Sanchez Reports Excellent Quarter

November 8, 2016 Elizabeth Alford

Sanchez Energy reported an excellent third quarter, highlighting their industry-leading well costs and acquisition successes.

During an earnings call this week, Sanchez executives shared the company’s significant process improvements and efficiency gains during 2016 Q3 including an average well cost is below $3.0 million each.

For their Eagle Ford development, Sanchez remains primarily focused on Catarina and the Maverick area of Cotulla. The company currently runs three rigs with plans to drop to two rigs during the fourth quarter. Their new, advanced completion designs are showing significantly higher oil yields of up to 250 barrels per million cubic feet of gas.

“SN currently has 13 upper Eagle Ford’s stacked wells on production with an additional three currently undergoing completion operations. The current drilling activity in South-Central will finish in early December and then will move to Western Catarina with the drilling of two stacked upper Eagle Ford, middle Eagle Ford development pads which will allow another six upper Eagle Ford targeted wells in addition to the previously mentioned 16.”

— COO, Chris Heinson

Third quarter highlights include:

Total production of 4.7 million barrels of oil equivalent (“MMBoe”), or approximately 51,500 barrels of oil equivalent per day (“Boe/d”)
Average drilling and completion costs at Catarina and Cotullawere $3.0 million per well
Company’s best wells coming in below $2.8 million per well in both areas
Company estimates it has over 350 Upper Eagle Ford locations with returns in excess of 50%
Revenues of approximately $114.8 million-up 3.5 percent when compared to the second quarter 2016
Company reported a net loss attributable to common stockholders of $70.2 million for the third quarter 2016;

Texas Mineral Owners & Operators Headed for a Showdown?

November 7, 2016 Elizabeth Alford

**Battle Ahead for 2017 Texas Legislative Session**

The 2017 Texas legislative session will likely be the scene of a showdown over property rights between mineral owners and the oil and gas industry.

Exploration companies and mineral owners have a tenuous relationship, as both try to maximize their own profits. And sometimes, things can get a little tense. One issue in Texas that is reaching the boiling point is the routine drilling of ‘allocation wells’, horizontal wells drilled across lease lines.

Controversy over this practice is pitting private property owners against producers who want to speed up the production process. Many people believe these wells are a way to force mineral owners into a pooling agreements without requiring permission from the mineral rights holders.

The Texas Railroad Commission (RRC) originally issued permits on these wells when operators had agreements with royalty owners that outlined how production would be shared. The RRC has maintained it has the authority to issue permits to drill horizontal wells that cross multiple lease lines without pooling those leases together, but there are still no clear rules defining these arrangements.

Mineral owners and exploration companies alike are hoping that state legislators will clear up the confusion and finally bring some clarity about drilling allocation wells in the state.

Mineral Rights Litigation Swells Across Country

In 2015, Representative Tom Craddick introduced HB 1552 that has strong language in favor of operators. The 2015 bill never made it out of committee, but many expect similar legislation will be filed in the upcoming 2017 session.

“…An operator or lessee with the right to drill an oil or gas well on or produce or develop oil or gas from each tract independently may, under a permit issued by the commission, drill,operate, and produce oil or gas from an oil or gas well that traverses multiple tracts in order to prevent waste, promote conservation, or protect correlative rights. If there is not an agreement among any of the affected owners of royalty or mineral interests in the tracts regarding the manner in which production from the well shall be allocated among the tracts, the production shall be allocated to each tract in the proportion that the operator or lessee reasonably determines reflects the amount produced from each tract.”

Eagle Ford Rig Count Climbs by Two

November 4, 2016 Elizabeth Alford

The Eagle Ford Shale rig count made gains this week, with our data showing 42 rigs running across our coverage area by midday Friday.

In recent Eagle Ford news, Cabot Oil announced plans to allot 21% of its E& P budget to Eagle Ford in 2017.

A total of 567 oil and gas rigs were running across the United States this week, a gain of 12 over last week. 117 rigs targeted natural gas (three more than the previous week) and 450 were targeting oil in the U.S. (nine more than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.) 262 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

Eight rigs in the Eagle Ford region targeted natural gas this week with the commodity dropping to $2.78/mmbtu.

34 Eagle Ford rigs were targeting oil with WTI oil prices continuing a decline to $44.13 .

A total of 37 rigs are drilling horizontal wells, zero are drilling directional wells and five are vertical.

