Monday, August 30, 2010

$10,000 acre DeWitt Going Rate

       You can access a very recent video presentation by Eagle Ford Oil & Gas where they state the going rate for oil window acreage is $10,000 today.

        We are early in the play and lease bonuses will be going up substantially from the $10,000 per net acre we are seeing today.  The dam has burst.

This editor has confirmed that a $12,500 per net acre lease bonus offer was made on a 80 acre tract in Gonzales County near where a well is currently being drilled.  Lease bonuses and royalty are highly negotiable now.

         Reasons the Eagle Ford is highly commercial and more valuable than other shale plays
  • In the best parts of the shale that produces oil, the wells are producing at rates of up to 1,000 barrels of oil per day (BOPD), and the estimated reserves are 500,000 barrels of oil equivalents (oil equivalents factor in the casinghead gas along with the oil produced) per well. In the best parts of the shale that produce natural gas, the wells are producing at rates of up to 5 million cubic feet of gas per day (MMCFGPD), and the estimated reserves are 6 billion cubic feet (BCF) of gas equivalents (gas equivalents factor in the condensate along gas produced) per well.
  • The Eagle Ford shale appears attractive because of several additional factors:
  • It appears to produce much more oil than the other shale fields
  • It has a much higher carbonate:shale percentage, thus making it more brittle and “fracable”.

The cost to frac Eagle Ford wells is substantially less than other shale plays. In the thicker parts of the trend in DeWitt County, operators are able to drill upper and lower laterals that produces roughly double the estimated ultimate recovery of oil. has a lot of useful information on their website. The graphics below are examples of the information available from them.

Friday, August 27, 2010

GeoSouthern DeWitt Properties LLC Get $125.0 Million Loan

CLG Energy Finance announced financing of $28.5 million for GeoSouthern DeWitt Properties LLC. Proceeds will be used by GeoSouthern primarily to fund capital expenditure requirements in the Eagle Ford Shale alongside its working interest partner, Petrohawk Energy. The facility may also be increased up to $125.0 million upon request by GeoSouthern and subject to lender approval.

Why Even Small Acreage Is Important To Eagle Ford Operators

The presentation of slides below was presented to a group of landowners on Nov. 18th at the Geosouther landman meeting with landowners at the DeWitt sale barn.  The meeting was apparently held to scare landowners into signing unfavorable leases under the threat that their land would not be leased if they held out for better terms. In my opinion, the oil company threat to you that they will bypass, go around, or not lease your land is just yet another attempt by the oil company to lease your land for less than fair market value. Some of us believe this meeting was an attempt to short change and confuse the landowner. Your land is important to the operator and you should demand he pay you a fair price. Don't believe the oil company propaganda. Fair is fair, and if you are in a good area, demand a fair price for your minerals. 

     Due to the fact that the Eagle Ford Shale is rather evenly distributed throughout the trend, all acreage regardless of size is important to the operator.  For the oil company to develop a successful and commercial exploration and production program in any given unit, all acreage in a direct line with any horizontal well has to be leased. The operator cannot drill under your land without committing trespass, and it quite simply is NOT feasible for them to exclude you or to drill around you.

      The manner and way in which small acreage is incorporated into larger Eagle Ford Shale tracts is illustrated in a news story I found on the internet today regarding a  43.291 acre tract at and

Global Petroleum Limited ("Global") is pleased to advise that it has signed an amendment to the Participation Agreement with Texon Petroleum Ltd (ASX: TXN) expanding the contract area of the Leighton Prospect to 1,651 acres for all depths beneath the Olmos Formation by cross-assigning its 15% working interest in the existing 873.691 acres, with 777.059 acres in which Texon holds an average 96% working interest.  Global will now own an undivided 7.939% working interest across the expanded area including the Eagle Ford Shale (131.05 nett acres).
 The 777.059 acres to be included in the expanded contract area is adjacent to and in the vicinity of the existing contract area of the Leighton Prospect and is comprised of 457.059 acres in Leighton Prospect lying outside the existing contract area and 320 acres in the adjacent Mandurah Prospect with depths from 7,100 feet down to 100 feet below the base of the Edwards Limestone Formation.
Following a recent survey, the acreage within the original contract area has increased by an additional 43.291 acres from 830.4 to 873.691 acres.  Under the amended Participation Agreement, Global retains its 15% working interest (11.25% net revenue interest) in the expanded 873.961 acres from the surface down to the stratigraphic equivalent of the base of the Olmos Formation.
Texon have advised that the rig for the first Leighton Eagle Ford horizontal well is scheduled to arrive in 2 - 3 weeks.  The first well will drill vertically to 10,500ft and then laterally 4,500ft.
The amendment to the Participation Agreement will enable a more efficient development of the Eagle Ford reservoir with horizontal wells.

