Central area of play outperformed other areas; liquids production aided by gas lift
Strong drilling results, coupled with the large prospective area, and magnitude of the resource potential, combine to make the Eagle Ford Shale play in South Texas a contender for the best tight oil play in the US, according to a new report from IHS.
According to the IHS Herold Eagle Ford Regional Play Assessment, typical well performance as well as peak-month production of the Eagle Ford’s best wells exceeds wells drilled in the Bakken Shale, often considered the tight oil standard. The favorable outlook for the Eagle Ford is reflected in a highly competitive merger and acquisition (M&A) environment, with implied deal values averaging $14,000 per acre for Eagle Ford acreage in 2011 and top prices approaching $25,000 per acre.
“Our analysis at IHS indicates that Eagle Ford drilling results to date appear to be superior to those of the Bakken,” said Andrew Byrne, director of equity research at IHS and author of the study. “Although the well counts aren’t nearly as high at this point in development of the Eagle Ford, the peak of the well-distribution curve compares favorably with the Bakken.”
The most frequent well result of the Eagle Ford is around 300 barrels per day to 600 barrels-per-day for a peak month production average, Byrne said, compared with 150 barrels-per-day to 300 barrels-per-day for the Bakken. The best wells in the Bakken have an average peak-month production rate of 1,000 barrels-per-day or more, while the Eagle Ford central area’s top wells are even better on a barrels-of-oil-equivalent (BOE) -per-day basis.
“The central area of the play has outperformed other areas and has been the focus of most of the drilling to date,” he added. “The western area is the next best, with the eastern area having the least activity and performance lagging the other two areas.”
The central area encompasses the following counties: Gonzalez, western Lavaca, DeWitt, Wilson, Karnes, Bee, Live Oak, Atascosa, Dimmit and eastern Mullen. The play is divided into three distinct windows: the oil window, the liquids-rich gas window, and the dry-gas window. Thus far, the highest maximum average 30-day production rates on a BOE basis have been reported from the liquids-rich window, where liquids production benefits from the natural gas lift.
The companies offering a combination of superior well performance and best leverage to the play (as is measured by the amount of acreage in the play per million dollars of the company’s enterprise value) include EOG Resources, Penn Virginia, and the Hillcorp Resources/Marathon Oil combination. The companies with simply the most leverage to the play include Clayton Williams Energy, Swift Energy, Matador Resources, SM Energy and Forest Oil.
The favorable drilling results to date in the Eagle Ford have resulted in rising M&A interest in the area. Implied deal values have been increasing, with several billion-dollar transactions for largely undeveloped acreage packages announced during the past year and a half.