Apache Corp. Sues Eagle Ford Oilfield Services Companies

June 24, 2014 Kirk Eggleston

Houston-based Apache Corporation is in the midst of an ongoing legal battle stemming from relationships it had with oilfield services companies in the Eagle Ford Shale. Apache is alleging fraud by the principals of two oilfield services companies and a string of other parties for more than $1 million, according to a report in the Houston Chronicle. Bexar County District Court documents show lawsuits were filed in late April of 2014 against three oilfield services companies — Stag Energy Services LLC, Double M Services, and Bronco Services LLC. James C. Mann and Robbie L. Ward, of Stag Energy and Double M Services, were named in the suit. Both companies have shut their doors.

According to the Chronicle, Mann worked at Stag with his now estranged wife, Ward, who was part owner in the company. After the dissolution of Stag in November of 2013 by its majority owner Steven Staglik, who was not named in the suit, Mann and Ward shifted their operations to Double M. The former Stag and Double M provided contract drilling services, equipment rental, and trucking services in the Eagle Ford and Permian Basin.

Apache alleges Chad Walker, a former construction foreman for the oil giant, began approving unsubstantiated invoices from the service companies run by Mann and Ward. In a court filing, Walker denied the allegations. In the Chronicle's report, separate attorneys for Mann and Ward also denied the company's claims.

Although this specific case puts a bad light on a few oilfield service companies and some alleged bad apples, most of oilfield service companies and oilfield workers in the Eagle Ford are on the up and up. As with any boom, where there is a good deal of money to be made, some people will be tempted to take advantage of the moment. EagleFordShale.com will keep you updated as this case develops.

Eagle Ford Shale Rig Count Increases by Three to 271

June 23, 2014 Kirk Eggleston

The Eagle Ford Shale rig count increased by three to 271 rigs running across our coverage area by the end of last week.

In recent Eagle Ford news, according to data from consultancy DrillingInfo, half of all U.S. crude oil production comes from just 20 counties/development areas. Included in the list are six Eagle Ford counties: Karnes, LaSalle, Dewitt, Dimmit, Gonzales and McMullen. Four counties in North Dakota covering another major shale play, the Bakken Shale, were also included.

The U.S. rig count increased by four to 1,858 rigs running by the end of last week. A total of 311 rigs were targeting natural gas (one more than the previous week) and 1,545 were targeting oil in the U.S. (three more than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.). 889or ~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 (215 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 12 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 fell slightly from the previous week to $4.55/mmbtu on Friday afternoon.

The oil rig count increased by four to 259 rigs running by the end of last week. WTI oil prices remained relatively flat from the previous week, trading at $107.26/bbl on Friday afternoon. Eagle Ford light crude traded at $103.00/bbl on June 19th.

A total of 240 rigs are drilling horizontal wells, 13 rigs are drilling directional wells, and 18 rigs are drilling vertical wells. Karnes, La Salle, and De Witt each have at minimum 30 rigs running. De Witt County has the highest rig count this week at 32. See the full list below in the Eagle Ford Shale Drilling by County below

South Texas Oil & Gas News:

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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.

Six Eagle Ford Counties Rank as Top U.S. Oil Producing Areas

June 20, 2014 Kirk Eggleston

According to recent data from consultancy DrillingInfo, half of all U.S. crude oil production comes from just 20 counties/development areas.

Included in the list are six Eagle Ford counties: Karnes, LaSalle, Dewitt, Dimmit, Gonzales and McMullen. Four counties in North Dakota covering another major shale play, the Bakken Shale, were also included.

The 20 counties/development areas covered make up only 2% of all oil producing counties across the country, but accounted for 52% of all oil production. Karnes County, which is the top oil producing county in the state, ranked at number seven on the list.

See below for a full list of Eagle Ford counties included in the DrillingInfo report and their respective ranking and daily production data:

Karnes (7) - 214,000 b/d
LaSalle (9) - 141,000 b/d
Dewitt (13) - 133,000 b/d
Dimmit (14) - 117,000 b/d
Gonzales (15) - 116,000 b/d
McMullen (19) - 88,000 b/d

In July of 2014, the Energy Information Administration (EIA) predicts the Eagle Ford Shale will produce 1.429 million b/d of crude oil and other liquids. That's approximately 24,000 b/d over June production, according to the EIA’s most recent Drilling Productivity Report. By 2020, some analysts predict the Eagle Ford will reach two-million b/d of crude and condensate production.