Eagle Ford Thickness Maps

Tuesday, August 17, 2010

Local Oil and Gas Operators Flipping Leases

Pioneer Natural Resources recently sold to Reliance Industries of India, a 45% interest in approximately 212,000 net acres leased by the Company in the Eagle Ford Shale play for $1.15 billion, amounting to approximately $12,000 per net acre. Interestingly, much of the acreage sold to Reliance was in the dry gas window effectively disguising what oil window acreage might be worth. Also, EOG's chairman Mark Papa, said the company had spent $1.7 billion in recent years leasing the drilling rights in several prime shale formations and is initiating a program to sell for a big profit some of that acreage. EOG right now has for sale over 100,000 acres in the Eagle Ford. Though most of this acreage is in the less commercially economical dry gas window, it will be interesting to see how much per acre it goes for. We will know in November what EOG gets for their Eagle Ford acreage. Chesapeake intends to enter into joint ventures on its Eagle Ford Shale play that currently includes approximately 400,000 net acres of leasehold. Chesapeake plans to offer 25% working interest to JV partners in exchange for the JV partner picking up all drilling and production cost. There have been an increasing number of joint ventures in the Eagle Ford Shale, too numerous to mention here. What jumps out at you is just how fast Eagle Ford lease acreage is going up in value. If the past is prologue, look for big incremental increases in what operators pay to infill their existing leasehold footprint. That will happen as new production units begin drilling.

 "Reliance paid $14,000 an acre for the Atlas assets and $11,000 an acre for the Pioneer assets, which analysts say is expensive. Not all shale areas are the same and the value of an asset depends on the quality of the acreage."


Why Eagle Ford Is So Hot

Improvements in directional and horizontal drilling techniques, as well as hydraulic fracturing methods, have revolutionized shale exploration and development in the US. Thanks to new horizontal drilling techniques perfected in the Barnett and Haynesville shale that can extract hydrocarbons from unconventional sources, The Eagle Ford has become a hugely profitable oil and gas play. Eagle Ford operators have the technical know how and the enviable ability to produce vast quantites of oil from shale. Operators in the area have acquired vast chunks of high grade acreage at bargain prices, that acreage in the years ahead, will dramatically boost the output of crude oil locally. This huge oil window acreage will yield extraordinary profits and enormous gains in proven reserves. The oil and condensate percentage in the DeWitt/Gonzales area has been quite high giving the companies a huge premium.

EOG Resources, Pioneer, Chesapeake, Conoco Phillips and Petrohawk are the leaders in the quantum shift under way in the exploration and production shift away from natural gas and towards more oil and liquids development in the area. Beginning about three years ago, using stealth and flying under the radar, they began building their mega acreage portfolio positions on the cheap, paying in the $100 to $400 per acre price range, with a paltry 20% royalty. Today, that same acreage brings in the neighborhood of $3,500 an acre and 25% royalty without a whimper. Savy landowners who did not sign early have seen lease signing bonuses and royalty rates steadily increase ten fold in the past three years. Since we are very early in the development of the Eagle Ford,it is impossible to predict with accuracy how high bonuses and royalty will go, although the trend and bias is definitely much higher.

The economics of the Eagle Ford shale is unmatched in any other shale play. The EF shale is very uniform and very thick in most of the trend. The cost to fracture wells is approximately half what it cost in the Barnett and Haynesville, which is a huge advantage. The Cheapside area where the EOG T R Marshall Unit is located has the best fracture characteristics of the entire Eagle Ford trend. The economics of the Eagle Ford shale is expected to attract huge investments in the DeWitt area over the next decade with a rapid increase in activities in the play. The major eight companies in the play plan to spend over $1billion in 2010.

Monday, August 16, 2010

New Pipelines To Carry Eagle Ford Oil and Gas

The Eagle Ford is the sixth largest oil discovery in the history of the USA. The infrastructure necessary to carry all this new nat gas, gas liquids, and oil, is being built-out now. As the pipeline and processing infrastructure comes online we will see increased drilling activity in the area.

Enterprise Products Partners has several new construction projects currently underway expanding its natural gas and natural gas liquids infrastructure in the area. The growing production volumes from the Eagle Ford Shale play will require substantial new pipelines to accomodate this growing oil and gas production.

When this needed infrastrcture is in place we will see a marked increase in drilling activity along with higher lease signing bonuses and royalty rates. There are no dry holes in the Eagle Ford. Landowners who are patient and do their due diligence in regards to their location in the trend should benefit handsomely.

Sunday, August 15, 2010

Eagle Ford / DeWitt County

The Eagle Ford is clearly building steam in the oil window in South Texas with 84 rigs running in the trend at last count. That is way up from the 49 rigs counted in April, including 10 rigs operating in De Witt County. New operators are joining the party monthly and operators are clearly moving more rigs into the oil-rich portions of the Eagle Ford. From company announcements we expect rig count to steadily increase as pipeline and processing infrastructure is built-out. Look for increased activity all along the transition line between the oil and NGL window where land is fetching the highest lease bonuses and royalty in the play.