Houston — Two recent asset acquisitions by small exploration-and-production companies in the Eagle Ford Shale of South Texas and press reports hinting at the potential for a much larger deal could signal a renewed interest in the play among producers.
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In the first deal, announced July 2, privately owned producer Venado Oil and Gas, in partnership with investment firm KKR, will acquire 22 producing wells and approximately 23,000 net underdeveloped Eagle Ford acres from an undisclosed buyer.
In Q2 2018 the acquired assets, which are next to the partnership's existing operated assets in Atascosa and Frio counties, saw production of around 4,500 boe/d net, the partners said in a statement. Production was composed of 74% oil, 11% natural gas and 15% natural gas liquids. Venado and KKR did not disclose the financial terms of the transaction
In the second deal, announced July 5, Japanese trading and investment conglomerate Sumitomo Corporation said subsidiary Summit Discovery Resources II had reached a deal to acquire 624 acres in Karnes County, in the core of the Eagle Ford. As a result of the transaction, SDRII has become the 100% working interest owner and operator of the assets, which have an estimated peak production of 3,000 boe/d.
INTEREST IN EAGLE FORD RISING ALONG WITH CRUDE PRICES
Interest in the oil-rich Eagle Ford is growing as oil prices and demand for crude are on the rise. Gas production from the play is expected to increase, in association with the region's crude oil output. Drilling activity in the Eagle Ford Shale has been unimpeded by pipeline constraints that are now affecting the Permian Basin.
On Friday, rig count in the South Texas play edged up to 81 and is now just shy of a recent 12-month high. In the Texas portion of the Permian, the number of drilling rigs slumped to 379 last week, down by 12 over the past month, data compiled by Baker Hughes shows. At nearly $76/b, spot market crude prices in the Eagle Ford are now outperforming benchmark WTI Midland crude by more than $15/b, according to S&P Global Platts data.
A widening spread between West Texas and Gulf Coast crude prices in recent months comes amid growing concerns over pipeline takeaway capacity from the Permian Basin.
Natural gas transport capacity isn't far behind either, with significant constraints expected to emerge by third-quarter 2018.
BP MAY BE LOOKING AT BIG US ONSHORE ACQUISITION: PRESS REPORTS
In addition to the two small transactions announced this month, a major deal, which would significantly change the ownership profile of the Eagle Ford, could be in the offing.
According to recent press reports, international oil and gas giant BP is the lead contender to acquire the onshore US oil and gas assets of Australia's BHP Billiton, having submitted a bid of $10 billion. Citing company policy, a BP spokesman declined to comment on the reported bid.
Last August BHP, which owns assets in the Haynesville Shale and Permian Basin plays as well as the Eagle Ford, under pressure from activist shareholder groups, announced plans to exit the US onshore sector and sell its existing US assets at auction.
At the time of the announcement BHP said its Eagle Ford assets had produced 10.9 million boe, which included 4.9 million barrels of oil and condensate, 2.7 million barrels of natural gas liquids and 19.4 Bcf of gas in the quarter that ended June 30, 2017.
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