Eagle Ford Deal Closings - June 2014

July 1, 2014 Kirk Eggleston

Several significant Eagle Ford acquisitions were announced in April and May of 2014. In June of 2014, the details of these acreage deal closings were announced by the buyers, which included Encana Corporation, Sanchez Energy, Panhandle Oil & Gas and Warwick Energy.

Encana Corporation

The Encana deal was by far the largest. The company completed its acquisition of ~45,000 net Eagle Ford acres located in the oil window of Karnes, Wilson and Atascosa Counties from Freeport McMoran on June 20, 2014 for $3.1 billion.

In the first quarter of 2014, the acreage produced 53,000 boe/d. Company officials estimate a drilling inventory of more than 400 locations. The company plans to update its production guidance in its next quarterly report on July 24, 2014.

Read more about the deal: Encana Purchases Eagle Ford Assets from Freeport McMoran

Sanchez Energy

Sanchez Energy announced on June 30, 2014 that it closed its massive Eagle Ford acreage deal with Royal Dutch Shell for 106,000 net Eagle Ford acres.

Total consideration for the acquisition was approximately $553.5 million, comprised of the $639 million purchase price less approximately $85.5 million in normal and customary closing adjustments. The transaction was funded from cash on hand from a portion of the net proceeds from the company's previously issued $850 million senior unsecured 6.125% notes due in 2023.

Panhandle Oil & Gas

Panhandle Oil & Gas announced the closing of its Eagle Ford acquisition on June 17, 2014. The deal includes a 16% non-operated working interest in a 11,100 leasehold acres (1,775 net) block that company officials say is held largely by production with 63 producing wells.

Net to the company's interest, May 2014 production in the newly acquired acreage was 825 boe/d , with an 80% oil cut. The property is currently being developed with a one drilling rig program by the operator, Oklahoma City-based Cheyenne Petroleum Company.

Warwick Energy

Read more about the deal: Warwick Energy Buys Eagle Ford's R/C Sugarkane for Undisclosed Amount

Closing details: Warwick Energy Closes Deal for 7,300 Net Eagle Ford Acres

Eagle Ford Shale Rig Count Decreases by One to 270

June 30, 2014 Kirk Eggleston

The Eagle Ford Shale rig count decreased by one to 270 rigs running across our coverage area by the end of last week.

In recent Eagle Ford news, after nearly four decades, the Obama administration has opened the door for U.S. exports of unrefined American oil, according to The Wall Street Journal (WSJ). The decision was approved in a private ruling by the Commerce Department’s Bureau of Industry and Security, and will for now allow only two companies, Pioneer Natural Resources Co. and Enterprise Product Partners LP, to export Eagle Ford condensate to foreign buyers. Shipments, which are likely to be small, could begin as early as August.

The U.S. rig count increased by 15 to 1,873 rigs running by the end of last week. A total of 314 rigs were targeting natural gas (three more than the previous week) and 1,545 were targeting oil in the U.S. (13 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 (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

The natural gas rig count decreased by one to 11 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 $4.39/mmbtu on Friday afternoon.

The oil rig count remained flat at 259 rigs running by the end of last week. WTI oil prices decreased slightly from the previous week, trading at $105.62/bbl on Friday afternoon. Eagle Ford light crude traded at $102.25/bbl on June 26th.

A total of 239 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 29 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:

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.

Comstock Reveals Results from First East Texas Eagle Ford Well

June 27, 2014 Kirk Eggleston

Comstock Resources East Texas Eagle Ford Map

Comstock Resources Inc. announced the results of its first well drilled in its East Texas Eagle Ford Shale acreage in Burleson County, TX.

The Henry A #1H test well had a peak 24-hour average production rate of ~1,267 boe/d, with a ~80% oil cut. The well was drilled to a vertical depth of 9,514 feet, and had a 6,841 foot completed lateral which was stimulated with 17 stages and 10.2 million pounds of proppant. Comstock's second well drilled in Burleson County, the Mach A #1H, recently reached total depth and will be completed in July.

