Derrick Petroleum's "Deals in Play' database has recorded $2 - $3 billion worth of Eagle Ford Shale assets for sale as on July 2011. The Eagle Ford Shale is becoming prized property for oil and gas companies in 2011. The shale play area starts at the Texas-Mexico border in Webb and Maverick counties and extends 400 miles toward East Texas. The play is 50 miles wide, an average of 250 feet thick at a depth between 4000 and 12,000 feet, and has high carbonate content making it easier to fracture than other shales. In addition, it is also more liquid rich than other shales. The $/acre of the shale has been increasing rapidly over the last few years due to increasing successes of companies exploring this play. The high present $/acre relative to previous years is also bringing capital to firms who want to sell non-core Eagle Ford assets to focus on their core assets.
The following table from Derrick Petroleum’s ‘Deals in Play’ database shows opportunities available with respect to Eagle Ford assets as on 4 July 2011.
Table 1: Is an interactive chart/ table showing data recorded from Derrick Petroleum's 'Deals in Play' database. Only deals above $10 million are shown. Net undeveloped acres have been sorted from highest (up) to lowest (down). Subscribers can click on the relevant bar to view detailed information from the database.
The following table shows recent transactions involving the Eagle Ford Shale for insight into its recent $/Acre.
Table 2: X axis shows Buyer-Seller. Y axis is deal value. $/acre is given above the bar's in the chart. Data is sorted by month and quarter. Only deals above $100 million in Q1 and Q2 2011 have been shown. Click on the bars for more detail on individual deals.
Analyst Comments
1. Total deal value involving Eagle Ford shales has been among the highest relative to the other US shales.
2. Number of deals involving Eagle Ford shale have been the highest so far in 2011 as compared to other shales (~25 deals), as recorded in Derrick's Deals database.
3. Eagle Ford shale looks set to dominate the deals market for unconventionals in 2011.
SM Energy Co (SME) entered into an agreement with Mitsui concerning a 12.5% working interest in its non-operated Eagle Ford shale position. The company will be carried on 90% of its drilling and completion costs (excluding costs associated with construction of mid-stream gathering assets) in this acreage until $680 million has been expended for the benefit of SM Energy.
Asset highlights:
The project comprises 310,000 gross acres in which Anadarko holds 73% operated WI (~225,000 net acres) and 27% WI is held by SME (~85,000 net acres). Post transaction, SME will have 14.5% WI (~46,000 net acres) in the non-operated portion of its Eagle Ford shale position
The acquired acreage includes Eagle Ford (~39,000 acres) and Pearshall acreage (~8,000 acres) and spans across Dimmit, Maverick and Webb counties;
Reported average daily production from SME's total non-operated Eagle Ford shale position at the end of the first quarter was 43.5 MMcfe/d / 23.36 MMcfe/d for Mitsui's 12.5% interest (42% oil, 36% natural gas, and 22% NGLs)
Proved reserves associated with SME’s total non-operated Eagle Ford shale position as of December 31, 2010 were 52 Bcfe (27.93 Bcfe for Mitsui's 12.5% interest). 48% of these reserves are proved developed.
$/Acre- Valuation Analysis
The value of the reserves is estimated to be $233 million (at $60,000/Daily BOE). In addition, the value of Pearsall acreage is estimated at $16 million (at $2,000/Acre). The remaining deal value of $430 million is ascribed to Eagle Ford acreage ($11,036/Acre). The metrics are calculated without discounting the future carry costs.
To see what other operators are reporting on "Eagle Ford", use our oil and gas document library:
Vigorous growth in Eagle Ford transaction activity:
Activity in the Eagle Ford play has been high in the recent months. In 2010 in the Eagle Ford, 1,018 drilling permits were issued through November, up from 94 the year before, and output of crude oil, condensate and other liquids nearly quadrupled to 3.9 million barrels, according to Texas Railroad Commission data.
In 2010, Eagle Ford Play had generated close to $2.9 billion in revenue and provided nearly $47.6 million in local government revenue. Over the next 10 years, it is expected that more than 5,000 new wells will be drilled and generate more than $21.5 billion in total annual economic output.
Some of the world's biggest oil companies - including Shell, BP, Statoil, Marathon, KNOC and CNOOC - have recently entered the Eagle Ford and taken the acreage metrics to a new bench mark level. Four years back, the acreage cost in the Eagle Ford play was $100-$200/acre which in 2010 was reaching an average price of $10,000/acre. The recent deals by Marathon and KNOC have moved it to another higher level of $20,000-$25,000/acre. The following interactive graph shows the Eagle Ford deals done by these majors.
A good progress in pipeline infrastructure in Eagle Ford play
The Eagle Ford has its high content of valuable crude and natural gas liquids. But along with the optimism, some operators worry that growth could be held back by equipment constraints and a potential lag in building new pipelines, processing plants and other infrastructure. Though the pipeline infrastructure in Texas is very mature, especially for oil and natural gas, the system needs significant investments to process natural gas liquids.
In 2010, investments in midstream development in the Eagle Ford play accounted for an estimated $404.3 million. With more than 130 miles of new pipeline activity, including the continued development of the Chisholm, Dilley, Dos Hermanas, Leona, and Fox Creek pipelines, all indications are that over the next three to five years midstream activities will continue to play a significant role inthe development and economic prosperity of the region. The following table shows the midstream deals regarding Eagle Ford play.
SM Energy entered into an agreement with Statoil and Talisman to divest a portion of its Eagle Ford shale position. The position is a detached block of acreage that is comprised of the entirety of the company's operated acreage in LaSalle County, Texas, as well as an immaterial portion of adjacent operated acreage in Dimmit County, Texas. In total, approximately 15,400 net acres are being sold for cash proceeds of approximately $225 million.
Due to limited infrastructure, there is currently no production associated with three wells that have been drilled on the acreage. As of year-end 2010, there was an immaterial amount of proved reserves booked for this acreage. The buyers will be entitled to approximately 12% of the takeaway capacity associated with SM Energy's agreement with Eagle Ford Gathering LLC, a joint venture between Kinder Morgan Energy Partners LP and Copano Energy LLC.
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A busy month for Eagle Ford Shale. A look at Eagle Ford metrics
SM Energy’s Eagle Ford divestiture is the third deal for the month June, 2011. The most notable transaction was Marathon’s acquisition of Eagle Ford acreage for ~$25,000/acre. The current SM divestiture leaves the acreage metrics at $14,600/acre.
In addition, Talisman is also looking to buy additional assets in Eagle Ford Shale, if prices are going to be reasonable. Recently, the metrics in Eagle Ford Shale is skyrocketing between $20,000-$25,000/acre as compared to the 2010 average metrics of $8,000/acre.
Here is an interactive tool with regards to Eagle Ford acreage metrics. Play around.
