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Eagle Ford Putting 'Swagger' in South Texas

Anyone familiar with the Eagle Ford Shale shouldn't be surprised that U.S. Capital Advisors analyst Cameron Horowitz would title his latest note on the play "South Texas Swagger."

"Eagle Ford has the steepest oil growth trajectory of any major resource play in the U.S. over the next five years," Horowitz and his colleagues said. "Crude production is set to increase by about 1.4 million b/d to about 2.1 million b/d in 2018, meaning Eagle Ford oil output will exceed the Permian [Basin] less than 10 years into the play's life versus 80-plus years of history in the Permian.

"Natural gas production should increase by about 2.4 Bcf/d to about 4.6 Bcf/d in 2018, and NGL [natural gas liquids] output is set to rise about 350,000 b/d to about 500,000 b/d in 2018."

According to Shale Daily's Unconventional Rig Count, drilling in the Eagle Ford is up 11% from a year ago, with the rig count at 244 as of Oct. 12. It is one of only four plays tracked in which rig counts are up from year-ago levels. The remaining nine plays tracked have all seen declines from a year ago ranging from 26% to 75%.

U.S. Capital said oil well productivity is accelerating at the fastest pace since the Eagle Ford began, with average 30-day initial production rates up 22% year over year in 2012. "Important to note, this is not just due to longer laterals...after we normalized for lateral length, productivity gains are tracking plus-16% y/y in 2012, which is also the fastest since the play began," the analysts said.

The most productive Eagle Ford operators on a lateral-normalized basis, according to U.S. Capital, are ConocoPhillips, Pioneer Natural Resources Co., Murphy Oil Corp., EOG Resources Inc. and Carrizo Oil and Gas Inc. Its analysis also found that tighter-spaced wells may experience an increase in lateral-normalized productivity.

Operators also are getting more efficient with spud-to-rig release times, which are down 40% over the last four years to about 20 days, the analysts said. Spud to sales times are down 70% to about 39 days. The most efficient operators on a spud to rig release basis are Anadarko Petroleum Corp., Newfield Exploration Co., Carrizo, Chesapeake Energy Corp., and SM Energy Co., according to U.S. Capital.

"We see the Eagle Ford as having the deepest inventory of high [net present value], low oil price breakeven opportunities of the established U.S. resource plays," Horowitz wrote. "The best economics are currently found in the core areas of Gonzales, Karnes and DeWitt counties, which present some of the best return characteristics in the country. Operators exposed to these sweet spots are ConocoPhillips, EOG, Marathon Oil Corp. and Pioneer, U.S. Capital said. As if that weren't enough, there could be stacked opportunities with the Pearsall Shale.

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