Eagle Ford Regional Rig Count at 240 April 5, 2013

April 5, 2013 R.T. Dukes

The Eagle Ford Shale drilling rig count increased two units to 240 running this past week. The rig count hasn't moved much over the past month, but I'd venture to say you might see a few rigs enter the play that weren't planned if natural gas prices stay near or above $4/mmbtu.

The week was highlighted by Penn Virginia's $401 million acquisition of properties from Magnum Hunter Resources in Gonzales and Lavaca counties. Read more in the article Penn Virginia - Magnum Hunter Deal Worth $401 Million.

The deal included 19,000 net acres, with 22.1 net wells producing 3,000 boe/d. Seven wells are waiting to be completed and four wells are currently drilling.

Eagle Ford Oil & Gas Rigs

[ic-l]The natural gas rig count held at a low of 20 running this past week. Natural gas prices traded down, then back up to more than $4/mmbtu on Friday. Don't forget, natural gas was trading closer to $2 than four this time last year. The extra revenue will be welcomed by operators and we shouldn't be surprised to see small upticks in natural gas activity later in the summer.

A total of 219 oil rigs are running in the region or two more than last week. WTI crude futures lost the ground it gained last week to trade at $92.50/bbl Friday afternoon. Eagle Ford light traded at $89.75/bbl on April 4th.

There are 211 horizontal rigs running in the region. An injection well is being drilled in Webb County.

La Salle and Karnes counties lead development with 32 rigs running. See the full list of drilling by county at the bottom of the page.

South Texas Oil & Gas News:

Be sure to visit our South Texas Oilfield Job Listings to search openings and come back weekly for update

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

BHP Job Fairs Underway in the Eagle Ford

April 5, 2013 R.T. Dukes

S. TX Expo Event Registration Line — Eagle Ford Event Registration Line Photo

BHP began holding jobs fairs this past week and still has a few on the schedule. If you're looking for a South Texas oilfield job, BHP is one of the largest operators in the play and plans to hire hundreds in the region. The company plans three job fairs next week:

April 9th – Oil & Gas Industry Job Fair, (5:30-7:30 pm) BHP Billiton Petroleum Job Fair, Floresville Event Center in Floresville, TX
April 10th – Oil & Gas Industry Job Fair, (5:30-7:30 pm) BHP Billiton Petroleum Job Fair, Jourdanton Community Center in Jourdanton, TX.
April 11th – Oil & Gas Industry Job Fair, (5:30-7:30 pm) BHP Billiton Petroleum Job Fair, Solomon P. Ortiz Center in Corpus Christi, TX.

The company employs 1,800 people in the area today and expects to have more than 3,000 employees when its Eagle Ford office opens in 2016.

If you'd like, you can read more about BHP's Eagle Ford History Here.

Phillips 66 Plans Gulf Coast Fractionator

April 4, 2013 R.T. Dukes

Phillips 66 is planning to build a 100,000 b/d fractionator in Old Ocean, TX. The plant will alleviate congestion in Mont Belvieu and add an outlet for Y-grade NGLs from the Eagle Ford. The plant will be located near the company's Sweeney Refinery and will have access to Gulf Coast petrochemical customers and the Month Belvieu distribution network.

Fractionators are used to separate NGL production into its various components (ethane, butane, propane, etc.).

“This project would enable us to take advantage of strong existing midstream transportation and storage infrastructure along with demonstrated operations excellence,” said Phillips 66 Chairman and CEO Greg Garland. “We see excellent market-facing opportunities to grow the natural gas liquids business, and the chance to supply purity NGLs and liquefied petroleum gas to the petrochemical industry and heating markets.”

Phillips 66 is currently seeking interest from suppliers of Y-grade NGLs.

The plant will also create even more Texas oilfield jobs. Hundreds of construction workers will be needed and 25 full-time positions will be created to run the plant. Construction should begin in early 2014 and the plant should be in service in late 2015.

Phillips already owns fractionation capacity in the Gulf Coast, at Mont Belvieu, and in Conway, Kansas.

Penn Virginia & Magnum Hunter Eagle Ford Deal Worth $401 Million

April 3, 2013 R.T. Dukes

Penn Virginia (PVA) has reached an agreement with Magnum Hunter Resources to acquire the company's Eagle Ford properties in Gonzales and Lavaca counties for $401 million. Magnum Hunter will retain 7,000 net acres in Atascosa, Fayette, and Lee counties.

The deal consist of approximately 40,600 gross (19,000 net) acres, with 46 gross (22.1 net) wells producing approximately 3,000 boe/d net in March of 2013. Seven wells are waiting to be completed and four wells are in some stage of drilling. Proved reserves of 12 million boe (37% PDP) were attributed to the assets at year-end 2012.

H. Baird Whitehead , President and Chief Executive Officer stated, “This is a transformational acquisition which will add significantly to our leasehold and drilling inventory in the Eagle Ford Shale play and is highly complementary to our existing operating areas where we and MHR have had very successful drilling results.

If we assume PVA paid an average of $60,000 per flowing boe/d, that accounts for $180 million of the acquisition price. That leaves $221 million for the 19,000 net acres or a little less than $12,000/acre. That's a rough estimate.

Penn Virginia now has 83,000 gross (54,000 net) contiguous acres in the area with an inventory of 640 gross (420 net) drilling locations. PVA now has 117 gross (82 net) wells producing an average of 10,900 boe/d. Drilling for the year in the Eagle Ford will now increase from 38 (28.8 net) wells to 62 (39.3 net) wells. Penn Virginia's capital budget will increase by $72-82 million as a result.

Magnum Hunter's Pearsall Shale exploration well with Marathon in Atascosa County will not be affected by the deal.

Chesapeake's Eagle Ford Well Costs Down, Now Testing Downspacing

April 2, 2013 R.T. Dukes

Chesapeake Energy held a conference call yesterday to address the company's leadership transition. The call also provided an interim operations update.

The Eagle Ford is Chesapeake's staple liquids asset and the beneficiary of 35% of the company's $6 billion capital budget in 2013. The play also accounts for approximately 35% of the company's oil production.

Highlights from the call include:

Recently hit a daily production record of 124,000 gross (56,000 net to CHK) barrels of oil per day in the Eagle Ford
Second largest oil producer in the Eagle Ford
Eagle Ford oil is fetching a premium to WTI, with prices tracking LLS
Total daily production average of 80,000 boe/d net, with a target of 92,000 boe/d net by year-end
80,000 boe/d net is after subtracting the 5,000 boe/d net that will be sold with the company's northern acreage block
Spud to spud well cycle time down from 26 to 18 days year over year
Costs down from $9 million to $7 million for average 6,300 ft lateral wells
Target is for $6 million well costs when all acreage is held by production
Testing 350 ft or roughly 50-acre spacing from 500 ft or 70-acre spacing
Have 584 gross operated producing wells in the Eagle Ford

Chesapeake's Northern Eagle Ford acreage package is still on the market and I suspect we'll hear news of a deal sometime in the second quarter. The sale is part of the company's plan to divest $4-7 billion in assets in 2013.

Steve Dixon, acting CEO, stated "We will remain focused on increasing our liquids production, driving capital efficiencies across our business and enhancing our financial flexibility to prudently fund our future growth."