Thursday, August 23, 2012

Drilling For Oil In The Unconventional Eagle Ford Shale

Drilling for crude oil in the unconventional Eagle Ford shale is very much still in it's infancy. We are in the very early innings. The Eagle Ford has been know to be the source for conventional natural gas and crude oil reserves in the area for decades. Technology is improving at a very rapid pace and horizontal drilling techniques continue to improve exponentially. Down spacing is occurring at 40 acres per well.  EURs are going up substantially. Operators have rushed in to lease the best acreage in the six largest shale basins that comprise 57 million acres. It's going to take a very, very long time to develop all that acreage, perhaps a century experts are saying.
Success in drilling in the Barnett, Haynesville and Marcellus has caused the gas market to collapse. Operators all want to drill on good oil prospects today like the Eagle Ford volatile oil window. The oil window is where all the action is today and that's where operators are allocating all of their capital.

Little noticed in all that is going on in the Eagle Ford is the way that it is shaping the future for the petrochemical industry. Many large refineries and chemical plants are being planned and announced for the Texas Gulf Coast. Pipelines are going in everywhere along the entire length of the Eagle Ford. More pipelines are being announced monthly.

The long and short of the Eagle Ford is that all liquids window acreage is extremely valuable. Mineral interest to all depths and horizons is incredibly valuable. Rosetta Resources claims EURs of 1.67 Million BOE per well at 55 acre spacing. At $100 oil the 1.67 million BOE per well translates to $167,000,000 per 55 acres. If you owned 55 acres and you receive 25% royalty that would amount to $41,750,000 due you over the life of the well. With other horizons like the Austin Chalk, Pearsall, Olmos and Buda you quickly see why Eagle Ford footprint acreage is selling for well over $100,000 per acre.

1 comment:

  1. Careful witht the math. Not all BOE's sell for $100. Especially NG and NGL's.