Rig Counts Continue to Decline

February 20, 2016 Elizabeth Alford

The Eagle Ford Shale rig count fell by three this week with 62 rigs running across our coverage area by midday Friday.

In recent Eagle Ford news, deposits are shrinking for Eagle Ford banks for the first time since 2010 as 15 community banks report losing a combined $111 million in deposits last year, down 3.5% from 2014.

A total of 514 oil and gas rigs were running across the United States this week, which is a drop of 48 over last week. 101 were targeting natural gas (1 less than the previous week) and 413 were targeting oil in the U.S. (26 less than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.)236 of the rigs active in the U.S. were running in Texas.

Baker Hughes reports its own Eagle Ford Rig Count that covers the 14 core counties. 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 below.

Eagle Ford Oil & Gas Rigs

Natural gas rigs in the Eagle Ford are at five this week as natural gas prices declined, trading at $1.80/mmbtu, a $.16 decrease from the previous week.

The Eagle Ford oil rigs dropped to 57 with WTI oil prices ending the week at $29.64, a decrease of $.06. A total of 57 rigs are drilling horizontal wells, one are drilling directional wells, and four are vertical rigs.

Karnes County leads the region in development with 14 rigs this week. See the full list below in the Eagle Ford Shale Drilling by County below.

Eagle Ford Shale Drilling by County

Eagle Ford Shale News

Pioneer Halts Eagle Ford Drilling

Eagle Ford Banks Feeling the Downturn

Devon Energy to Cut 1,000 Jobs

Noble Energy: $150 Million Earmarked for Eagle Ford in 2016

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.

Noble Energy: $150 Million Earmarked for Eagle Ford in 2016

February 18, 2016 Elizabeth Alford

Chesapeake Released 2015 Q1 — Noble Energy Q4 2015

Noble Energy, a newcomer in the Eagle Ford, plans to spend $150 million dollars on its South Texas operations in 2016.

Related: Noble Cuts Eagle Ford Jobs

In a recent earnings call, Noble Energy executives reported 2015 as a year of 'outstanding operational and strategic execution'. They highlighted record sales volumes, record safety performance and $5 billion in liquidity at the end of the quarter.

Noble Energy moved into South Texas in July of 2015 by acquiring 50,000 net acres in the Eagle Ford Shale Play from Rosetta Resources in a $2.1 billion deal. The purchase has proved to be good for business.

“I expect higher volumes in 2016 versus 2015 pro forma, driven mostly by the Eagle Ford.”

— Gary W. Willingham - Executive Vice President-Operations

Eagle Ford Highlights

Production volumes for the Eagle Ford averaged 60 MBoe/d in the fourth quarter of 2015, up 11 percent from the third quarter of 2015. Other highlights include:

Drilled three Lower Eagle Ford wells
Drilling times have been reduced significantly versus prior performance on these assets
Commenced production on five Lower Eagle Ford wells
The two most recent wells brought on production were designed to test enhanced completions on tighter lateral spacing (500 equivalent feet). The wells, Gates 05D 22-20 and 24-20 with an average lateral length of 6,500 feet, were completed with 40 foot cluster spacing and approximately 2,000 pounds of proppant per lateral foot. The 30-day IP for the wells was 4,200 and 3,870 Boe/d, respectively. Production from both wells, when normalized to a 5,000 foot lateral, is higher than the three million barrel type curve, which is based on wider lateral spacing.
40 wells drilled but uncompleted at the end of 2015
Capital allocation for the Texas asset is approximately $250 million. 60% is expected to be spent in the Eagle Ford

Devon Energy to Cut 1,000 Jobs

February 17, 2016 Elizabeth Alford

Devon Energy released its fourth quarter earnings this week at the same time they announced new layoffs.

In a recent press release, Devon announced today announced core earnings of $319 million for the fourth quarter of 2015. The company also reported oil production averaged 278,000 barrels per day in the fourth quarter, a 16 percent increase compared to the fourth quarter of 2014.

Devon has 72,000 net acres located in DeWitt and Lavaca counties in the Eagle Ford and reports production averaging 111,000 barrels a day for full year 2015.

Devon also announced it would lay off 20 percent of its workforce, or 1,000 employees company wide.

