Eagle Ford Rig Count Down to 52

March 4, 2016 Elizabeth Alford

The Eagle Ford Shale rig count fell by one this week leaving 52 rigs running across our coverage area by midday Friday.

In recent Eagle Ford news, the latest numbers produced monthly by Comerica Bank show the Texas Economic Activity Index continues to decline and pessimism reigns.

A total of 489 oil and gas rigs were running across the United States this week, which is a drop of 13 over last week. 97 were targeting natural gas (five less more than the previous week) and 392 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.)227 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 increased in the Eagle Ford remained steady at six this week as natural gas prices continued to dip trading at $1.67/mmbtu, a $.12 decrease from the previous week.

The Eagle Ford oil rigs dropped to 46 with WTI oil prices ending the week at $35.81, an increase of $3.12. A total of 47 rigs are drilling horizontal wells, zero are drilling directional wells, and five are vertical rigs.

Karnes County continues to lead the region in development with 12 running rigs. See the full list below in the Eagle Ford Shale Drilling by County below.

Eagle Ford Shale Drilling by County

Eagle Ford Shale News

Ex-Chesapeake Chief Killed in Car Crash

Fracking Facts: Cleaner Than Coal

Texas Economic Index Declines

Sanchez Reports Strong 2015

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.

Ex-Chesapeake Chief Killed in Car Crash

March 3, 2016 Elizabeth Alford

Shale innovator and founder of Chesapeake Energy, Aubrey McClendon, died yesterday morning in a single-car crash in Oklahoma.

Police are reporting that McClendon was killed when his SUV burst into flames after suddenly crossing a center line and hitting a wall at a high speed. McClendon, 56, was expected to turn himself in at 11am yesterday after being indicted on federal charges of conspiring to rig bids for oil and natural gas leases.

McClendon founded Chesapeake in 1989 and came under scrutiny multiple times throughout the past several years. After he stepped down as CEO in 2013, Chesapeake filed a lawsuit againstMcClendon and his new company, American Energy Partners, alleging he stole confidential documents including maps of oil and gas prospects before leaving the company.

Mr. McClendon was a fairly controversial figure in the investing world as he led the most aggressive leasing strategy ever implemented. The company has leased millions of acres and in turn flipped a portion of the assets to other companies. The deals funded the company’s shale leasing spree.

Many hail McClendon as one of a handful of industry leaders who transformed the face of energy in the U.S. by pioneering hydraulic fracturing.

“If you have to choose one person responsible for that growth, the only person you can really choose is Aubrey McClendon.”

— Russell Gold, author of “The Boom”

Chesapeake has struggled recently, dealing with a flood of royalty lawsuits across several states on top of the prolonged downturn.

Fracking Facts: Cleaner Than Coal

March 2, 2016 Elizabeth Alford

The fracking boom in the Eagle Ford and across the country, beginning around 2008, has caused a huge unexpected benefit: the shift away from using coal as a primary energy source to using the cleaner alternative of natural gas.

Related: Is Fracking Safe?

Hydraulic fracturing, better known as fracking, is the process of extracting natural gas from shale formations by use of water and chemical mixture.

Although fracking is extremely cost efficient and productive, it has remained under fire for the last eight years as some claim it causing extreme harm to the environment.

Following is a quick look at the two most important potential environmental hazards of fracking compared to the production/mining of coal.

Fracking Fact: Less Water Contamination

The number one argument against fracking by environmentalists is the concern over water contamination. But current research suggests that coal mining plants are actually much more likely to contaminate your drinking water.

A recent study by Duke University states, ‘New data from 236 domestic wells from Pennsylvania and New York states show no systematic difference in chloride, barium, chromium, boron and arsenic contents in wells located in ‘active’ zones and ‘non-active’ areas’.
‘...only 42 documented incidents of such problems (water contamination), out of tens of thousands of wells drilled.’ (MIT)
Of the 290 coal plants observed by the EPA, 132 reported contaminated surface waters and 123 contaminated surface waters.

“With respect to arsenic, boron, cadmium, iron, lead, manganese, nickel, selenium and thallium, the 290 coal plants observed by the epa put as much strain on the environment as thousands of sewage plants. “In almost each instance, coal plants are the largest source of each of these pollutants nationally.”

