Baytex Energy - Aurora Deal for Eagle Ford Assets - ~$2.6 Billion

February 10, 2014 Kirk Eggleston

Canadian-based Baytex Energy agreed to buy Australian-based Aurora Oil and Gas for ~$2.6 billion dollars in early February 2014.

Aurora has approximately 22,000 net contiguous acres in the Sugarkane Field, located in the heart of the Eagle Ford Shale., with 97% held by production.

In March of 2013, Aurora purchased 27 net acres near the Sugarkane Field for $117 million.

The Sugarkane Field

Aurora’s fourth-quarter 2013 gross production was 24,678boe/d (82% liquids) of mostly light, high-quality crude oil from the Sugarkane Field.

“The Eagle Ford play provides not only exposure to light oil, but also to Gulf Coast crude oil markets with established transportation systems. A portion of the produced crude oil benefits from Louisiana Light Sweet based pricing, which currently trades at a premium to WTI.”

— James Bowzer, Baytex CEO

In addition to sustainable infrastructure, the deal was also appealing to Baytex because of reserves upside potential from well downspacing, improving completion techniques and new development targets in additional zones.

Marathon is the majority operator of the Eagle Ford acreage.

Baytex Added Reserves and 2014 Outlook

The deal adds proved reserves to Baytex of 106.7 million boe and proved plus probable reserves of 166.6 million boe. The company sees reserve upsides in other horizons such as the Austin Chalk and Upper Eagle Ford formations, through downspacing and improving completion techniques.

Prior to the purchase agreement, Aurora's forecasted production for 2014 was 29,000 boe/d to 32,000 boe/d. That's a 43% increase in production over 2013.

Baytex-Aurora Deal at a Glance

Early February 2014, Baytex agrees to buy Aurora for ~$2.6 billion
Aurora Oil acreage assets include 22,000 net contiguous acres in Eagle Ford
97% of Aurora acreage is held by production
Aurora's Q4 2013 gross production was 24,678boe/d (82% liquids)
Marathon is primary operator of acreage in the Eagle Ford
Forecasted production for 2014 is 29,000 boe/d - 32,000 boe/d

Eagle Ford Rig Count - 264 - Conoco Increases Eagle Ford Production 58% in 2013 - February 7, 2014

February 7, 2014 Kirk Eggleston

The Eagle Ford Shale rig count increased by two rigs to 264 running over the past week.

In recent news, ConocoPhillips (COP) increased production in the Eagle Ford by 58% to 141,000 boe/d. In 2014, COP will spend $4.3 billion on the Eagle Ford, Bakken and Niobrara Shale plays.

The U.S. rig count decreased by 14 to 1,771 running over the past week. A total of 351 rigs are targeting natural gas (7 less than last week) and 1,416 are targeting oil in the U.S. (6 less than last week). The remainder are drilling service wells (e.g. disposal wells, injection wells, etc.). 845 or ~48% of rigs active in the U.S. are running in Texas.

Baker Hughes rig count is quoted here. Baker Hughes also releases its own Eagle Ford Rig Count that covers the 14 core counties (214 rigs). The rig count published on EagleFordShale.com includes a 30 county area impacted by Eagle Ford development. A full list of the counties included can be found in the table near the bottom of this article.

Eagle Ford Oil & Gas Rigs

[ic-l]The natural gas rig count increased by one rig to 37 running this past week. Average rig counts for natural gas production in 2012 were around 82 and then dropped to around 41 in 2013. Over the past week, natural gas decreased slightly to $4.77/mmbtu on Friday afternoon.

The oil rig count increased by 2 to 227 rigs running. WTI oil prices increased slightly, trading at $100.07/bbl by the end of the week. Eagle Ford light crude traded at $96.25/bbl on February 7th.

