SM Energy Expects Eagle Ford Condensate Discount - Interruptible Gathering

May 6, 2013 R.T. Dukes

SM Energy Operated Eagle Ford Acreage Map

SM Energy expects its Eagle Ford condensate production will realize a long-term average discount of $7-8 to NYMEX prices. Oil production in the region averaged price realizations of 101% and 103% of WTI in the fourth quarter of 2012 and first quarter of 2013, respectively.

SM Energy's operated Eagle Ford production grew 15% over the fourth quarter to 51,800 boe/d. That represents 74% growth over the first quarter of 2012. The company's non-operated position (Anadarko operated) grew 3% in the quarter to an average of 16,000 net boe/d.

SM Energy's Eagle Ford Gathering Will Be Interruptible

The company's operated production has regularly exceeded 300 mmcfd in March and April of 2013. Firm transportation agreements are currently in place for 300 mmcfd and the company is confident there is adequate gathering infrastructure in place. Additional firm capacity will be online mid-year 2013 and the company believes current infrastructure will allow for growth in the interim.

SM ran five drilling rigs in the quarter and completed 28 wells. Anadarko ran nine rigs.

Expanding East Texas Woodbine & Eagle Ford Acreage

The company now has approximately 150,000 net acres prospective for the Woodbine and Eagle Ford in Walker, San Jacinto, Polk, and Washington counties. Watch for well test results in the second half of the year.

Read the full press release at sm-energy.com

Eagle Ford Regional Rig Count 264 on May 3, 2013

May 3, 2013 R.T. Dukes

The Eagle Ford Shale drilling rig count settled at 264 this past week. That is one more than last week when 263 rigs were running.

It was an event packed week, with companies reporting earnings and the Eagle Ford Conference & Expo in Robstown Wednesday and Thursday. We'll have more details from many Eagle Ford operators later next week.

Chesapeake reported this week and noted their drilling time had fallen to 18 days from 25 days at this time last year and that they believe the drilling time could fall to 13 days. They are also reducing their rig count to 13 in the second half of the year. That's down from 30+ just a year ago. It's a steep drop, but the improvement in drilling time decreases the impact substantially.

*Note* Now quoting Baker Hughes. Baker Hughes also releases its own Eagle Ford Rig Count that covers the 14 core counties (~230 rigs). Our numbers cover a 30 county area impacted by Eagle Ford development. A full list of the counties included can be found in the table at the bottom of this article.

Eagle Ford Oil & Gas Rigs

[ic-l]The natural gas rig count settled at 29 rigs this past week. That is no change from one week prior.

Natural gas prices were down 10 cents on the week, but still holding above $4 at $4.05/mmbtu on Friday afternoon.

A total of 235 oil rigs are running in the region or one more than last week. WTI futures were trading at $95.75/bbl on Friday afternoon. Eagle Ford light crude traded at $90.50/bbl on May 2nd.

Karnes and La Salle counties lead development with 33 and 32 rigs running, respectively. See the full list of drilling by county at the bottom of the page.

South Texas Oil & Gas News:

Our friend Omar Garcia from STEER contributed an article this week - Ensuring The Future of South Texas

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

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 Baker Hughes 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.

Chesapeake Eagle Ford Drilling Time Improving - Rig Count Down

May 2, 2013 R.T. Dukes

Chesapeake's Eagle Ford well drilling time is down from 25 days a year ago to 18 days in the first quarter of 2013.

The company is running 15 rigs in the play now, but plans to drop the rig count to 13 in the second half of the year. Chesapeake also believes they will be able to drive drilling times down by another five days.

Thirteen rigs drilling wells in 13 days is comparable to 25 rigs drilling wells in 25+ days. All that to say, the rig count is almost one-third of the 30+ the company operated at the peak, but they will be drilling wells at rates much more comparable to 2012 levels. That's the magic of improving operational efficiencies. More with less.

“We are pleased to raise our 2013 oil production guidance by 1 million barrels (mmbbls), largely as a result of improving performance in the Eagle Ford Shale, where we are drilling longer laterals, achieving better-than-expected well performance and encountering improved gathering system pressures along with fewer gas processing constraints. ”

— Steven C. Dixon, Chesapeake’s Acting CEO

CHK's Eagle Ford Production Continues To Climb

Chesapeake's Eagle Ford production grew to 75,000 boe/d net (166,000 boe/d gross operated) in the first quarter. That's 20% more than the fourth quarter and 225% more than one year ago. Approximately 65% of production is oil and the remainder is almost evenly split between NGLs and natural gas.

Approximately 650 wells were producing at March 31, 2013. 887 have been drilled, but 34 are awaiting pipeline connection and 203 are in various stages of completion. 111 wells were completed in the quarter at average IPs of 950 boe/d. 300 additional wells will be completed by year-end when the company's acreage is expected to be fully held by production.

Chesapeake is still in the process of selling acreage in the northern portion of its Eagle Ford holdings. I expect we'll hear more later in the quarter.