At the end of 2013, Comstock inked a deal with Ursa Resources for 21,000 net East Texas Eagle Ford acres in Burleson and Washington Counties for $66.5 million. In early May of 2014, the company announced it had acquired a 30% working interest in one producing well and approximately 9,000 net acres in Burleson County for $33.9 million from Ursa, and was increasing its capex budget to acquire additional interests in the county. In an official statement from June of 2014, Comstock claimed 30,400 net acres in Burleson County.

“We are very excited about the initial results from the Henry well and look forward to having an active development program on these properties in the future,” said Comstock CEO M. Jay Allison in a company statement. “The initial results of our first East Texas Eagle Ford well combined with successful offset wells of other operators are confirming the potential of our newly acquired acreage.”

Comstock plans to spend approximately $510 million in 2014 on development and exploration projects in its South Texas and East Texas Eagle Ford acreage in 2014. The budget for drilling activity includes $284.0 million to drill sixty-five wells (46.0 net) in the Eagleville field in South Texas, $79.0 million to drill 10 Eagle Ford shale wells (9.2 net) on the Burleson County, Texas acreage. The budget also includes $76.0 million to complete 18 wells (13.3 net) in the Eagleville field that were drilled in 2013 and $38.0 million on facilities and other development activity.

Drug Use Spikes in Eagle Ford Shale Counties

June 26, 2014 Kirk Eggleston

Since the Eagle Ford oil boom began in South Texas, drug arrests in Dimmit, La Salle, and Frio counties have skyrocketed, according to a recent report in The Austin American Statesman. Experts say the increase in arrests has been fueled by an influx of well-paid workers chasing the shale oil boom. Since 2008, the U.S. Census Bureau estimates 43,000 people have moved to the Eagle Ford region in South Texas.

In Frio County, statistics provided by the local sheriff's office indicate 315 drug-related arrests were made in 2013. That's an astounding increase of 500% from 2011, when only 63 arrests were made.

In neighboring Dimmit and La Salle counties, drug-related arrests have also been on the rise. In 2013, Dimmit County had 104 drug-related arrests, which was an increase of 263% from 2008. In La Salle County, 73 drug-related arrests were made in 2013. Law enforcement officials indicate that the arrests account for only a fraction of offenders.

Hospital officials in the region have also seen an increase in drug use cases, and injuries stemming from drug-related violence. Rural areas in particular have been affected due to a lack of adequate resources.

The South Texas area encompassing the Eagle Ford Shale has long been a corridor for the Mexican drug cartels to funnel their product into the United States. Law enforcement officials say the geography and infrastructure in the Eagle Ford make it easy for drug runners to operate.

Oil Exports to Foreign Buyers Begins

June 25, 2014 Kirk Eggleston

After nearly four decades, the Obama administration has opened the door for U.S. exports of unrefined American oil, according to The Wall Street Journal (WSJ).

The decision was approved in a private ruling by the Commerce Department's Bureau of Industry and Security, and will for now allow only two companies, Pioneer Natural Resources Co. and Enterprise Product Partners LP, to export Eagle Ford condensate after it has been minimally processed. Shipments, which are likely to be small, could begin as early as August, the paper noted.

Condensate, which is also referred to as ultra-light oil, and light crude oil make up a majority of production in the Eagle Ford Shale. As a general rule, lighter crudes and condensate are easier to process into refined products.

Light-Sweet Crude/Condensate Production Booming in the Eagle Ford

With production booming in the Eagle Ford, there has been chatter for some time about the easing of the export ban, as the supply of light sweet crude/condensate has begun to saturate the market and drive prices of Eagle Ford crude down. By 2020, consultancy Wood Mackenzie estimates crude and condensate production coming out of the Eagle Ford will reach 2-million b/d, which is nearly double current production.

WSJ reports the private rulings by the Commerce Department define some ultralight oil as fuel after it has been minimally processed, making the oil eligible for sale outside of the U.S. This new ruling flirts with current rules put into place after the Arab oil embargo in the 70s, which allow U.S. companies to export refined products such as gasoline, but not unrefined products (i.e. crude and condensate), with certain limitations and special licensing provisions.