Oilfield Activity Around Pearsall Texas

Anyone who has recently traveled between the town of Pearsall (the county seat of Frio county,) and Cotulla on IH-35, may have noticed that there are dozens of new oil and gas businesses in that area. Pearsall had a population of around 7000 residents according to the 2001 census, however judging from the number of new businesses, the traffic on area roads and from all the new construction, the population of Frio county has most likely climbed in the past couple of years. The Frio county government is currently dealing with increased wear and tear on area roads. So far no per – well fee has been imposed on oil and gas companies to offset road and bridge wear in Frio County, but one may be considered if the amount of drilling activity picks up.  (Click On Maps To Enlarge)

Many of the oil wells (green dots,)  seen on the map above are old Austin Chalk wells. Most of the ones that you see on this map were drilled in the late 1980s to 1990s and have been plugged. These wells featured a very short lateral (horizontal wellbore) or two, but generally nothing in terms of the lateral length that is possible today.  The technology required to horizontally drill and hydraulically fracture the Austin chalk and Eagle Ford Shale formations simply did not exist back then in the same form that it does today. After completion, many of these wells came in as so-called “barn burners,”  since their large gas flares burned for days.  Some of the first Austin Chalk wells in Frio county produced hundreds of barrels of oil per day. Some oil company insiders referred to these high IP (initial production,)  wells as “doctor wells” because the high IP results were so good at helping lure new investors such as physicians. Sadly for both the investors and the oil companies, Frio county Austin Chalk wells did not last more than a few weeks or months before depleting to a barrel or two of oil per day. During this flurry of oil and gas production in Frio County, a number of oil and gas gathering lines and transmission pipelines were constructed to transport Austin Chalk production to market. Pipelines built for Austin Chalk production, such as the  Harvest Pipeline Company’s Pearsall Mainline, are now being used to transport Eagle Ford Shale production eastward to refineries such as Valero’s in Three Rivers.

(Click On Map To Enlarge)

What’s in store for Frio county in terms of Eagle Ford Shale drilling? Right now oil and gas companies such as Chesapeake Energy and EOG Resources are scrambling to drill high IP and high EUR wells in the volatile oil and wet gas windows of the EFS, (to keep share prices high and fund new drilling activity with high production wells,) in addition to hold leases about to expire. Oil and gas E&P companies will balance the need to drill Eagle Ford Shale wells in Frio County with their overall objectives in the greater Eagle Ford shale play. Some leases are held by production from older Austin Chalk and other oil and gas wells, therefore there is no rush to drill on those leases. Frio county is about 1,134 square miles in size, or approximately 725,760 acres. Potentially productive Eagle Ford shale lies beneath more than half of this area, so Frio county will most likely be in the game for many years to come, as hundreds more oil and gas wells are drilled over the coming decades. As natural gas prices rise, interest in drilling the Pearsall shale will return. The Pearsall shale, a large formation containing primarily dry natural gas, also lies under much of Frio County in addition to the Eagle Ford shale.

For the office of the Frio County Clerk, law enforcement, and Tax Appraisal District, see the Frio County Government Web Site

Article by Nolan Hart, Copyright 2012, All Rights Reserved

Map of Zavala County Eagle Ford Shale. (Click On Any Of The Images Below To View At Full Size.)

Below, map of Petrohawk’s Red Hawk Field.

For many years Crystal City was known as the  “Spinach Capital Of The World.” “Wintergarden” vegetable farms around the area still produce much of the nation’s supply of Popeye’s favorite vegetable.   Crystal City has not completely taken on the feel of an  “oilfield town” just yet, as has Carrizo Springs, located in Dimmit  County just a few miles to the south.  There is however  a noticeable increase in the amount of  traffic on area roads  and a number of new businesses such as RV parks in southern Zavala County. One such new park is the Caza Ranch RV park, which can be seen below, located on the Big Wells Highway, just south of Crystal City.

Below is a map from the Texas Railroad Commission showing some of the drilling activity in Zavala County, south of Crystal City.

