford development activities accelerated during 2012 as we achieved record levels of production, reserves, and cash flow, and ended the year with a fully self-funding Eagle Ford program," said Randy Limbacher, Rosetta's chairman, CEO and president. "Rosetta is on track to deliver another year of double-digit production growth. In addition, we continue to advance our efforts to capture new opportunities and further expand our substantial inventory of projects."

The company's production rose to 44.3 mboe/d in the fourth quarter of 2012, which represents growth of 38% over Q4 2011. More specifically, oil and NGL production grew 87% and 69% year-over-year, respectively.

Proved reserves grew at a rate of 25% to eclipse 200 million boe. The 201 million boe are comprised of 44.4 mmbbls of oil, 71.6 mmbbls of NGLs, and 509 Bcf of natural gas.

Rosetta has 67,000 net acres prospective for the Eagle Ford and 53,000 are expected to yield liquids-rich production.

What is the Breakeven Oil Price in the Eagle Ford?

March 5, 2013 R.T. Dukes

Breakeven oil prices needed in the Eagle Ford can range quite a bit by operator and by acreage, but we know the price need is much lower than where oil trades today. There are more rigs actively targeting the play than any other oil and gas development in the world.

A Baker Hughes official recently noted that the breakeven oil price needed in the South Texas Eagle Ford is somewhere between $50-57 per barrel. Read the full story at mysa.com

The $50-57 number is for liquids-rich areas of the play. We don't know the answer in the dry gas areas to the south. Gas prices haven't reached high enough to entice operators to target gas alone. Most industry analyst assume it will take $5/mcf natural gas prices before we see significant exploration in the dry gas window.

Breakeven Economics Are Deceiving

Breakeven oil prices are the price of oil per barrel needed for an operator to make a reasonable rate of return for the risk taken.

Typically, oil companies make decisions based on a 10-20% rate of return. It is the bare minimum price a company needs and is NOT necessarily the floor for what will sustain activity at current levels.

The Eagle Ford is the prime example of a play that can survive at much lower oil prices, but there would not be 200+ rigs running if oil was $50 per barrel. Yes, operators could make money, but their operating cash flow would be devastated. US operators are known for pouring capital back into developments and at $50 oil there would NOT be much cash to invest.

Now, don't get me wrong. The Eagle Ford is a best in class play. Even if oil prices were to fall, it would still be best in class and would still garner the lion's share of capital budgets. Very much like it is today.

On the other hand, there are also sunk costs that have been invested that would make single well economics or breakeven prices even lower in certain areas. Imagine if you've already built the pipelines, processing, and have an existing well pad. The breakeven economics for that well will be much lower. All that to say, even if oil dropped below $50 per barrel, you'd still see a few rigs active in South Texas.