SM Energy 2014 Eagle Ford Capex Budget Increased

August 29, 2014 Kirk Eggleston

SM Energy revealed in mid-August that it will add $30-million to its $900-million Eagle Ford capex budget for 2014.

Company officials indicate the increase is due to higher than expected activity in SM's non-operated acreage. The company currently holds approximately ~46,000 net non-operated Eagle Ford acres.

SM Energy Revises Production Guidance Portfolio-Wide

SM Energy increased its portfolio guidance for 2014 by approximately 3% in August, 2014. In addition to its Eagle Ford assets, the company is active in the Bakken, Powder River, and Permian.

The revised production estimates take into account the company's anticipated downtime in its operated Eagle Ford assets. During the third-quarter, SM will temporarily shut-in certain wells to conduct offset completion work. SM's operated assets in the Eagle Ford (~144,000 net acres) are located primarily in Webb County, TX, with a portion in Dimmit County, TX.

Lucas Energy Announces Eagle Ford Joint Venture

August 28, 2014 Kirk Eggleston

Houston-based Lucas Energy Inc. has signed a joint venture agreement to develop its Eagle Ford Karnes County acreage with Oak Valley Resources, LLC.

Lucas, which is in financial trouble, recently received an extension from the New York Stock Exchange (NYSE) through October to avoid delisting. Lucas management indicates the joint venture meets the company's objective to focus on Eagle Ford drilling and development, therefore maximizing production and cash flow.

“We are pleased to finalize this joint venture agreement with a respected and experienced independent operator to begin to develop our Eagle Ford reserves in south Texas. Our objective is to continue to focus on drilling our most valuable asset, our Eagle Ford shale acreage, in order to maximize production and grow cash flow. We will continue to seek appropriate opportunities to work with Oak Valley Resources on future drilling projects.”

— CEO, Anthony Schnur

At closing, Lucas will receive $444,000 for a 50% working interest on approximately 400 acres. Oak Valley will manage the drilling of the wells and each company will bear 50% of the drilling and completion costs. Once the wells are on production and initial oil sales begin, all revenues and operating costs will also be split between the parties on a 50%-50% basis. The first well is expected to be spudded no later than December 2014. The joint venture expects to drill a minimum of four wells on the property.

Texas Oil Production Hits 2.16 Million - June 2014

August 27, 2014 Kirk Eggleston

This week, the Texas Railroad Commission (RRC) reported state-wide crude oil production of 2.16-million b/d in June, 2014. That's less than a 1% increase from the previous month, but 29% from the same time in 2013.

Most of the state's oil production in June came from the Eagle Ford Shale and West Texas' Permian Basin. The U.S. Energy Information Administration (EIA) predicts the Eagle Ford Shale will produce 1.51-million b/d crude oil in Sept., 2014. That’s an increase of ~31,000b/d over August’s expected production (1.48-million b/d).

Five of the top ten oil producing counties were in the Eagle Ford, and four of those led state-wide production by county for the month:

Karnes - 204,500 b/d
La Salle - 155,283 b/d
De Witt - 140,323 b/d
Gonzales - 110,598 b/d

Drilling Permits Issued in Texas

Drilling state-wide continues to grow. The RRC issued 2,419 state-wide drilling permits in July, which was an 11% increase from the previous month. Approximately 91% of permits issued in June were for new oil and gas wells. The highest number of permits issued by RRC district was in the San Antonio area (377 permits).

Across the state, natural gas production was also on the rise in June. Texas produced 603 million Mcf of gas during the month, which represents a 9% increase from the same time last year.

Conoco Liquids Up 22% in Lower 48 Thanks to Eagle Ford

August 26, 2014 Kirk Eggleston

Liquids production volumes from Conoco Phillips' (COP) Lower 48 assets increased by 22% year-over-year thanks largely to the Eagle Ford and the Bakken, company officials reported in their second quarter 2014 report at the end of July.

COP production grew by 38% year-over-year to 208,000 boe/d in the Eagle Ford Shale and Bakken Shale plays combined. That's ~39% of the company's total production for its Lower 48 asset portfolio. In the Eagle Ford alone, production grew 12% quarter-on-quarter from 140,000 boe/d to 157,000 boe/d. However, company officials expect for the rate of growth to slow in both plays in the second half of the year due to multi-pad drilling effects and weather-related issues in the fourth quarter.

“We expect to have multi pad drilling effects and are anticipating winter weather impacts in the fourth quarter. So the rate of growth will slow in the second half of the year. The net effect of this is we are still on track to achieve our 2014 volume targets for both the Eagle Ford and Bakken but we do expect rates to flatten in third and fourth quarters and then begin to ramp up as we head in to 2015.”

— Conoco's EVP, Exploration and Production Matt Fox

Conoco Doesn't Have Plans to Apply for Permit to Export Eagle Ford Condensate

Despite advocating for condensate and crude oil exports, COP management indicated in the company's second quarter conference call on July 31st that it would not apply with the U.S. Commerce Department (U.S. DoC) for a permit to export Eagle Ford condensate.

Recently, the U.S. Commerce Department granted permission to certain companies to export minimally processed Eagle Ford condensate, which it considers a refined product. The oil export ban, which has been in place for nearly forty years does not limit the export of refined products. Just last week, BHP Billiton, a major Eagle Ford producer, applied with the U.S. DoC for an export permit.

“The larger issue we are having in North America is growing light oil production and the feasibility or the capacity being used up in the refining sector to really absorb. Right now we’re getting most of our condensate to the Gulf Coast putting it on ships and getting it around.”

— CEO, Ryan Lance

Lance continued, saying if the company saw an advantage to applying for a similar permit to those recently issued, the company would approach the U.S. DoC.

Eagle Ford Shale Rig Count Decreases by One to 260

August 25, 2014 Kirk Eggleston

The Eagle Ford Shale rig count decreased by one to 260 rigs running across our coverage area by the end of last week.

In recent news, Houston-based BHP Billiton may soon get the green light to export condensate from the Eagle Ford Shale. According to the Houston Chronicle, BHP President Rod Skaufel confirmed the company has applied for an export permit with the U.S. Commerce Department (US DoC).

The U.S. rig count decreased by 17 to 1,896 rigs running by the end of last week. A total of 330 rigs were targeting natural gas (nine more than the previous week) and 1,564 were targeting oil in the U.S. (25 less than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.). 888 or ~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 (200 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 increased by three to 13 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 increased slightly from the previous week to $3.85/mmbtu on Friday afternoon.

The oil rig count decreased by four to 247 rigs running by the end of last week. WTI oil prices stayed relatively flat from the previous week, trading at $93.57/bbl on Friday afternoon. Eagle Ford light crude traded at $90.50/bbl on August 21st.

A total of 247 rigs are drilling horizontal wells, four rigs are drilling directional wells, and nine rigs are drilling vertical wells. Karnes, La Salle, De Witt, and Webb each have at minimum 25 rigs running. Karnes County has the highest rig count this week at 33. 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.