LaSalle County leads production this week with nine rigs in production. See the full list below in the Eagle Ford Shale Drilling by County below.

Eagle Ford Shale Drilling by County

Eagle Ford Shale News

Carizzo Spends Big in the Eagle Ford

Baytex Remains Focused on the Eagle Ford

Titanium Exploration Partners Gains Eagle Ford Acreage

Cabot to Keep Eagle Ford Spending Low

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.

Carizzo Spends Big in the Eagle Ford

November 3, 2016 Elizabeth Alford

Carrizo’s third quarter included spending a hefty chunk of their drilling budget on the Eagle Ford.

Carrizzo Oil and Gas executives announced a solid quarter for the company, with net oil production of 24,488 barrels of oil per day and revenues of $111 million.

“We have continued to expand our inventory of de-risked drilling locations in the Eagle Ford Shale. We also expect to further expand our drilling inventory through the recently-announced, accretive acquisition of bolt-on Eagle Ford Shale properties from Sanchez. As a result, we now have more than 1,100 net de-risked locations in the Eagle Ford Shale, or more than 16 years of inventory at our current drilling pace. Over time we expect to continue to expand our drilling inventory on this world-class asset, which should fuel strong production growth for years to come.”

— President and CEO Chip Johnson

Eagle Ford Operations

Approximately 80% of the Carizzo’s third quarter drilling and completion spending was in the Eagle Ford Shale. Other highlights include:

Drilled 17 gross (14.9 net) operated wells
Completed 24 gross (23.2 net) wells
Crude oil production was more than 21,600 Bbls/d, up 2% versus the prior quarter
Company expects fourth quarter volumes to show a material increase
At the end of the quarter, company has 26 gross (23.8 net) operated wells waiting on completion
Currently operating two rigs in the Eagle Ford and
Company expects to drill approximately 71 gross (67 net) operated wells and complete 73 gross (69 net) operated wells in the play during 2016

Last month, Carrizo agreed to acquire approximately 15,000 net acres located primarily in the the Eagle Ford Shale for $181 million with an estimated net production during of approximately 3,100 Boe/d (61% oil). Following the closing of the transaction, Carrizo will hold approximately 101,000 net acres in the Eagle Ford Shale, concentrated in LaSalle, McMullen, and Atascosa counties.

Baytex Remains Focused on the Eagle Ford

November 2, 2016 Elizabeth Alford

Baytex Energy reported a strong third quarter, with their Eagle Ford operations remaining the focus of their development activity.

Calgary-based, Baytex Energy announced third quarter financial and operational results this week, highlighting reduced debt and significant cost reductions.

Eagle Ford Operations

Executives also announced that the company is currently running four rigs and two completion crews in the Eagle Ford and they expect this level of activity to continue into 2017.

For the third quarter, Baytex continued to reduce capital spending, focusing all development activity in the Eagle Ford for the third quarter. The company averaged 2-3 drilling rigs and 1-2 completion crews on Eagle Ford property. They participated in the drilling of 18 gross (5.7 net) wells in the Eagle Ford and commenced production from 30 gross (8.8 net) wells. 15 of these wells have been producing for more than 30 days and are averaging a production rate of approximately 1,350 boe/dIn Q3/2016.

“Our emphasis on deploying capital efficiently was evident during the third quarter as we continue to curtail our level of capital spending and focus all development activity in the Eagle Ford. In the third quarter, our exploration and development expenditure totaled $40 million as compared to $36 million in the second quarter and $82 million in the first quarter.”

— CEO Jim Bowser

Other Eagle Ford highlights year-to-date include:

Exploration and development expenditures totaled $39.6 million, as compared to $35.5 million in Q2/2016 and $81.7 million in Q1/2016.
The pace of completions in the Eagle Ford was down approximately 21% from January-September, compared to the first nine months of 2015.
Participated in the drilling of 100 gross (29.5 net) wells in the Eagle Ford
Commenced production from 84 gross (24.7 net) wells, as compared to the first nine months of 2015 where we participated in the drilling of 149 gross (38.4 net) wells and commenced production from 123 gross (31.3 net) wells.
Continue to advance completion activity in the Eagle Ford with increased frac stages and proppant usage.