EOG Has Big Plans For Eagle Ford Shale Oil Window

EOG Reports Major Oil Discovery In South Texas

For those who have been wondering what EOG Resources is up to in the Eagle Ford shale, a recent press release has shed some light on their plans.

EOG Resources has so far been hush – hush about their plans for drilling in the Eagle Ford shale.  On the company website they announced several weeks ago that they were aquiring acreage but were going to keep plans for development quiet until most of the leasing had been done. Now that it has they are letting the cat out of the bag.

Now information is surfacing, such as this from an official press release, that they are planning a major drilling program in the oil window of the Eagle Ford shale with “significant production” coming online in 2011.

EOG declared the Eagle Ford shale a “major oil discovery”   in this April 7 press release.  CEO of EOG, Mark Papa was quoted as saying that the Eagle Ford shale was, in his words “one of the most significant United States oil discoveries in the past 40 years”.  EOG has estimated that the Eagle Ford, as an oil discovery, will rank #6 in size of all time giant oil fields in the U.S. just after the Bakken Shale. The largest would be Prudhoe Bay.

EOG hs aquired just over a half millon acres of South Texas leases across six counties.

Sixteen dileneation wells were drilled over a 120 mile trend to determine the extent of the play.

“Based on initial drilling and production results, as well as technical and core analysis, the estimated reserve potential on EOG’s 505,000 net acre position in the oil window is approximately 900 million barrels of crude oil equivalent (MMboe), net after royalty (NAR).”

(NAR refers to how much the company keeps after giving the landowner a percentage of production.)

EOG is currently operating six rigs,  drilling more wells over a large area of the Eagle Ford shale in the upper portion known as the “oil window”. Due to depressed natural gas prices, the oil rich part of the shale may be more intensley drilled than the southern gas portion.

Many Potential Well Locations

EOG has estimated that there are 2,840 potential well locations in the 505,000 it holds in the oil window of the Eagle Ford shale.  They estimate that 75% of the acreage is drillable. They are basing all estimates of production on well spacing of 125 – 140 acres per well.

EOG has stated that there is “great rock quality with high consistency” in the play, with wells 30 miles apart showing similar porosity of between 4 – 11% and permeability of 40 – 1,300 Nd.

Leasing is underway in the upper counties including Frio, Atascosa, LaSalle, McMullen, Zavala, Dimmitt, Live Oak, Wilson, DeWitt, Gonzales, Karnes, Dimmit and Webb counties.

EOG has a good track record of drilling horizontal wells in the Barnett Shale and Bakken Shale. EOG investors as well as landowners who just signed leases should be pleased with this recent news about the Eagle Ford shale oil discovery.

Update: In a May 4 EOG webcast it was stated that the current drilling program in the Eagle Ford shale would be moderated until a major 3D seismic project was completed and the results analyzed. EOG has drilled their 17th Eagle Ford shale well, the Harper 4H, which is producing 602 Bbl of oil per day and 650 Mcf of gas. “Don’t expect a constant Eagle Ford news flow from EOG until late this year” it was stated in the webcast.
EOG expects to average only 6000 Barrels per day equivalent per day of oil from the Eagle Ford in 2010 with much more production coming online in 2011. This indicates that a major drilling program will ramp up in late 2010 when the most productive areas of the acreage are identified and targeted by 3D seismic surveying.

Update:

Despite persistent rumors of a 25 rig program, Oil and Gas Journal reported the following on August 9th, 2010:

(From Oil and Gas Journal)
HOUSTON, Aug. 9 – EOG Resources Inc., Houston, will ramp up its operated rig fleet to 12 at the end of 2010 and 14 in 2011 from five at present as it better understands the South Texas Eagle Ford shale from interpreting 3D seismic along the 120-mile oil trend in which it holds 505,000 net acres.

EOG management said it is still early days in the play, but the Eagle Ford reservoir seems to be working on expansion drive toward 3-4% estimated ultimate recovery. Unresolved are determining optimum spacing, locating wells, areas that will be productive from Upper and Lower Eagle Ford or just one, and other issues.

EOG plans to drill 245 gross Eagle Ford wells in 2011 compared with 111 this year. Even so, the formation will be a large contributor to oil production growth in the second half of 2010, as EOG has drilled and completed 31 wells and has 25 awaiting completion.

Recent company Eagle Ford wells had initial production rates of 1,033, 1,002, and 625 b/d of oil plus rich gas, and the first wells in Wilson County came on at 707 b/d and 836 b/d. EOG has 100% interest in the wells.

EOG raised its 2010 capital expenditure budget by $500 million. Of that, roughly $270 million is for Eagle Ford crude oil related production and midstream facilities the company had previously planned to contract to a third party. EOG laid the change to timing and cost issues.

EOG’s exploration staff is clamoring to test the Austin chalk and Buda formations on the company’s Eagle Ford acreage, said Mark Papa, chairman and chief executive officer. Papa said EOG also sees South Texas production contributions from the Frio and Vicksburg formations.

Update #2:

HOUSTON, Aug 6 (Reuters) – EOG Resources Inc (EOG.N) said on Friday it plans to sell about 180,000 acres in U.S. shale plays as part of the oil and gas company’s effort to increase funds for oil exploration.

EOG will sell 117,000 acres in the Eagle Ford Shale in South Texas; 51,000 acres in the Marcellus Shale in Pennsylvania; in 15,000 acres in the Haynesville Shale, Mark Papa, the company’s CEO, told analysts on a conference call.

“We’re so long on acreage relative to what we can logically develop in a reasonable period of time,” Papa told analysts.

There is no word yet on where the acreage EOG is selling is located but statements from Papa indicate that because EOG will be “focusing more on oil production”, the acreage will not be part of what it holds in the oil window. It would be hard for me to imagine them giving up much acreage in the lucrative oil window. It could be this is dry gas acreage farther south and west.

Companies such as EOG Resources and Petrohawk Energy have decided to focus more on liquids than on natural gas. To do this will require a lot of capital and the company has realized that it is in way over its head when it comes to drilling up Eagle Ford shale acreage, which is mostly on three year lease agreements, before those leases expire.  To exploit what they have they will need large amounts of capital, something the latest Eagle Ford shale acreage sale aims to remedy.