What’s in store for Zavala County in terms of Eagle Ford Shale drilling?  Although Zavala county Eagle Ford shale wells typically have lower EUR (Estimated Ultimate Recovery) and lower IP (Initial Production) rates, they are cheaper to drill, since the formation lies at around 4000′. There is no doubt that the major oil and gas companies will return to the county in earnest  at some point.  In Zavala county there exists favorable geology for “stacked pay” opportunities, with the Escondido, Olmos, San Miguel, Anacacho, Austin Chalk, Eagle Ford shale, Buda and Georgetown formations prospective for hydrocarbons. Currently some companies with leases  in Zavala County may let the primary term of the lease expire and pay landowners an additional bonus payment to hold  the acreage for a couple more years until they can shift rigs back in this direction.  Some of the Eagle Ford Shale acreage in Zavala County is held by production from older oil and gas wells. We may see more drilling activity in Zavala County in the latter part of this year as oil and gas companies drill to hold acreage on larger parcels where they may find it too costly to pay extra lease bonus payments to hold the land for a couple more years.

Article by Nolan Hart, Copyright 2012, All Rights Reserved

 Click  On Any of the Images below to View at Full Size

Below, the small town of  Big Wells is living up to its name as  rigs drilling Eagle Ford Shale “gushers” can be seen from almost anywhere in town. The small town was named for large Carrizo – Wilcox  water wells, which were used to  irrigate crops such as onions  and cabbage. Now that same water is in high demand from oil companies, who use it to frac  new  Eagle Ford Shale wells in Dimmit county. Oilfield businesses in Dimmit  County are thriving and creating many new jobs for area residents. Second Photo: The new offices of  Flexpipe Systems, a new oilfield business in Big Wells Texas, which  specializes in providing water line and pipe to the oil industry.

Money from the oil and gas industry that is flowing into Dimmit  County may help to uplift some of the more impoverished areas of the county. Small  migrant worker shacks, such as this one in Big Wells Texas, are being bulldozed down to make room for new oilfield businesses, housing  and RV parks.  This oil boom is not without its problems  however. The  government of Dimmit County is finding it hard  to keep county roads maintained and keep up  with the demand for classroom space for children of oilfield workers and other issues. The population of Dimmit  County has long hovered around 10,000  people, yet according to some estimates that figure has  nearly doubled in the past three years.

Click On Photos To View At Full Size

Below, an old longhorn cow near the county line may be wondering if there will be any water left for her after Eagle Ford shale drilling in Dimmit county is done.

In the next image, an oilfield gate guard checks in visitors to a new Eagle Ford shale well location.

Below, a steady stream of traffic flows along State Hwy 85  between  Big Wells and Carrizo Springs. On the hill in the far distance is a new oilfield business specializing in saltwater disposal from Eagle Ford Shale wells in Dimmit and Zavala counties.

There will be some reduction in the amount of oil tanker traffic across the Eagle Ford Shale play as new pipelines come online this summer. However, overall oilfield traffic will  most likely continue  for many years to come as thousands more wells are drilled. Dimmit  County consists of 1,334 square miles, or about 853,760 acres. With some  oil and gas companies experimenting with  well spacing of the small  as 40 acres in the Eagle Ford Shale, there will no doubt be thousands more wells drilled in Dimmit  and surrounding counties.

 Click on the Map To View At Full Size

In the  first  photo below, (a long exposure,)  a steady stream of  oilfield traffic heads west toward Tilden in the early morning hours.  In the next photo you can see that most of  the oilfield traffic  passing the McMullen County Courthouse is turning north, heading to new wells, pipeline and construction projects in the “volatile oil” zone.

Click  On Any of the Photos Below to View It Full Size

Oilfield traffic at the intersection of  SH–72  and SH–16  in the early morning hours.  A hastily drawn sign advertises cheap housing for oilfield workers. Scores of RV parks have opened up in Tilden Texas, as residents  attempt  to cash in on the oil boom in whatever ways they can.  Several new oilfield businesses have opened on the outskirts of Tilden, including Stallion Rentals.   For many years the population of McMullen County hovered at around seven hundred souls, yet an influx of oilfield workers has  more than tripled the population in only a few short years. The influx of new residents and increase in oilfield activity has placed strains on everything from the  school system to law enforcement, EMS and area roads. Tax revenue from oil and gas activity is helping somewhat to alleviate the burden placed on county taxpayers.

Click On Any Photos Below To View At Full Size

Below, Wheeler’s  Store, just across from the McMullen County Courthouse  in Tilden Texas, is already crowded with oilfield workers at six in the morning on a weekday.

Just west of Tilden Texas, a new pipeline pumping station under construction by  Plains Pipeline L.P.

In the early morning hours an oil tanker waits at the stop sign next to the McMullen county courthouse.

