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.

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The size of an oil or gas play may be only a few hundred acres or as is the case with the Eagle Ford shale, Haynesville shale, Barnett shale and Marcellus shale, cover hundreds of thousands of acres over a wide region.

A shale gas play, such as the ones mentioned above, is simply a discovery of oil or gas in shale rock that is significant enough for oil and gas companies to launch a campaign of leasing and subsequent exploration. In the case of the Eagle Ford shale it is turning out to be both a shale gas play and and oil play.

What Is Shale Gas?

Shale is a sedimentary rock that is generally formed as particles of sediment settle out in calm water. Shale can be formed in shallow inland waters or deep ocean basins. Many of the shale formations in the United States, such as the Marcellus shale, were formed during the Devonian period, around 390 million years ago.

The rock found in the Eagle Ford shale, which is the focus of this blog, was formed in a marine environment during the Cretaceous period, approximately 145 to 65 million years ago. It was during the Cretaceous period, following the Jurassic period, that many of the worlds limestone formations were laid down. Cretaceous literally means “chalky”, taken from the German word for chalk,  Kreide. The Cretaceous period was a time of warm climate and high seas. During the Cretaceous period billions of tons of CO2 were “sequestered” by marine organisms and eventually returned to the earth in the form of sediments.

Shale rock is generally high in organic content. Once covered up by other sediments and buried over millions of years, heat and pressure begin to work on these sediments and oil and gas are formed. Some of the oil and gas may begin to migrate upwards, to layers of sandstone and porous limestone where it becomes trapped. These are considered conventional oil and gas reservoirs and shale is often the “source rock” or original source of the hydrocarbons. In some cases, as in the Eagle Ford shale play, a significant quantity of oil and gas remain in the shale rock. Natural gas and oil that occur in shale are called “unconventional”.  Now with new horizontal drilling and hydraulic fracturing methods it is possible to extract that oil and gas. “Unconventional” gas is quickly becoming the new norm.

The illustration below shows how South Texas looked during the Cretaceous. It was covered by shallow warm seas. It was during this period that the Eagle Ford shale was deposited.

Below is an illustration of what a shale formation looks like underground and how a horizontal well is drilled.

Shale gas, from rock formations such as the Marcellus shale, Haynesville shale, Barnett shale and now the Eagle Ford shale, is an important energy resource for the United States. Now thanks to these “discoveries” or moreover the advances in technology that make recovery of oil and gas from shale possible, we have over 100 years worth (and growing) of natural gas supply in North America. Hopefully our elected officials will wake up to this new reality and quit wasting our tax dollars on things like corn ethanol and “clean coal” and instead focus on converting our vehicles and power plants to use abundant natural gas.

Article by Nolan Hart

Here is a good book to get if you are considering leasing your land for oil and gas exploration. It’s not cheap but could save you thousands in the long run.

The name of the oil and gas play is frequently misspelled as “Eagleford”. The correct spelling is what is seen on this website.   The Eagle Ford shale takes it’s name from the small town of Eagle Ford Texas, where it outcrops in North Texas near Dallas.

The following map is from Ross Smith Energy Group . They do not sell maps to the public.  It appears here with their permission.   This Eagle Ford shale map shows the trend from Mexico (where it obviously continues across the border as well) to East Texas. It shows the low pressure, oily section in the northern region, the condensate section in the middle and the dry gas section at the lower half. Although it is difficult to read the gray areas are Austin Chalk producing areas. Wherever you find Austin Chalk production you are likely to find Eagle Ford oil as well.

Here is a map from EOG Resources showing the oil, gas and condensate zones of the Eagle Ford Shale as well as some initial production rates. (Note, IP, or initial production rates should not be confused with long term production rates). You can click on the map for full size.

Below is a map from the U.S. Energy Information Administration. The map is a little out of date when it comes to showing well locations, since dozens of new Eagle Ford shale wells have been drilled since it was made. It does however provide a good picture of Eagle Ford shale thickness and extent.

