ZaZa Energy Continues Laying Groundwork for Eagle Ford Growth

May 14, 2014 Kirk Eggleston

ZaZa's first quarter 2014 average combined production in the Eagle Ford (South Texas) and Eaglebine (East Texas) was 630 boe/d. The company has re-focused its attention to the Eaglebine, after divesting 10,300 net Eagle Ford acres in July of 2013 to a subsidiary of Sanchez Energy for $28.8 million. Approximately 82% of ZaZa's first quarter production came from the Eaglebine.

During the first-quarter, the company continued to position itself for growth across its portfolio. In May of 2014, ZaZa announced that its CEO, Todd Brooks, will be taking a salary of $1 dollar for the next two years. During that time frame, Brooks' compensation will consist of equity grants or other equity-related compensation.

“Through a series of transactions over the last two years, we have transformed ZaZa into a growth vehicle for emerging unconventional plays, particularly in East Texas. The elimination of my salary and adoption of STI and LTI performance hurdles for the next two years further aligns me with shareholders as we look forward to the delivery of continued production and reserves growth.”

— Todd Brooks

ZaZa Energy is currently operating at a net loss of $1.4 million, compared to $2.9 million last year at this time.

ZaZa Energy Eagle Ford First Quarter 2014 Operations Update

During the quarter, one of ZaZa's joint venture partners, Sabine South Texas LLC, completed its commitments to drill two horizontal wells in ZaZa's Sweet Home Prospect. The first commitment well was completed on February 14th and the second on March 11th. Sabine has now been assigned a 75% interest in 7600 net acres in the Sweet Home Prospect, and a well that ZaZa refers to as the "Boening well." Participating interests in any additional drilling or acquired lease acreage in the Sweet Home Prospect will be shared 75% by Sabine and 25% by ZaZa under an area of mutual interest agreement (AMI) that will expire during the third quarter.

ZaZa Energy Eaglebine First Quarter 2014 Operations Update

ZaZa entered into a further amendment of its joint venture with EOG Resources in the Eaglebine during the first quarter. Under the ammendment, ZaZa will receive ~$14 million and a two-well drilling commitment from EOG. As part of the agreement, EOG must begin drilling the first of two wells by July 1, 2014. In exchange, EOG will gain a 75% working interest in all of Zaza’s remaining acreage (9,600 net acres).

During the quarter, ZaZa acquired 5,000 net acres in Houston County and Southeastern Leon County in its core East Texas area. This acreage is currently held 100% by ZaZa.

Penn Virginia Seeks to Expand Eagle Ford Position

May 13, 2014 Kirk Eggleston

Penn Virginia Eagle Ford Operations Update - Dec 2013

During the first quarter of 2014, Penn Virginia added 6,400 net acres at a cost of $3,000 per acre, and in January, the company sold its Eagle Ford Shale natural gas gathering assets for $100 million in-part for reinvestment in the play.

Penn Virginia currently has 125,300 gross acres (85,900 net) in the Eagle Ford, and anticipates on growing its acreage to a minimum of 100,000 net acres.

“Due to continued success in adding to our Eagle Ford Shale acreage position, we are increasing our leasing capital expenditures guidance for the year.”

— CEO, H. Baird Whitehead

It can be assumed with great confidence that Penn Virginia will strike a deal for more Eagle Ford acreage in the very near future.

Penn Virginia Eagle Ford First Quarter Operations Update

Penn Virginia's Eagle Ford production was up 15% quarter over quarter, from 13,145 boe/d to 15,152 boe/d at the end of the first quarter of 2014. Eagle Ford production represented ~72% of Penn Virginia's record breaking total production for the quarter of 21,133 boe/d.

During the quarter, the company saw positive results from two of its Upper Eagle Ford test wells in Lavaca County. One of the wells had an initial production (IP) rate of 2,165 boe/d. Company officials say that the two wells have the highest wellhead flowing pressures they have seen to date in the Eagle Ford, with GORs (gas-oil-ratios) of 5,000 - 6,000 standard cubic feet per barrel.

“Initial testing of our adjacent Upper / Lower Eagle Ford Shale wells commenced in the first quarter and the initial results are strong. We saw initial production in excess of 2,000 BOEPD with a very high flowing pressure. Longer term testing will be necessary in order to fully understand the upside associated with the Upper Eagle Ford Shale, but we are very optimistic about the play.”

— Whitehead

Penn Virginia estimates in both the upper and the Lower and the Upper Eagle Ford that approximately 1,510 gross drilling locations remain. Of that figure, 68% of those locations are prospective for the Lower Eagle Ford.

During the quarter, the company completed 16 (12.9 net) operated wells and participated in the completion of two (0.9 net) outside operated wells. At the end of the quarter, the company had a total of 19 (11.1 net) wells completing or waiting on completion and six (3.4 net) wells being drilled.