An H2S flare burns brightly behind the cactus on a new Eagle Ford shale oil well in northern McMullen County.   Dark  and starry skies have long ruled at night over McMullen County, however  many residents have noticed how there is a constant glow in the night sky from natural gas flares and large outdoor lights placed around well sites during drilling and fracking operations. The nighttime glow from this oil boom being experienced by local residents is unlikely to fade anytime soon. McMullen County is comprised of approximately 731,520 acres, with some type of oil and gas bearing rock formation underlying almost of it. With some oil and gas exploration  companies examining well spacings  of as low as 40 acres, there will be thousands more oil and gas wells drilled in McMullen over the next several decades.

If you enjoyed these photos of Eagle Ford shale activity in McMullen County, please  “like us” using the Facebook icon on this page.

 Article by Nolan Hart. Copyright 2012.

(Click on images to view in original size).

Below  is a map from the Energy Information  Administration showing Atascosa County’s  location in the Eagle Ford Shale play. More than half of the county is located in the oil window.   Notice that the lower southeastern portion  of Atascosa County lies in the  “volatile oil – condensate  window”, of Eagle Ford Shale. This is the area that is seeing the most  intense drilling activity as oil and gas companies go after the  highly valuable natural gas liquids and oil found in that part of the play. This is where the “investor presentation wells”, with initial production figures of up to two thousand barrels a month or more, are being drilled.  Companies such as EOG Resources will drill as many of these wells as they possibly can before having to go drill wells to hold leases in the more oily section of the  Eagle Ford Shale in Atascosa County.  The depth of the  top of the Eagle Ford Shale in Atascosa County ranges between 6000′ to over 10,000′.

The first photo below was taken in Pleasanton, Texas, (which located  just north of the major Eagle Ford shale liquids core area), shows new cars for sale on a lot next to a new motel being built. The second Eagle Ford shale photo on below was taken south of Jordanton, Texas.  It shows new oilfield equipment  in temporary storage before being installed on leases in Eagle Ford Shale.

Note: Most Of The Photos Below Can Be Enlarged By Clicking On Them.

Next, a drilling rig on an Eagle Ford shale well just north of Cotulla Texas, near the small community of Woodward in LaSalle county.

Below,  vacuum trucks unloading produced water  from Eagle Ford Shale wells  at a new saltwater disposal facility north of Tilden Texas.  Because of the  great amount of water used to frac Eagle Ford Shale wells,  there  is a need for more  saltwater disposal wells in the Eagle Ford Shale. Many new vacuum truck driver jobs in the Eagle Ford shale have been created as a result for this need to dispose of produced water from new wells.  So competitive is the  Eagle Ford Shale saltwater disposal business that you will  often  find facilities located across the road from each other. There is another Eagle Ford shale saltwater injection facility in Atascosa county located just across SH-16 from the one seen below.

Above: Gas flares burning at night are becoming a common sight across much of South Texas.

Below  is a photo taken at night,  showing new natural gas treatment equipment including a separator and dehydrator unit on a new Eagle Ford well location  in Karnes County. The  second photo below it,  shows a Union Pacific locomotive and cars loaded full of aggregate which is destined for new  Well locations and roads in the Eagle Ford Shale area.  The  aggregate or gravel business is booming in South Texas.   Some material is being sourced locally, however  much of the  premium aggregate material is coming from outside of South Texas.

A  new well location in southern Atascosa County. This  photo shows a heater treater,  tank battery  and a small flare burning waste gas. The second photo shows a  a large new natural gas liquids gathering and treatment facility near Pleasanton Texas.

A pipeline crew laying a new line in LaSalle County near Woodward, northwest of Cotulla.

> Next Page Of Eagle Ford Shale Photos

Please  check back with us soon, as we will be adding more new Eagle Ford Shale photos.

Article by Nolan Hart. Copyright 2012. Please “like this page” on Facebook if you found these photos interesting.

The new oil boom in South Texas is creating hundreds, if not thousands of new jobs. Among the hottest jobs in the Eagle Ford shale are truck driving positions. Despite this fact, trucking companies are finding it hard to recruit enough qualified drivers, for a number of reasons. At a recent meeting at Coastal Bend College in Beeville, several trucking firms voiced their concerns about the problems related to recruiting enough qualified applicants for Eagle Ford shale truck driving jobs.

Why Are Eagle Ford Shale Truck Driving Jobs So Hard To Fill?

Among the concerns that most of the trucking company owners had was the fact that one in four  applicants does not pass a mandatory  drug screening test. Another was that many applicants do not pass a basic background check. The applicant may not necessarily have a criminal record, but if they have too many driving violations they can’t be hired. Another issue that employers are facing is that  even if the applicants  have a valid CDL, they may lack the basic reading and math skills required to read company manuals, fill out load forms, calculate barrels of oil hauled, etc.

