Skip to comments.PN Bakken: King of the hill
Posted on 01/05/2013 5:37:36 AM PST by thackney
Liquids production from the Eagle Ford of South Texas could catch or surpass North Dakotas output from the Bakken petroleum system in 2013, a recent study by EAI Inc. indicates. Meanwhile, a separate report by Wood Mackenzie projects 2013 capital spending in Eagle Ford will total a whopping $28 billion.
With $28 billion in capex being spent in 2013 and development now in full swing, the excitement in the Eagle Ford and value being extracted from the play continues to exceed expectations, said Callan McMahon, upstream research analyst for Wood Mackenzie.
Behind the Bakken, Eagle Ford is currently the second largest tight oil play in the United States, while also ranking fifth in terms of shale gas production.
Production numbers published by the U.S. Energy Information Agency in 2012 and analyzed by private researchers, such as Bentek Energy, showed that Eagle Ford daily output was closing in on the Bakken and that Eagle Ford might soon overtake the Bakken. This has not yet happened.
Eagle Ford versus Bakken
However, research firm EAI, Energy Analysts International, recently stepped forth with its own forecast: Eagle Ford production is likely to rival Bakken production levels in 2013. EAI said it based the forecast on its latest North American Shale Fairway Crude Supply, Logistics, Refining and Pricing Outlook study update and basin production tracking. Specifically, EAI estimated average daily Eagle Ford production in December of about 560,000 barrels of liquids (crude and condensate), and projected the play would exit 2012 at 610,000-660,000 barrels per day, increasing to 800,000-900,000 bpd in 2013.
North Dakota production, which is dominated by the Bakken, was averaging 747,239 bpd in October 2012, the last month for which statistics were available, and EAI forecasts that North Dakota daily production will approach 900,000 barrels during 2013.
However, the span between Eagle Ford and Bakken production is actually much closer considering that North Dakota production is made up of roughly 10 percent conventional oil, bringing the 900,000-bpd North Dakota target down to around 810,000 barrels, when taking into account only the Bakken petroleum system, which includes both Bakken and Three Forks formation production.
North Dakotas production estimates
The production numbers grow even tighter based on the North Dakota Department of Minerals Resources own projections for 2013. Director Lynn Helms told reporters in a recent conference call that the department expects North Dakota production to grow to around 830,000 bpd by the middle of the year and to 850,000 bpd by year-end. That equates to year-end Bakken only volumes of about 765,000 bpd, compared to the 800,000-900,000 bpd of Eagle Ford liquids projected by EAI. And though North Dakota production is expected to return to a 3-4 percent monthly growth, it registered only a 2.5 percent increase in October, due to less drilling and a substantial backlog in hydraulic fracturing jobs. Though some of the slowdown was attributed to temporary setbacks, it also may have signaled a departure from boom times to more stable economic growth.
Investment to exceed $116 billion
On the investment side, industry is likely to sink more than $116 billion in the Eagle Ford between 2012 and 2015 more than the cost of developing the Kashagan offshore field in Kazakhstan, which has been called the worlds most expensive standalone energy project, Wood Mackenzie said. With $28 billion in anticipated capital spending in 2013 alone, Eagle Ford will represent 27 percent of the total capital expenditure of the onshore Lower 48 total. Wood Mackenzie said Eagle Ford growth has been driven by a number of factors, including: operators have successfully delineated acreage; well productivity has increased because of both technology and experience; and depressed natural gas prices have continued the diversion of capital to liquid-rich plays such as the Eagle Ford.
In tandem, the capacity constraints faced earlier in the plays development have been eased, as midstream and service companies invest aggressively to capitalize on the growth in production, Wood Mackenzie said.
Eagle Fords leading players
According to Wood Mackenzie, there is no substitute for core acreage in resource plays, and the Eagle Ford is no exception. Today, most operators have moved into the development phase and the quality of acreage positions is being realized. The leading players EOG Resources, BHP Billiton and ConocoPhillips not only hold core acreage positions, but also hold a larger quantity of the quality acreage. The three companies have a combined remaining value in the Eagle Ford of around $30 billion. Wood Mackenzie estimates that for EOG, the Eagle Ford holds 38 percent of the companys upstream value.
EOG was one of the first companies to shift its strategic focus to liquids, a decision that has been well rewarded in the Eagle Ford, McMahon said.
BHP Billitons Eagle Ford assets, acquired through the takeover of Petrohawk, now represent 20 percent of the companys entire upstream global portfolio.
ConocoPhillips also targeted the liquids-rich core area of the play early on, enabling a substantial acreage position to be built at a lower entry cost.
The larger capital budgets have enabled these big companies to progress further along in their development programs increasing overall valuations, while smaller players are able to leverage joint venture and cost-carry agreements to maximize on a value per acre basis, Wood Mackenzie said.
Rigs to target liquids areas
The counties with crude and condensate exposure are expected to drive Eagle Ford growth, as 74 percent of the future drilling rigs likely will be assigned to target liquids-rich areas, Wood Mackenzie said. The pace of growth in the Eagle Ford shows no sign of slowing down, and our analysis indicates that Gonzalez, DeWitt and Karnes counties have established themselves as the sweet spots of the play, and now account for over 50 percent of daily liquids production, McMahon said.
There are multiple, rapidly growing unconventional oil and gas plays across the United States, but according to industry analysts, the Eagle Ford stands above most because of its heavy liquids content, sprawling existing and proposed infrastructure, high initial oil production rates and proximity to some of the largest energy markets in North America.
Moreover, Eagle Fords geology is said to be favorable for rapid development. Its production is near many existing processing and fractionation plants and multiple pipelines and other infrastructure. Its drilling costs also are low compared to many other unconventional plays because of abundant liquids, high production rates and rapid drill times.
Drill n Frack em all.
Good article, the Eagle Ford should surpass the Balken just because of where it sets. Our company CEFS is involved in the Balken with XTO but it is slow going up there. Tried to get into the Eagle Ford to many big money players where there first. CEFS did buy Encana system down around Bryan Texas but it is a dry play.
As always, good article Sir!
It’s a long reach or us here in West TX but we picked up 820 acres west of Weimer and fixing to make our first play down there.
Maybe it’s just a pet peeve or maybe I’ve just been in this business for too damn long but there ain’t no “K” in fracturing. Not aimed at you because thats the way everybody refers to it.
I suspect this sort of thing is our only hope for keeping our hides out of the fire once the rest of world realizes the USD isn’t worth the paper it’s not printed on and starts pricing oil in something other than dollars.
Hookem Horns! Beat Bakken.
I was at a conference last year where a speaker said that oil in the Eagle Ford was worth $12-14 a barrel more than in the Bakken, just because it was near pipelines, refineries and population centers.
West Texas seems to be busy on their own with the Wolford and other plays.
Yes Sir we are, we’ve got 18 more wells to drill on our place up nth and the we’re going to move to the sth side of the big ranch for another 16. I’m trying to retire but it don’t look like their going to let me, I swear it’s like being in the mafia!
My dad is in his mid-seventies and has tried a dozen times. He OQs pipeliners. He keeps raising his rates...they keep paying him. Unreal.
How can you keep those Texas boys on the farm once they’ve seen the bright lights of Minot?
It makes me wonder how much oil shale there might be in Mexico?