The following Eagle Ford shale map from the Texas Railroad Commission shows counties with permitted and completed wells as of August, 1, 2011.

Below is an Eagle Ford shale map showing the depth of the top of the formation.

Below, Eagle Ford shale thickness maps from Petrohawk Energy. Thickness in feet of the Eagle Ford shale in Atascosa, Gonzales, Wilson, Karnes and DeWitt counties is shown.

The map below, from Marathon Oil, shows the Eagle Ford shale divided into four zones, dry gas, wet gas, volatile oil and black oil. While the distinctions between “black oil” “volatile oil”, condensate and “wet gas” are something even petroleum engineers can’t seem to agree on, basically “volatile oil” is lighter oil that evaporates faster than heavier crude. Lighter crude oil (higher API gravity) typically trades at premium prices since it is more easily refined into gasoline, etc. Marathon Oil purchased the acreage shown in blue from Hilcorp Resources Holdings for approximately $20,000 an acre.

The Carrizo Wilcox aquifer is an important source of water for much of the area where the Eagle Ford shale lies, and a primary source of frac water used in completing wells. Below is a map of the Carrizo water sand.

Below is a chart showing the Cretaceous geology of South Texas, including the Eagle Ford shale formation. The Pearsall shale is located deeper than the Glen Rose formation at the bottom of the chart.

Below, The first Eagle Ford shale well near Fowlerton in the old Naylor and Jones Survey.

The Naylor and Jones Unit 86, #1H is the first permitted Eagle Ford shale well within 10 miles of Fowlerton Texas..

A Brief History Of Fowlerton Texas.

At the turn of the twentieth century a couple of shrewd businessmen, the Fowler brothers, decided to form a land company and promote the dry, cactus and mesquite covered country along the Frio river in LaSalle and McMullen counties as the “Wintergarden”. They attracted well over two thousand buyers, many of whom migrated from the East Coast for the chance to own a plot of fertile farmland for a few dollars. A farm could be had for as little as twenty five dollars down and ten dollars a month. Many have called the brothers “swindlers” but some historians maintain that they did have a vision of the area as a farming utopia. The Fowler Brothers happened to tour the  country just prior to their development plans, during one of the “wet” cycles, when almost any crop could grow there.

Below is an advertisement that appeared in a 1913 edition of the “Fowlerton Reporter” for the First State Bank Of Fowlerton Texas. Like most of the buildings in the town of Fowlerton, nothing remains today.

Photo Of The First State Bank Of Fowlerton Texas

History of Fowlerton Texas And The Naylor And Jones Land Company

Two brothers with the surname of Dull, who had made their fortunes in Pittsburgh, PA, once owned the vast 400,000 acre Dull Ranch. The Dull brothers later sold 240,000 acres to B.L. Naylor and Judge A.H. Jones.  Naylor died in 1910 and Jones in 1912. Jones had contracted with the Fowler Brothers to develop 100,000 acres around what would eventually become the town of Fowlerton, Texas. Growth of the town really took off in the years between 1913-1915.

The Fowler Brothers, in conjunction with Naylor and Jones Land Company, laid out the town  they named after themselves on a grid system and over two hundred miles of roads were built. Lots were divided up, some as small as a sixteenth of an acre in the town-site,  as well as numerous farm plots of anywhere from an acre to a hundred acres or more. When someone bought a ten to 160  acre tract of farm land, they automatically were given a lot in the townsite of Fowlerton.

A cotton gin, large rail depot, hotel, two banks, department stores and schools were all built. There was even a seafood restaurant featuring fresh oysters and shrimp that were brought in on ice from the coast by rail car.  Fowlerton Texas featured several paved streets, sidewalks, fire hydrants and free flowing artesian water wells, (which unfortunately contained some salt.)  The “Artesian Route” as described on the SaU&G railroad advertisement, referred to the areas numerous flowing wells.