A total of 235 rigs are drilling horizontal wells, 18 rigs are drilling directional wells, and 11 rigs are drilling true vertical wells. Karnes, DeWitt, La Salle, Dimmit and McMullen counties each have at minimum 26 rigs running. LaSalle County has the highest rig count this week at 30. See the full list below in the Eagle Ford Shale Drilling by County:

South Texas Oil & Gas News:

Be sure to visit our South Texas Oilfield Job Listings to search openings and come back weekly for updates or sign up for alerts - Daily or Weekly Email Alerts

Eagle Ford Shale Drilling by County

Eagle Ford Operated Rig Count By Company

SmithBits no longer reports its operated rig count, but we'll have updated number for you from a new source soon. Until then, you can reference our numbers from mid-April. There has not been a significant change in the overall rig count since this date:

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 Spending $1.82 Billion in 2014

February 7, 2014 Kirk Eggleston

Chesapeake has set its 2014 capital budget at $5.2 billion - $5.6 billion. That's down ~20% from the midpoint of the company's 2013 capital budget.

Approximately 35% of the budget will go to the Eagle Ford in 2014.

Low end estimates put that figure at about $1.82 billion. The company plans to run 15 - 18 operated rigs in the Eagle Ford throughout the year.

Chesapeake Plans on Divesting Acreage in 2014 and Increasing Production

In 2014, Chesapeake plans to reduce its capital expenditures, and continue divesting noncore assets. In July 2013, the company sold 55,000 net Eagle Ford acres to EXCO Resources for $680 million.

“While our guidance today does not reflect the impact of potential divestitures, we continue to pursue opportunities to high-grade our portfolio through asset sales. We believe these transactions will be value accretive and enable us to further reduce financial complexity and improve overall leverage. Over the last eight months, we have conducted an extensive review of Chesapeake’s portfolio. Due to the size and quality of the asset base, I am confident that by remaining focused on our strategic priorities we can deliver long-term production growth per debt-adjusted share of 5 – 9% annually, while maintaining a disciplined capital spending profile.”

— Doug Lawler, Chesapeake's CEO

Average daily production estimates for 2014 are 680,000 - 695,000 boe/d company-wide, with an estimated 1,300 gross operated wells to coming online in 2014, or approximately 115 fewer wells than in 2013.

Chesapeake December 2013 Production and 2013 Well Inventory

For the month of December, net production of an Eagle Ford well was 90,000 boe/d.

At the end of 2013, 109 gross operated wells had been drilled in the Eagle Ford, but were awaiting completion. That figure represents the third highest total of un-completed wells at the end of 2013 in Chesepeake's play interests, with the Utica Shale and Marcellus Shale ranking at 195 and 112 respectively.

Chesapeake at a Glance

2014 Capital Budget in Eagle Ford is $1.82 billion
Chesapeake plans on divesting more noncore assets in 2014
Net production of an Eagle Ford well in December 2013 was 90,000 boe/d
109 gross operated wells awaiting completion in Eagle Ford at the end of the year
680,000 - 695,000 boe/d company-wide, with approximately 1,300 gross operated wells to sales in 2014

Winter NAPE Expo Business Conference Highlights - 2014

February 6, 2014 Kirk Eggleston

The NAPE Expo is a North American event with some international influence, which features key players in the oil and gas industry. The business conference theme for 2014 was sustainability in the U.S. oil and gas industry.

The conference touched on key issues such as hydraulic fracking, regulatory and environmental issues, operational procedures and technological innovations.

Hydraulic Fracking and the Issue of Water

Multiple speakers put a spotlight on the practice of hydraulic fracturing, and water sustainability. Here are some of their comments:

Former Secretary of the Interior, Ken Salazar, said, "I believe hydraulic fracking is safe... there is not a single case where fracking has caused an environmental problem for anyone."
David Blackmon, Dir. FTI Consulting, said, "the biggest issue by far facing the industry today is water."
880 Trillion Gallons of brackish water in Texas could potentially be used for development in 2 - 3 years according to Blackmon
"The Eagle Ford doesn't flow back as much water as other areas, and it looks like its going to be at a net water deficit for some time," said Andrew Slaughter, VP, Upstream Research, IHS

Regulations and Environmental Issues

Effective January 1st, new casing and cementing regulations went into effect for all Texas Operators
Texas Rail Road Commissioner, Christi Craddick, to Texas Operators: "we'll be implementing and enforcing flaring rules [in February 2014]." Read more at rrc.tx.state.us
David Blackmon, Dir. FTI Consulting, said, "the Endangered Species Act could potentially have a significant (detrimental) impact on business in [Texas]."