Eagle Ford Shale Rig Count Increases by Two to 269

May 12, 2014 Kirk Eggleston

The Eagle Ford Shale rig count increased by two to 269 rigs running across our coverage area by the end of last week.

In recent Eagle Ford news, Canadian-based Encana Corporation has agreed to purchase 45,500 net Eagle Ford acres from Freeport-McMoRan for $3.1 billion. The acreage is located in Karnes, Wilson and Atascosa counties.

The U.S. rig count increased by 1 to 1,855 rigs running by the end of last week. A total of 323 rigs were targeting natural gas (flat from the previous week) and 1,528 were targeting oil in the U.S. (1 more than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.). 895or ~48% of rigs active in the U.S. were 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 (218 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

The natural gas rig count decreased by one to 14 rigs running by the end of last week. Average rig counts for natural gas production in 2012 were around 82 and then dropped to around 41 in 2013. Natural gas prices decreased by nearly 20 cents from last week to $4.53/mmbtu on Friday afternoon.

The oil rig count increased by three to 255 rigs running by the end of last week. WTI oil prices increased slightly, trading at $100.03/bbl on Friday afternoon. Eagle Ford light crude traded at $96.50/bbl on May 9th.

A total of 238 rigs are drilling horizontal wells, 17 rigs are drilling directional wells, and 14 rigs are drilling vertical wells. Karnes, La Salle, De Witt, and McMullen counties each have at minimum 25 rigs running. Karnes County has the highest rig count this week at 31. See the full list below in the Eagle Ford Shale Drilling by County below

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 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.

Halcón Resources Focused on El Halcón Area Sweet Spots

May 9, 2014 Kirk Eggleston

Halcon Resource's Eagle Ford Acreage Map

In its first quarter 2014 report, Halcón Resources made the claim that its entire East Texas El Halcón area is "de-risked and repeatable". That may sound a little like a sales pitch, and likely, it is. Halcón Resources CEO, Floyd Wilson, has indicated within the last year that a sale of the company wouldn't be out of the question. For the time being however, no definitive or official statements have been made by Halcón Resources, but it sounds like a nice bow is being wrapped around the company for a potential buyer.

During the first quarter, Halcón further strengthened its Eagle Ford position by divesting some of its' non-core East Texas properties, and in a separate transaction in March 2014, the company acquired nine wells in El Halcón from Aresco LP. The purchase price of the wells was undisclosed.

Recently, several Eagle Ford operators have begun testing for the upper Eagle Ford. Halcón officials revealed in a quarterly conference call that they're sticking to their current game plan to drill in the "sweet spots" of their acreage.

“We [] have an upper section that has pay in it. We think we’re fracking into it from where we are, and we don’t really plan on changing what we’re doing. We’re in the sweet spot of the zone, and it’s repeatable across the entire acreage position. We’re not really interested to go after some other hit-or-miss-type objectives. We’re going to stay with what’s working well.”

— Charles Cusack, COO

El Halcón First Quarter 2014 Operations Update

Halcón's average production from its' El Halcón area during the first quarter of 2014 was 7,018 boe/d. That's an 843% increase compared to the same period last year. Company officials say current production is approximately 10,400 boe/d in the area.

“First quarter results exceeded expectations. We are firing on all cylinders from an operational standpoint and are excited about the opportunities that lie ahead.”

— Floyd Wilson, CEO

Halcón operated an average of four rigs in El Halcón during the first quarter and expects to operate an average of two to three rigs in the play for the remainder of the year. There are currently 57 Eagle Ford wells producing, 5 wells being completed or waiting on completion and 3 wells being drilled.

Swift Energy - PT Saka Energi Eagle Ford Joint Venture

May 8, 2014 Kirk Eggleston

Houston-based Swift Energy announced in early May of 2014 that it has entered a joint venture agreement with Indonesian-based PT Saka Energi to develop 8,300 Eagle Ford acres in the Fasken area of Webb County.

In March of 2014, Swift revealed it was in negotiations for a joint venture to accelerate development in the Fasken area, after completing three Eagle Ford test wells with average initial production (IP) rates of 22.1 mmcf/d.

Under the companies' agreements, effective January 1, 2014, Saka will pay Swift $175 million to acquire a 36% full participating interest in Swift Energy's Fasken properties. $50 million will be used to carry a portion of Swift's future field development costs. Swift will remain the operator of the properties, and be responsible for conducting all drilling, completion and production operations.

“Saka recognizes the opportunity in the Fasken area to create value through highly productive natural gas drilling, and is aligned with Swift Energy in its assessment of the valuation of our Fasken acreage. Both parties are committed to rapidly realize the full value of this asset through an aggressive, disciplined development program.”

— Terry Swift, CEO of Swift Energy

The closing date is anticipated at the end of June of 2014. Per the agreements, the companies will jointly determine development plans for the field.