The San Antonio, Uvalde & Gulf Railroad Company, nicknamed the “Sausage” connected the new farming center with faraway markets for produce such as onions, cabbage, spinach and other vegetables that were grown by the farmers. The following flyer is from Fowlerton’s newspaper, the Fowlerton Reporter. You will notice many town names, such as Prince and New California that exist in no form today.

old flyer from SAU&G railroad in South Texas

At the height of Fowlerton’s heyday, somewhere between 2000 to 4000 people called the town and immediate vicinity home. Over the years a series of droughts, combined with the negative effect of watering the farms with saline artesian well water, forced almost all the farmers to leave the country. A few remained and switched to ranching but by the 1960′s the town of Fowlerton Texas was down to about two hundred residents. Now census figures show that only about a hundred hardy souls remain.

What does remain in great number are hundreds of small lots, many of which have dubious ownership. Because of the “buy ten acres, get a town lot” system, many farmers never used or even claimed ownership of their town lots from the very beginning of the subdivision, starting in the 1900′s. Over the years many of these lots were sold for back taxes or claimed under the “quit claim deed” law, that enables one to claim ownership simply by occupying the land and paying taxes. Other owners kept up their taxes, though those parcels have no  road access and have been used for generations by local ranchers as their own. Another issue is that the town was incorporated, with official roads and streets, which still  may be legally opened up and which run right through tracts of land, next to (and even through) existing houses and barns, etc. There is no city government so who get any oil and gas royalties from the land occupied by the dozens of active and abandoned streets?

All of this is an attorney or landman’s nightmare  and when it comes to tracking down the owners of these lots it won’t be easy especially since the records are many, are kept in two different county courthouses (LaSalle County and McMullen County). For this reason the township of Fowlerton, as well as a similar Wintergarden community, Los Angeles, will likely be the last acreage to be leased by major oil companies.

Below is a recent photo of Fowlerton as it appears today.  Of all the buildings that were built in the once prosperous town only a handful of non-residences remain standing. The old Red Store, (rear left), which was once owned by Mr. O.W. Herman and sons, now serves as the post office.  (Ironically and sadly,  as the biggest economic boom in Fowlerton’s history arrives, the government is considering closing down the post office there.) The Baptist church is located two blocks off of highway 97 and the old Catholic church, now boarded up, sits surround by cactus and mesquite just off of Texas street.

Fowlerton Texas U.S. Post Office

One thing is for certain, and that is the little community is about to experience the biggest “land rush” since the days of the Fowler Brothers. Most of the interest will be in mineral rights of property outside of the town.  The vast number of owners of the town site lots may make drilling in the Fowlerton town site prohibitive since it may be difficult to get all of the thousands of owners  to lease enough land for wells to be drilled.  Whether this oil boom will lead to any real population growth for Fowlerton remains to be seen.  For those with fond memories of  towns like Fowlerton and Los Angeles Texas, there is hope that these historic towns may be revived from “ghost town” status.

Update: 09/02/2011

Reliable sources have indicated  that EOG Resources has assembled a team at the Cotulla, TX office to begin tracking down the owners of mineral rights in the old Fowlerton Texas townsite. Initially the company, which has leased up most of the land around the 2000 acre townsite, had decided to avoid the area, due to the difficulties involved.  As production figures began to come in from new wells on either side of Fowlerton over the past few weeks, things apparently changed. The fact that EOG Resources already has contact information for many of the townsite lot mineral rights owners, (due to the fact that they have already leased many of the associated 10 acre+ parcels in the old Fowler Brothers development), is a plus.  Still, the process of tracking down all of the remaining owners may take months, but may be worthwhile for EOG in the long run. Fowlerton is apparently is situated at a “sweet spot” in the Eagle Ford shale play, which could potentially contain millions of dollars worth of oil and natural gas.  Currently EOG Resources is in the process of either drilling or planning to drill several new wells in the River Lowe Ranch lease, located about 2.6 miles northeast of  Fowlerton, and  in the Naylor and Jones Unit 43, about 3 miles to the southeast of town. See map below:

Article by Nolan Hart.