Operational Procedures and Using Technology for Sustainability

Robert Turnham, CEO, Goodrich Petroleum on business strategy: "We move early, identify opportunities and take the risk up-front. If you move early, then you enjoy lower royalty burdens straight off the top."
Apache converting waste gas to electricity for field grid usage
General industry focus on artificial lift technology in shale drilling to quickly drain reservoirs
New diverter technology being utilized to make shale drilling more economic in marginal wells

Other Notable Comments from the Conference

Luke Keller, VP, BP America, said, "[the] U.S. could achieve energy independence by 2035."
"$2000 financial benefit to every American household by 2015 due to unconventional drilling of natural gas," according to Don McClure, VP, Government Stakeholder Relations and Legal, EnCana Oil and Gas USA
"The U.S. has close to 200 - 300 years of hydrocarbon reserves," according to Charles McConnell, Rice University
Industry encouraged to support better outreach and education initiatives via social media outlets

Learn more about NAPE by visiting napeexpo.com

ConocoPhillips Eagle Ford Production Up 58% to 141,000 boe/d in Q4 2013

February 5, 2014 Kirk Eggleston

ConocoPhillips' Eagle Ford Shale production was 141,000 boe/d in the fourth-quarter of 2013, surpassing fourth quarter 2012 production from the formation by 58%. The Lower 48 and Latin America accounted for ~28% of the company's total production.

ConocoPhillips Close to Hitting Projected Growth Targets in the Eagle Ford

In the fourth quarter of 2012, Conoco's Eagle Ford production averaged 70,000 boe/d, but grew rapidly in Q4 2012 to 100,000 boe/d. In December of 2013, Conoco announced a five year plan to invest $8 billion in the Eagle Ford and grow production to almost 150,000 boe/d by 2017.

Conoco will likely reach its goal of 150,000 boe/d from the Eagle Ford sometime in 2014 or almost three years earlier than planned.

ConocoPhillips Capital Budget in Unconventional Drilling

In 2014, Conoco will spend ~$9 billion on its North American operations. Approximately $4.3 billion will be focused on the Bakken, Eagle Ford and Niobrara Shale. In 2013, Conoco's production in the Eagle Ford, Bakken and Permian grew 31% from ~167,000 boe/d in the fourth-quarter of 2012 to ~218,000 boe/d in 2013.

Eagle Ford Contribution to Conoco's Reserves

The growth in unconventional drilling has contributed greatly to Conoco's reserves.

“2013 was a significant year for the company and we achieved several important, strategic milestones... [the company] achieved conventional and unconventional exploration success... [and] our capital program yielded strong organic reserve replacement.”

— CEO Ryan Lance

In 2013, Conoco added 470 million boe in Lower 48, primarily in liquids-rich shale plays, including the Eagle Ford and Bakken.

ConocoPhillips Production in 2013 and Plans Moving Forward at a Glance

ConocoPhillips Eagle Ford Shale Q4 production up ~58% from 2012 to 141,000 boe/d
~ 28% of ConocoPhillips Lower 48 Production is in Bakken
$4.3 billion will be focused on the Bakken, Eagle Ford and Niobrara Shale in 2014
470 million boe in Lower 48 reserves added in 2013, primarily in liquids-rich shale plays, including the Eagle Ford and Bakken
31% production growth in Bakken, Eagle Ford and Permian to ~218,000 boe/d in Q4 2013