November 17, 2016 • Vol. 6, No. 7docFinder alert
docFinder alert

Eagle Ford rebounds on lower costs, higher productivity


ConocoPhillips boosting rig count from one to five


November 10, 2016

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Marathon cuts costs, hikes spending

Marathon Oil

November 2, 2016

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While the plunge in oil prices triggered severe investment cutbacks across all North American resources plays, the largest impact was on the Eagle Ford shale. The play had the highest tight-oil production, reaching 1.6 MMbo/d in March 2015 but falling 40% to 962,000 bo/d in September 2016. This compares with a 22% decline in the Bakken shale, the second-largest tight-oil play.

The number of rigs drilling for oil in the Eagle Ford plunged from a high of 214 in April 2014 to a low of 26 in May 2015, an 88% decline compared with a 79% decline in total US oil rigs in the same time period. However, the US rig count has rebounded substantially from that low in May, increasing 43% through Nov. 11, driven primarily by a surge of activity in the Permian Basin.

The number of oil rigs in the Eagle Ford has increased, but we wondered if growth would accelerate further as prices recover. For answers, we turned to docFinder, the most comprehensive and accessible source of global oil and gas financial and operational information. We found that the major Eagle Ford producers were, in fact, planning substantial increases in drilling activity in late 2016 and 2017, driven by substantially lower costs along with higher oil prices.

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One of the most dramatic increases in investment intensity is by ConocoPhillips, the largest US E&P and the third-largest oil producer in the Eagle Ford (139,000 boe/d). The company had only one rig in the play in 1H16 and had been concentrating on cost reductions and new drilling techniques to boost recovery. The results were 40% and 30% reductions in drilling and lifting costs from 2014, respectively, and a 20% increase in EURs. The combination resulted in a 40% increase in the number of drilling locations that are economic at oil prices of $40/bbl or less. So, the company announced it would increase its drilling rig count from one to four by YE16 and five in 2017.

Marathon Oil, the fifth-largest Eagle Ford producer, had been investing below the maintenance capital level in the play as it concentrated on expanding a new position in the SCOOP and STACK plays in Oklahoma. The company’s oil output in the play decreased 10% to 97,000 boe/d from Q2 to Q3. However, the company has reduced completed-well costs by 20% YOY to under $4 million and has boosted output with “engineered” completion designs focused on tighter spacing in the oil window. As a result, Marathon announced it would increase rigs in the play from four to six in Q4 to stem the output decline. The company also said returns would allow the play to effectively compete for capital in 2017.

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featured.slides from docFinder

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High IRR from oil window

November 7, 2016


Superior results change Noble's view of play

September 14, 2016


Boosts investment, adds acreage

September 20, 2016


Company to test enhanced oil recovery

November 3, 2016

Pure Eagle Ford producer Sanchez Energy increased output four-fold from mid-2013 to mid-2015, but growth leveled off as it slashed investment 73% from $871 million in 2014 to $235 million in 2016. But the company generated a 57% reduction in cash operating costs by limiting its focus to the Catarina and Cotulla areas within the oil window of the play, where its total capital costs were $3.0-3.5 million per well. Sanchez said it would raise total 2016 investment by 19% to run three rigs in Catarina and Cotulla, which would generate 5-8% production growth in 2017.

Noble Energy entered the Eagle Ford and the Permian Basin through its 2015 acquisition of Rosetta Resources. It initially focused on investment in the Delaware Basin, which it moved to the top of its priority list after outstanding exploration well results. But the results from one rig in the Eagle Ford, especially EURs averaging 3.0 MMboe per well in its South Gates Ranch area targeting the Lower Eagle Ford, led the company to add a second rig in the fourth quarter. Noble said it now views Rosetta’s most famous legacy asset in the Eagle Ford as having about the same potential as the Delaware Basin.

Carrizo Oil & Gas has a diverse portfolio that includes positions in the Delaware, Niobrara, Marcellus and Utica shale as well as the Eagle Ford. The company drastically cut 2016 investment and said it planned to suspend Eagle Ford drilling in Q4. However, Carrizo lowered its well cost to $4.3 million in its core area, reducing breakeven to just $32.50/bbl. It reversed its decision to suspend drilling, announcing it would run two rigs and one frac crew through Q4 and into 2017 while conducting no drilling in its other regions. And in late October, Carrizo announced it would increase its Eagle Ford holdings through a $181 million acquisition from Sanchez Energy.

EOG Resources is the largest Eagle Ford producer, averaging 207,000 boe/d of liquids in 2015. It holds 561,000 net acres in the play. The company has sustained a higher level of activity than most of its peers, running five rigs to drill 190 wells in 2016. That investment could increase because EOG has been testing enhanced oil recovery. In fact, EOG has conducted four gas-injection pilot projects on 15 producing wells that have generated 30-70% increases in cumulative production per well. While the company says this technique isn’t widely repeatable in other tight-oil plays, it may be copied by other producers, which would significantly contribute to the Eagle Ford rebound.


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