Since the Eagle Ford oil boom began in 2009, more than 14,000 drilling permits have been issued by the Texas Railroad Commission (RRC) in the play. Permitting peaked in 2012 and 2013 in the top producing Eagle Ford counties, and has started to decline. According to the RRC, in 2013, there were 2,521 producing oil leases on schedule.

Why Horizontal Drilling is Important to Texas Oil Production

June 19, 2014 Kirk Eggleston

The tight oil and shale gas revolution has been made possible largely by horizontal drilling and fracking technology. Although the controversial process of fracking tends to dominate the headlines, advancements made in horizontal drilling have allowed operators to precisely access more of the shale rock layer than was thought possible even a decade ago.

As of this writing, 237 rigs in the Eagle Ford are drilling horizontal wells, which accounts for 88% of all rig activity in the play. Without a doubt, horizontal drilling dominates the Eagle Ford play, not to mention the next most significant shale play, the Bakken Shale, where horizontal drilling also reigns supreme. On our sister site, BakkenShale.com, horizontal drilling in our coverage area accounts for nearly 90% of all active rigs.

Horizontal Drilling Ramps Up in the Permian Basin

Although the Eagle Ford is by far the top producer in the state of Texas, it is not the top dog for horizontal drilling. Rather, its the Permian Basin that currently wears that crown. For years, much of the oil produced in the state came from West Texas, and although the spotlight has recently shifted to the Eagle Ford, the Permian appears to be ramping up for a revolution of its own.

According to the U.S. Energy Information Administration, since the end of 2013, the number of horizontal rigs in the Permian Basin have increased dramatically. From December 27, 2013, to the week ending on May 9, 2014, the number of horizontal, oil-directed rigs in the Permian Basin rose by 63 rigs, which accounts for 50% of the total increase in the United States.

“A change in the horizontal, oil-directed rig count of the scale seen in the Permian indicates a significant rise in activity in its tight oil plays relative to recent developments in other major production area.”

— EIA

At the beginning of 2013, both the Eagle Ford Shale and the Bakken Shale, exceeded the Permian Basin in the number of oil-directed horizontal drilling rigs. By the end of 2013, the Permian Basin's 215 rigs surpassed both the Eagle Ford and Bakken, which at that time had 173 and 164 rigs, respectively. During the first quarter of 2014, the increase in oil-directed horizontal rigs in the Permian Basin was more than four times the combined increase in the Eagle Ford and Williston Basin.

Ares Management Buys Eagle Ford's BlackBrush Oil & Gas

June 18, 2014 Kirk Eggleston

Private equity investor Ares Management LP announced in June of 2014 that it will purchase BlackBrush Oil & Gas, an independent Eagle Ford exploration and development company, for an undisclosed amount. The deal includes 160,000 net acres across Dimmit, Frio, Karnes, La Salle, Maverick and McMullen counties.

BlackBrush CEO Scott Martin will continue to lead the 75-employee San Antonio-based company. Co -founder Phil Mezey will also remain involved as an advisor.

“Partnering with the Ares private equity team provides us the capital to continue developing and growing our large asset base.”

— Scott Martin

Currently, BlackBrush operates over 300 oil and gas wells in South Texas. Estimates on the company's website indicate 50-wells will be drilled over the next year targeting the Eagle Ford, Buda, Austin Chalk, San Miguel, Olmos and Pearsall Shale. With this transaction, more activity may occur inside of the company's drilling target window.

The transaction is expected to close in the the third quarter of 2014.

Another Recent Eagle Ford Transaction Has Ties to BlackBrush Leadership

In June of 2014, Dallas-based Southcross Energy announced it was acquiring San Antonio-based pipeline company TexStar Midstream Services, LP. for $450 million. TexStar was also led by BlackBrush's Martin and Mezey.

The deal includes 3,700 miles of pipeline, four processing plants and three fractionation facilities in the Eagle Ford Shale area. After the transaction closes, a newly formed company, Southcross Holdings LP (“Holdings”) will own 100% of the general partner of Southcross and equity interests in Southcross as well as former TexStar assets.