Baytex Energy Tackles Eagle Ford Debt with Bakken Sale

August 1, 2014 Kirk Eggleston

Calgary-based Baytex Energy, a recent entrant into the Eagle Ford, announced in late June of 2014 that it's selling its Bakken Shale assets in North Dakota to pay down a portion of its Eagle Ford debt. In February, the company added 22,200 net contiguous acres in South Texas through its $2.8 billion acquisition of Aurora Oil & Gas, which closed in June of 2014.

In anticipation of the Eagle Ford transaction, Baytex conducted a contingent resources assessment of its assets. During that process, the company earmarked certain properties for divestiture, including its Bakken assets.

Baytex Eagle Ford Debt Primary Reason for Bakken Divestiture

SM Energy will pay Baytex $330.5 million for 61,000 net acres in the Bakken. The transaction is expected to close toward the end of the third quarter with after tax net proceeds from the sale, estimated at $275-million. Company officials say the money will be directly applied against outstanding bank indebtedness.

Penn Virginia Upper Eagle Ford Production Taking Off

July 31, 2014 Kirk Eggleston

Penn Virginia Corp.'s second-quarter report revealed a decrease in its full-year production guidance portfolio-wide. Company officials cited operational complexities associated with pad drilling and the timing of completions as the primary reasons for the decrease.

Despite lowering its guidance, Penn Virginia's second quarter Eagle Ford production was up 6% to 15,618 boe/d (75% oil cut), compared to 14,761 boe/d in the previous quarter. And Upper Eagle Ford production in the company's Marl position has also been very positive, according to company officials.

In June of 2014, Penn Virginia's average Eagle Ford production was 16,861 boe/d (74% oil cut). The company's average Eagle Ford production in July 2014 is estimated at 18,100 boe/d. Year-to-date, Penn Virginia has turned in line 43 (28.0 net) operated wells, excluding shallow wells.

“We have expanded our ongoing pad drilling program in the Eagle Ford and are encouraged by our recent results in the play, especially our results in the Upper Eagle Ford. We are modestly reducing our full-year production guidance, but we remain confident that we can deliver significantly higher production levels in the second half of 2014 as we realize the ongoing benefit of our pad completions and rig expansions along with an increased focus on the Upper Eagle Ford.”

— Penn Virginia CEO, H. Baird Whitehead

Penn Virginia Upper Eagle Ford Update

To date, the company has tested three Upper Eagle Ford wells, including the Welhausen #A2H, which had an initial production (IP) rate of 2,165 boe/d. At the release of this post, the Welhausen #A2H average rate is 1,070 boe/d, since being turned to sales in March of 2014.

Company officials believe the Upper Eagle Ford and Lower Eagle Ford are separate reservoirs in the specific areas around the three Upper Eagle Ford test wells. According to company officials, this theory has been based on performance comparisons between adjacent Lower Eagle Ford wells to the Upper Eagle Ford test wells. Penn Virginia plans to spud 19 additional Upper Eagle Ford wells, with eight scheduled in the Welhausen area.

SM Energy-Mitsui Eagle Ford Carry Ends

July 30, 2014 Kirk Eggleston

In SM Energy's second quarter earnings report released this week, the termination of the drilling and completion carry with its joint venture (JV) partner, Mitsui, was confirmed.

SM Energy is now responsible for funding its proportionate share of drilling and completion costs in the area. An increase in SM Energy's capital guidance for 2014 was announced in the company's first quarter earnings report to accommodate for the additional costs.

Mitsui's $680-million carry commitment in the Eagle Ford provided needed capital funding to accelerate SM's development in the play. SM Energy and Mitsui entered their Eagle Ford joint venture agreement in 2011.

SM Energy Eagle Ford Non-Operated Acreage Update

Net production in SM Energy's non-operated portion of its Eagle Ford shale program for the second quarter of 2014 averaged 23,800 boe/d. That's a 2% sequential increase over the first quarter of 2014 and a 37% increase year-over-year.

The operator made approximately 95 flowing completions during the second quarter.

SM Energy Eagle Ford Update in Operated Acreage

During the second quarter, SM Energy made 23 flowing completions in its operated Eagle Ford Shale program. The company's operated net production in the Eagle Ford shale averaged 83, 200 boe/d in the second quarter of 2014. That's a 9% sequential increase from the previous quarter and a 26% increase year-over-year.

SM Energy Sand Loading Tests Yield Positive Results

SM Energy has been shifting its Eagle Ford drilling and completion program toward longer lateral wells and completions with higher sand loading. Company officials say longer lateral testing is ongoing, but sufficient data on SM's increased sand loading tests is now available from wells in Area 2 of SM's operated Eagle Ford shale position to conclude that wells completed with higher sand loadings are more productive and have improved initial condensate yields.

Eagle Ford Boom Bad News for County Roads - KENS-TV - Video

July 29, 2014 Kirk Eggleston

The Eagle Ford oil boom has been a boon on the Texas economy, injecting billions of dollars in revenue from oil & gas companies into the state's budget. By contrast, local county governments have not seen parallel increases for their coffers, although money derived from local tax revenues and drilling fees, in some instances, have padded local county budgets.

One of the most serious problems for local county governments is a direct result of the increased traffic on their roads. According to a recent KENS-TV story, it takes 1,200 18-wheelers to set up a rig, and another 350 trucks during the life of the rig for maintenance. Karnes County and DeWitt County, which are both in the heart of the oil window of the play, have consistently had active rig counts between 20 - 30, since the beginning of the year, which has equated to a lot of traffic on roads not designed for such heavy loads.

In the past 3 ½ years, $28,000,000 has gone directly to the state through right of way royalties, but less than 1% has been returned for road maintenance. Karnes and DeWitt County have forked over $16-million during the same time frame, according to the report.

Local county officials are fed up with not receiving what they feel is more adequate funding from the state for road maintenance in their areas. Now, there is talk about a coalition of county governments being formed to demand more money from Austin.

Eagle Ford Shale Rig Count Decreases by One to 264

July 28, 2014 Kirk Eggleston

The Eagle Ford Shale rig count decreased by one to 264 rigs running across our coverage area by the end of last week.

In recent news, a study commissioned by the Texas Pipeline Association (TPA), claims the state’s oil and gas pipeline industry provided $33-billion in overall economic impact, and supported more than 165,000 jobs in 2013. During the same time frame, the study says industry provided for $18.7-billion in gross state revenue, and injected $1.6-billion in state and local revenue taxes.

The U.S. rig count increased by twelve to 1,883 rigs running by the end of last week. A total of 318 rigs were targeting natural gas (three more than the previous week) and 1,562 were targeting oil in the U.S. (eight less than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.). 886or ~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 (211 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 nine rigs running by the end of last week. Average rig counts for natural gas production in 2012 were around 80 and then dropped to around 40 in 2013. Natural gas prices fell from the previous week to $3.78/mmbtu on Friday afternoon.

The oil rig count stayed flat at 255 rigs running by the end of last week. WTI oil prices decreased by ~$1 from the previous week, trading at $101.99/bbl on Friday afternoon. Eagle Ford light crude traded at $98.50/bbl on July 24th.

A total of 238 rigs are drilling horizontal wells, 13 rigs are drilling directional wells, and 13 rigs are drilling vertical wells. Karnes, La Salle, and De Witt each have at minimum 30 rigs running. La Salle 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.