Fracking Fact: Fewer Emissions

A 2011 study done by Carnegie Mellon University states that ”wells in the Marcellus region emit 20 percent to 50 percent less greenhouse gases than coal used to produce electricity”.

Here are the top four emissions that make coal so fatal:

Sulfur Dioxide- Coal plants are the number one source of SO2 pollution in the U.S. causing acid parties that can penetrate the human lungs and acid rain.
Nitrogen Oxide: NOx is the number one contributor to smog pollution.
Particulate Matter(soot)- Causes a wide array of breathing problems ranging from asthma, recurrent bronchitis and death.
Mercury- Coal plants cause over half of the U.S. mercury emissions (caused by humans).

In today’s world, vast amounts of energy are needed to sustain our quality of life and as we collectively look at which energy sources are the safest for our world, the shift to natural gas over coal is a step in the right direction.

Texas Economic Index Declines

March 1, 2016 Elizabeth Alford

Mineral Owners May be Losing Money — Texas Economic Index Declines

The latest numbers produced monthly by Comerica Bank show the Texas Economic Activity Index continues to decline and pessimism reigns.

The Economic Index fell 1.2 percentage points in December to 92.8. The index averaged 97.7 points for all of 2015 and measures variables such as non-farm payrolls, exports, hotel occupancy rates, unemployment insurance claims, housing starts, sales tax revenues, home prices, and the state rig count.

“Our Texas Economic Activity Index declined again in December, now down 13 out of the last 14 months. This is strong evidence that the collapse of oil prices is dampening economic growth in Texas. Payroll employment and house prices were the two positive components of the index in December.” said Robert Dye, Chief Economist at Comerica Bank. “2016 will be a transitional year for the Texas economy as it adjusts to lower oil prices for longer.”

In December, business executives expressed optimism regarding future business conditions, but the latest Texas Outlook Survey, manufacturers reiterated their deeply pessimistic view of current business conditions as the downturn affects many sectors.

“An anonymous comment by a machine manufacturer said that “It’s a tough time in the oil patch. We plan on cutting 20 percent of staff this month after cutting 25 percent a year ago. We are not sure how we can sustain our skill sets with these dramatic troughs.”

Sanchez Reports Strong 2015

February 29, 2016 Elizabeth Alford

Chesapeake Released 2015 Q1 — Sanchez Energy 2016

Sanchez Energy ended 2015 with record production in the Eagle Ford and $435 million in cash, despite the difficult downturn.

While many producers in the oil and gas industry are struggling to stay afloat, Sanchez Energy Corporation has been able to position itself for strength during this difficult time. During a recent earnings call last week, company executives cited some core competitive advantages that have helped them move forward.

Highlights for 2015 include a record annual production of 19.2 MMBoe an increase of 72% over 2014 and a 37% reduction in capital expenditures over 2014.

“2015 was a strong year for Sanchez Energy despite the most challenging commodity environment we have faced as a Company,” said Tony Sanchez, III, Chief Executive Officer ofSanchez Energy. “In addition, our operations delivered exceptional results on all fronts in terms of both increased well productivity and continued cost reductions.”

2015 Eagle Ford Highlights

Expanded inventory in our Catarina and Cotulla assets.
Increase well performance through advancements in our completion designs
Reduced well costs by more than 55%
Catarina and Cotulla were now delivering total well costs of less than $3.5 million
Record production of 5.3 million barrels of oil equivalent ("MMBoe")
Phase 1 of the high-pressured gas gathering line is scheduled to be in service near the end of the first quarter
Construction of the gas processing plant has also started and is still on track for an estimated completion in early 2017

In 2016, Sanchez has set a capital expenditure budget between $200 million to $250 million and plans to spend 89% on drilling and completions in the Eagle Ford. The company also plans to drill 52 net wells and complete 55 net wells in the region. The company expects to reduce the Eagle Ford rigs from three to one at the end of the second quarter.

“While we can’t control oil prices, we can control what we spend and where we drill and it’s something that is a daily focus for everyone in our organization.”

— Gleeson Van Riet, CFO