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Eagle Ford Outpacing Competition, Braziel Says

Low natural gas prices have stifled activity in the dry window of the Eagle Ford Shale in South Texas, but the play's natural gas liquids (NGL) and crude windows "are hotbeds of activity," according to veteran industry observer Rusty Braziel, now principal of RBN Energy.

Since the Eagle Ford was discovered by Petrohawk Energy Corp. four years ago, growth in the play "has been astronomical" with more than 1,600 noncompleted wells in the play today, Braziel said on a blog on the RBN Energy website. New well starts are up 104% compared with last year.

And hydraulic fracturing (fracking) crews are moving into the Eagle Ford from other plays, including the Haynesville in Louisiana, the Fayetteville in Arkansas and the Barnett in Texas, where the preponderance of dry gas has led to a drop in activity.

"With gas prices at the sub-$2.00 level, any operator that can take a rig from a dry gas play to a wet gas play is doing so, and fortunately for the Eagle Ford it is just down the road," Braziel said. But even with additional rigs, not all of the noncompleted backlog will be worked off any time soon, because some of those wells are in the play's dry gas zone, "and dry gas is no more attractive in the Eagle Ford than it is in the Haynesville."

RBN estimates that investments in gas processing, NGL transportation, fractionation, crude/condensate transportation, storage and terminaling will hit $6.5 billion over the next few years.

Oil production in the Eagle Ford has increased tenfold in just two years, from 50,000 b/d in April 2010 to more than 500,000 b/d today and will reach 1.5 million b/d in 2016, "a couple of hundred thousand barrels per day over the Bakken," Braziel said. Production in the Bakken Shale is just above 600,000 b/d and is estimated to reach 1.3 million b/d in 2016.

"Not only will it be a horse race for bragging rights, it will be heads up competition for oilfield services on the input side and downstream markets on the output side. Although it may change in the future, today there are no other basins playing at the world-class scale of the Eagle Ford and Bakken."

Associated gas production in the Eagle Ford averaged slightly less than 200 MMcf/d last year, compared to only 83 MMcf/d in 2010, according to Barclays Capital analysts Shiyang Wang and Michael Zenker. "Eagle Ford associated gas output is due to grow this year, as the total oil and gas rig count in the basin continues to grow," they said in a note to clients Tuesday.

Dry gas shales, such as the Haynesville, the Fayetteville and the Barnett, remained the largest producing shales in 2011, according to a recent Federal Energy Regulatory Commission (FERC) market report (see NGI, April 23). However, the fastest growing shales were found in the liquids-rich shale basins, the report said. Production in the Marcellus doubled to nearly 6 Bcf/d by the end of 2011, while production in the Eagle Ford grew 64% to 3 Bcf/d over the same period, the highest growth of any shale.

Producers appear to be shifting from developing dry gas wells to oil and natural gas liquids (NGL) wells, according to the FERC report. Although some dry gas-only wells might be shut in, production of gas associated with NGLs and oil is continuing to grow.

Rig activity continues to increase in the Eagle Ford. According to NGI's Shale Daily Unconventional Rig Count, rig activity in the play shows the largest year-over-year growth. For the week ending April 27, there were 261 rigs actively drilling in the Eagle Ford, up from 260 a week earlier, 248 a month ago and 169 last year.

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