Is the Eagle Ford Shale really an oil play? There is no doubt that it is, but when you look at the volume of condensate being produced you might believe otherwise. Newly released reports on API gravity of Eagle Ford Shale producers seems to indicate that the majority of recent liquids production is in fact gas condensate, with only a handful of companies actually producing crude oil.
In a recent investor report from EOG Resources, chairman Mark Papa made the claim that his company was one of only a few in the Eagle Ford Shale actually producing crude oil. The rest of the major players in the Eagle Ford Shale are actually producing gas condensate. By definition, condensate refers to light petroleum liquids above 45 API gravity, with petroleum liquids below that figure falling in to the crude oil category. It appears that EOG is far and away the largest producer of crude in the EFS if reported figures are accurate. (See diagram below from eogresources.com.)
Below, a map showing API gravity in the Eagle Ford Shale, from Drillinginfo.com. Tracts indicated in white belong to Carrizo Oil and Gas.
According to the Eagle Ford Shale API gravity map above, a large portion of the Southern half of the play will produce mostly gas condensate and natural gas. Those companies who were lucky enough to amass acreage in the northern oil zone are in a good position to reap the benefits of a high crude oil price, especially if they are able to cheaply transport it to the Gulf Coast, where it can trade at LLS price. Light Louisiana Sweet or LLS is currently priced comparable to benchmark Brent Crude and higher than the WTI benchmark. Condensate often trades well below crude oil, however this past February it was trading at $14 above WTI in Canada. Condensate is in high demand there since high API gravity liquids are being used to dilute heavy Canadian tar sands crude to a consistency suitable for Gulf Coast refineries to process.
The EIA forecasts that natural gas prices will continue to rise, ultimately leading to more drilling in the dry gas and condensate portions of the Eagle Ford Shale and the Pearsall Shale.
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