Monday, March 21, 2011

Eagle Ford oil production to ramp up in 2011. Eagle Ford opportunities worth $3 billion are up for grab



Significant increase in deal activity

Activity in Eagle Ford has stepped up with more than $4 billion worth of assets on the market. Operators are looking to tie up with partners to develop the oil window, as the returns on investment expected from oil window is higher compared to gas window.  


Heading
Type
Value Range ($m)
SM Energy considers options for Eagle Ford acreage
Property
$500 - $1,000
El Paso seeks JV partner for Eagle Ford acreage
JV
$100 - $500
ConocoPhillips offers Eagle Ford/Austin Chalk acreage
Acreage
$100 - $500
Forest Oil seeks JV partner for  Eagle Ford acreage
JV
$100 - $500
Stonegate and TriTech offer Eagle Ford acreage
Acreage
$100 - $500
EOG Resources to sell certain Eagle Ford Shale acreage
Acreage
$100 - $500
Buffco Production seeks partner for Eagle Ford acreage
Acreage
$100 - $500
U.S. Enercorp and partners offer Eagle Ford acreage
Acreage
$25 - $100
Sanchez Oil & Gas offers Eagle Ford acreage
Acreage
$25 - $100
Petro-Hunt to divest Eagle Ford acreage
Acreage
$25 - $100
BlueStone Natural Resources offers Eagle Ford acreage
Acreage
$25 - $100
BTE Energy offers Eagle Ford acreage
Acreage
$25 - $100
Caiman Ranch offers Eagle Ford acreage
Acreage
$25 - $100
Denali Oil & Gas considers sale of certain Eagle Ford assets
Acreage
$25 - $100
Newfield Exploration to sell certain Eagle Ford assets
Property
$25 - $100
Texas HBP to sell certain Eagle Ford acreage
Acreage
$25 - $100
Touchwood Resources to divest 12.5% ORRI in Eagle Ford
Royalty
$10 - $25
Westover Energy offers Eagle Ford oil window acreage
Acreage
$10 - $25
SMSE offers Eagle Ford oil window acreage
Acreage
$10 - $25
Don Poe & Associates offers Eagle Ford acreage
Acreage
$10 - $25
Vander Ploeg offers Eagle Ford and Pearsall acreage
Acreage
$10 - $25
Bald Eagle Land offers Eagle Ford oil window acreage
Acreage
$1 - $5


Significant increase in the rig count in the region


Last year, U.S. operators expressed their intentions to step up drilling programs in the Eagle Ford Shale formation. Strong oil prices and favorable well economics, due to greater concentrations of natural gas liquids, made drilling in this part of Texas appealing. True to their word, the rig count in the Eagle Ford has nearly doubled to 154 rigs, versus 82 reported in March 2010.

EOG is the largest oil producer in the Eagle Ford at 23MM bopd and currently controls 595,000 net acres across the region. After drilling 96 net wells in 2010, EOG has plans for 250 net wells in 2011. Chesapeake Energy currently has the most active rigs in the region at 17 rigs where it holds 445,000 net acres through a partnership with CNOOC. In terms of concentration of resources, ConocoPhillips, with 14 rigs drilling across 254,000 acres held, has approximately half of its currently active U.S. rig fleet operating in the region.

The five largest drilling fleets in the Eagle Ford control 68% of the market.











Shift from gas to oil window
The shift occurring between drilling for natural gas or oil continues to move away from the natural gas. A year ago, the split was 91% gas and 9% oil rigs in the Eagle Ford. Today, the mix is 60% gas and 40% oil.
Operators in the region are responding to the huge return on investment gap that exists between drilling oil wells today versus drilling natural gas wells .On drilling a natural gas well operator gets around $4 per unit of production vis vi drill an oil well and receive around $15 per unit of production.

Drilling plans for the Eagle Ford operators
EOG Resources commented that the Eagle Ford would be the firm's largest component of year over year oil growth during 2011. EOG also expects that its well costs in the region were anticipated to fall from current levels of $6 million per well to approximately $5 million in 2012 due to frac optimization techniques.

ConocoPhillips has very aggressive development programs going on in the Eagle Ford where they plan to drill probably 140 to 150 wells this year.

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