“Devon has begun its previously announced employee reductions and expects to complete the process at its Oklahoma City headquarters by midday Thursday. At field-level offices, the company expects to complete notifications Feb. 22.”

Delivered oil production growth of 26 percent from year-ago quarter
Reduced field-level costs by nearly $400 million in 2015
Maintained significant financial flexibility with nearly $4 billion of liquidity
Decreased 2016 E&P capital spending outlook by 75 percent
Reduced operating and G&A expense outlook by $800 million annually
Adjusted quarterly dividend to improve cash flow by $320 million annually

Just one year ago Devon Energy announced it finished an “outstanding year” as it rebounded from a $20 million net loss in 2013 to end 2014 with net earnings of $1.6 billion. In 2016, Devon’s E&P capital investment is estimated to range from $900 million to $1.1 billion, a decrease of 75 percent from 2015.

Eagle Ford Banks Feeling the Downturn

February 16, 2016 Elizabeth Alford

Mineral Owners May be Losing Money — Eagle Ford Bank Deposits Decline

Banks in the Eagle Ford are showing signs of strain due to the downturn in the oil and gas industry.

Related: Eagle Ford Retailers Hang On

According to the Express News, deposits are shrinking for Eagle Ford banks for the first time since 2010. They report that 15 community banks based in the Eagle Ford have lost a combined $111 million in deposits last year, down 3.5% from 2014.

During the height of the boom communities in the Eagle Ford were magnets for new retail, foodservice and hospitality businesses who flocked to the area to get a piece of the financial pie. But since things went bust last year, there are fewer dollars to go around.

Between 2008-2014, deposits in Eagle Ford banks outpaced growth and increased 140% to more than $1.8 billion and contributed to the following:

Stockmens National Bank (Cotulla) saw a loss of $25.5 million, or 21% of its deposits last year, the largest percentage drop of any bank in the region.
Karnes County National Bank's deposits surged more than five-fold since the end of 2008 but fell last year by about $6.5 million, or 1.8 percent, to $344.8 million.
Jourdanton State Bank will be purchased by Seguin's First Commercial Bank before the end of next month.
Nixon State Bank was purchased by Heritage Bank

“To be honest, it didn’t hurt us to lose those deposits because with the low interest rates the way they are, unless you have loans to put that money in, it’s almost a liability,” Stockmens CEO John H. Northcut said. “We were sort of glad to see the reduction in deposits.”

Banks make the decision to lend based on total outstanding loans plus the ratio of loans to deposits. The 15 banks operating in the Eagle Ford had an average loan-to-deposit ratio of about 50% compared to 67% for other community banks.

Pioneer Halts Eagle Ford Drilling

February 15, 2016 Elizabeth Alford

Pioneer Natural Resource plans a strategic retreat from the Eagle Ford while cutting its horizontal drilling program in half.

In an earnings call last week, Pioneer executives reported a fourth quarter loss of $27 million, production of 215,000 barrels of oil equivalent per day and that projected spending for 2016 capital expenditures will be about $2 billion.

After bucking the trend to reduce spending last year, Pioneer is now joining the ranks of other producers who are cutting back during this drastic downturn.

“Our activity is down zero here shortly. And we’re going to have to wait until prices get back into the mid to high 40s before we start back up again. And so, it may be a while. And so, all of our acreage is held by production. And so, in today’s market, I don’t think you will see anybody be trading Eagle Ford production or acreage just because the prices are too low. You got to have some type of recovery, in my opinion, over the next two years, before people start moving Eagle Ford acreage and values.”

— Chairman and CEO Scott Sheffield

Besides reducing drilling, Pioneer also announced that will close its Victoria pumping services site in a move that will mean cutting 50 jobs and transferring another 100.

Eagle Ford Operational Highlights for 2016

Rig count will reduce from six rigs at year-end 2015 to zero rigs during the first quarter
Relocating Pioneer’s two Eagle Ford Shale pressure pumping fleets to the Spraberry/Wolfcamp
17 DUCs that the company will hold off until prices come back, likely 2017
Spending in the Eagle Ford Shale for 2016 will be $60 million ($30 million for the horizontal drilling program and $30 million for compression, land and other)