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El Paso: Eagle Ford Value Worth Developing Alone

El Paso Corp. has decided to go it alone in developing its profitable Eagle Ford Shale acreage and has scuttled plans to take on a joint venture (JV) partner.

The decision follows an "extensive evaluation of proposals from potential partners," the Houston-based company said. "While interest in our Eagle Ford shale position was high, we believe that we will create greater value for shareholders by developing it ourselves," said Brent Smolik, president of El Paso Exploration & Production Co.

El Paso has 170,000 net acres in the South Texas play, with 60% in the "oily area," spokesman Bill Baerg told NGI's Shale Daily.

The Eagle Ford Shale is the fastest growing play in North America in terms of development growth. According to NGI's Shale Daily Unconventional Rig Count (see shaledaily.com), the number of rigs searching for oil and gas in the play has doubled over the last year. One year ago, 79 rigs were in operation, while the current tally sits at 164.

For several months the company considered whether to take a partner to help with development costs. Last month CEO Doug Foshee said El Paso was "actively testing the waters for a partner" and would make a decision within weeks (see Shale Daily, March 29). That was about one week after Anadarko Petroleum Corp. and a unit of Korea National Oil Corp. struck a JV agreement in the Eagle Ford (see Shale Daily, March 22).

However, the company's finances have continued to strengthen, and the high price for oil gives the Eagle Ford a particular luster. Smolik noted how important the oil and liquids play has become for El Paso, which also has the largest natural gas pipeline network in the country.

"The Eagle Ford Shale program is one of our most valuable assets, and we are very excited about the future of this program. It is a key resource for oil reserves and production growth; the wells in our central area in LaSalle County, TX, are exceeding our expectations, and we continue to drive efficiencies in our drilling and completion processes as we have in the Haynesville Shale program."

In February El Paso had twice as many oil rigs as gas rigs working in the field, a ratio that is expected to widen over the course of the year (see Shale Daily, Feb. 25). "We...are currently running four rigs in the oil area, which may increase to six or seven by year-end," Baerg said.

At the end of March El Paso had 14 producing wells in the leasehold, with total gross production of about 4,700 b/d of oil and 8 MMcf/d of natural gas, he said.

"We continue to work with pipeline gatherers in the area, which has seen significant growth," said the El Paso spokesman.

Although he couldn't name names, "interest was high" concerning potential partnerships. When asked whether El Paso may reconfigure its capital spending to allocate more money to the Eagle Ford, Baerg said those plans have yet to be determined.

El Paso's unconventional holdings in the U.S. onshore include 46,000 net acres in the gassy Haynesville Shale, as well as 193,000 net acres in the Altamont tight oil formation, and 135,000 net acres in the liquids-heavy Wolfcamp Shale.

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