More than a decade after its unveiling to the oil and gas industry, the Eagle Ford Shale remains profitable despite challenging financial markets, speakers said Sept. 25 at a conference devoted to the South Texas play.
The Eagle Ford, which debuted in late 2008 as an unconventional natural gas play and soon after came to be known for its high-quality oil, has generally offered low breakeven prices and has provided excellent cash flows, operators and analysts said at the 10th annual DUG Eagle Ford Conference in San Antonio. The conference is sponsored by Hart Energy.
Speakers agreed on the many advantages of the Eagle Ford. "The maturity of the play is a plus," said Bryce Erickson, senior vice president of Mercer Capital Management Inc. "It's shallower, so has lower drilling costs. Water cuts are much better, and breakevens are lower."
Also, the "fundamentals of the area" — that is, a location relatively close to the U.S. Gulf Coast with its refining and export markets — are also a feature, Erickson said.
But capital is more difficult to come by these days, and "there's probably less private equity money than there has been," he added.
Bid-ask spread is still wide
Moreover, even though consolidation might seem logical for a mature play, the bid-ask spread remains wide, with property owners wanting more money for assets and potential buyers unwilling to meet those expectations, Erickson said.
The Eagle Ford produces 1.5 million barrels per day of oil and 6.74 Bcf/d of gas, S&P Global Platts Analytics data shows.
As of last week, 79 rigs were drilling in the play, down from 91 at the start of 2019 and a peak of 278 in 2014, according to Enverus/DrillingInfo. Of the 79 rigs, about 61 were in the western area, with the eastern area accounting for the rest, said Bernadette Johnson, Enverus' vice president of market intelligence.
The western Eagle Ford appears to house the "best, [most] highly economic areas" of the play, Johnson said. Productivity in the two areas is different, with type curves and average well yields a little higher in the west than in the east. That is due to a shift in drilling to more outside core areas in the east after 2016.
"Companies are starting to delineate and test on the outskirts, and you're seeing a little drop, but nothing dramatic," Johnson said. Even so, both sides are "very consistent," and overall the Eagle Ford has been "more resilient" than other plays, she said.
Production has rebounded to its present level from barely over 1 million bbl/d in mid-2017. Prices hung lower during the previous two years. Now oil breakevens are sometimes below $30/bbl in the play, but mostly $30/bbl to $40/bbl.
"In some other plays, the variance is much greater," Johnson said. "Even in the Permian, you still see areas of $80/bbl-plus."
The play has attracted and retained some of industry's biggest shale operators including BP PLC, ConocoPhillips and EOG Resources Inc. "We still have thousands of wells yet to drill and billions of [barrels of oil equivalents] yet to produce," said Erec Isaacson, vice president of ConocoPhillips' Gulf Coast unit.
ConocoPhillips produced 221,000 boe/d from the Eagle Ford in the second quarter of 2019, up from 182,000 boe/d in the second quarter of 2018.
Improved completion techniques
ConocoPhillips has continued to tweak its well completion techniques for greater efficiency and hydrocarbon yields, as most of the industry is doing. Data analysis, which helps identify trends quickly and maximize operations, has "had a profound effect on our fields," Isaacson said.
A pilot project in DeWitt County, Texas, showed ConocoPhillips that it could improve well recoveries. The company found more hydraulic fractures than anticipated, many of which did not have sufficient proppant, Isaacson said. Proppant is a sand and fluids mixture that keeps fractures open to allow oil and gas to flow to the well.
ConocoPhillips also found that proper spacing and stacking of wells can create value, as does refracturing older wells with an updated completion template. The result has been a 60% increase in resource from refracked wells. Not only that, but refracturing smooths out issues between old "parent" wells and new infill drilling of what the industry calls "child" wells, Isaacson said.
The maturity of the play has made things "a little tougher now," said William Deupree, founding partner, president and CEO of Escondido Resources. The company operates in the Escondido and Olmos formations in Webb and La Salle counties in Texas.
But the economics are worth it. "Even though we're not right in the middle of the core, the returns stack up versus five years ago, with plenty of running room ahead," Deupree said.
Starr Spencer is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.