Three wells noted were:

Gates 010-CHK-A TR3-J2H in Webb County, TX achieved a peak rate of approximately 3,110 boe/d, which included 930 b/d oil, 1,160 b/d of NGL and 6.1 mmcfd
PGE Browne G 4H in Webb County, TX achieved a peak rate of approximately 1,840 boe/d, which included 770 b/d of oil, 570 b/d of NGL and 3.0 mmcfd
Sultenfuss Unit 6H in Dimmit County, TX achieved a peak rate of approximately 1,360 boe/d, which included 1,260 b/d of oil, 60 b/d of NGL and 0.2 mmcfd.

Read the full press release at chk.com

Enterprise Products Third Yoakum Processing Plant Online, Volumes Up

May 1, 2013 R.T. Dukes

Enterprise Product Partners brought its third cryogenic processing plant in Yoakum, TX, online in March and is reaping the benefits. Natural gas processing volumes are up 38% and NGL production is up 532% from one year ago in South Texas.

The Yoakum Facility in Lavaca County will have ultimate capacity of 900 mmcfd. The first plant at the Yoakum Facility came online in May of 2012, the second in August of 2012, and the Third in March of 2013. From just a year ago, fee-based processing volumes in the region have increased by 622 mmcfd and equity NGL production has increased by 27,000 b/d.

It's good timing. Volumes in the Rocky Mountains have fallen considerably, but South Texas growth has more than offset the declines.

Enterprise is also on pace to complete construction of its latest segment of its Eagle Ford crude oil pipeline in the third quarter. The project is a joint venture with Plains All American Pipeline. You can read more about the joint venture in the article Plains All American - Enterprise Eagle Ford Crude Oil Joint Venture.

Those aren't the only assets benefiting from Eagle Ford growth:

“The Texas Intrastate pipeline system reported an $8 million increase in gross operating margin on a 389 billion British thermal units per day (“BBtud”) increase in natural gas pipeline volumes compared to the first quarter of 2012 as a result of increases in Eagle Ford shale production. ”

Read the full press release at enterpriseproducts.com

Ensuring The Future Of South Texas Communities - Op Ed

April 30, 2013 Kenny DuBose

With the 83rd Legislature in session, legislators have a unique opportunity to address county transportation infrastructure needs during this transformative time in South Texas. All eyes are on Texas -- and the Texas legislature as it develops solutions -- for good reason. Texas is known for our innovative platforms, our reinvestment methods and a collaborative spirit that is at the very core of being a Texan.

Cities and counties are forging strategic alliances pertaining to productive development of the Eagle Ford shale region; educational institutions from across the region are ramping up science, technology, engineering and mathematics (STEM) coursework to meet the growing needs of the industry; and communities are attracting increasing numbers of small businesses, new residents and visitors.

The Eagle Ford Is Bringing Economic Prosperity

South Texas is fortunate to be experiencing the benefits of expanded oil and gas activity, astutely described by Forbes as “the blessing that is the Eagle Ford Shale.” Access to bountiful natural resources in this region is truly a “blessing” whose impact will be pronounced for many generations of Texans. But with this opportunity comes a very real need to create and sustain critical infrastructure to meet the growing community and industry’s needs, including roads, housing, medical facilities and other basic necessities.

“Texas is in a favorable growth position as evidenced by the continually-developing Eagle Ford Shale region.”

STEER and its founding members -- Anadarko, Chesapeake Energy, ConocoPhillips, EOG Resources, Lewis Energy Group, Marathon Oil, Murphy Oil Corporation, Pioneer Natural Resources Company, Shell Oil Company, Statoil and Talisman Energy -- are committed to working with our South Texas leaders to identify and share solutions to support and enhance the vitality of the region. The STEER founding members invested more than $12 million in 2012 for a variety of infrastructure needs in South Texas. County officials are limited in their ability to raise funds necessary to repair and maintain impacted county roads. STEER will continue the dialogue with stakeholders in South Texas to assist with finding solutions that will ensure continued prosperity and economic development for the region.

STEER Will Collaborate With Local Communities

Texas is in a favorable growth position as evidenced by the continually-developing Eagle Ford Shale region. The timely release of the University of Texas at San Antonio’s Institute for Economic Development March 2013 report on the Economic Impact of the Eagle Ford Shale, states that the shale now ranks as the largest single oil and natural gas development in the world based on capital expenditures by companies in the industry. Wood Mackenzie Ltd. has calculated that the oil and natural gas operators active in the Eagle Ford Shale will spend $28 billion in 2013, up 68 percent from the $19 billion spent in 2012.

Collaboratively, STEER local community leaders, and state elected officials must work together to promote long-term investment and sustainability in South Texas. Infrastructure improvements and investments made today will pay off many times over, as unprecedented economic impact brings a renewed spirit into South Texas.

By Omar Garcia, President, STEER - South Texas Energy & Economic Roundtable

As President of the South Texas Energy & Economic Roundtable (STEER), Omar Garcia facilitates communication, education and public advocacy surrounding the production of energy resources in the Eagle Ford Shale Region and all of South Texas.