They also stated that there are more than likely many good candidates out there for truck driving jobs in the Eagle Ford shale, but that the majority of people who apply do so in person, and are not likely to apply online. If more job seekers were aware of how to fill out an online application, or were aware of the number of trucking jobs in South Texas and what they paid, perhaps a more diverse group of people might apply.  One trucking firm owner stated that they will “basically hire anyone with a CDL or commercial driver’s license who can pass a background check and drug screening”.

One would think that in these tough economic times the need to feed one’s family would be greater than the need to take recreational drugs, yet this does not seem to be the case in South Texas.

What Does It Take To Get A CDL In Texas?

1. You must pply in person at a Texas Driver License office.
2. You must present documents that verify your Identity. The requirements vary based on whether you are a U.S. citizen of lawful immigrant
3. Show proof of Social Security Number.
4. Meet the non-resident driver’s license requirements if you are not a Texas resident.
5. Have proof of Texas vehicle registration and liability insurance on all vehicles you own. (Or your employer must.)
6. Complete the application form.
7. You must be photographed, fingerprinted, and sign the application.
8. Pass the required vision exam. If you wear glasses, you must bring them to the appointment.
9. Pass the required written test for class of CDL you are applying for, including which endorsements your employer requires,  Pass A & B rules test (written), and the driving skill tests in the type of vehicle you will be driving.
10. Complete the HAZMAT or  Hazardous Material Endorsement Procedures.
11. Pay the required state fee.
12. You must provide a commercial motor vehicle for the driving exam, and present current liability insurance, Texas vehicle registration, and inspection for the vehicle. Note that if you are not licensed to operate the vehicle, you cannot drive it to the examination site. For more info you can view the state’s site here: Texas DPS

If you are in need of a job and would consider a move to South Texas to work in an Eagle Ford shale truck driving job, companies are literally begging you to apply.  Check sites such as Texasoilfieldjob.com and Coastal Bend Workforce Solutions for links to trucking company websites where you can fill out a job application. If you have a clean background record, (usually meaning fewer than 3 moving violations and no felonies), and can pass a drug test, chances are there is a truck driving job in the Eagle Ford shale waiting for you.  There is currently a need for frac sand truck drivers, vacuum truck drivers, gravel haulers, oil truck drivers and pipe and heavy equipment haulers.

Downsides?  Many frac sand hauling firms are looking for owner / operators, who have their own tractor, or trailer combo. These firms are offering sign on bonuses as high as $5,000. For those without their own rig, it may be a bit harder to find a frac sand hauling job. Those without rigs might consider vacuum truck jobs, or oil hauling jobs.

One of the biggest concerns that many South Texas residents have about the Eagle Ford shale oil and gas boom is the long term effect on water aquifers such as the Carrizo Wilcox. These water “sands” are not so much in danger from hydraulic fracturing, as some environmentalists would lead you to believe, but rather may suffer from depletion due to the amount of water used to frac new wells. How much that depletion amount ends up being is something that has bothered me for a while now.  Chesapeake Energy reports that a typical Eagle Ford shale well requires approximately 6 million gallons of water to drill and complete. With potential spacings as small as 80 acres to the well, and tens of thousands of wells to be drilled across the play, some fear a substantial drop in Carrizo Wilcox aquifer  levels. Another wild card that could come into play is that once all these new water wells are drilled, and oil and gas drilling is mostly over with, will ranchers sell their water rights and allow the wells to be connected up to pipelines, sending Carrizo Wilcox water to cities such as San Antonio?

All Doom And Gloom Or Just A Need To Proceed With Caution?

I’m beginning to come around and accept the fact that the Eagle Ford shale can be developed responsibly, with a minimal amount of impact on the Carrizo Wilcox. I’d still like to see more studies done, but here’s how it looks so far.   If you take six million gallons, which is about how much water that is used to frac a well, multiplied by 8 wells to the square mile,  you arrive at a one – time water use of about 48 million gallons, or 147 acre feet.   (An acre foot, or 325,851 gallons equals the amount of water which will fill a one acre area, one foot deep). Using a little “roughneck math”, on the 640 acre lease (one square mile), on which 8 wells would be drilled and fracked, there would be somewhere around 208,544,640 gallons of water available in a couple feet of the Carrizo aquifer, which is indeed quite thick. See Carrizo Wilcox thickness map below:

(The amount of water held in a vertical section of any aquifer depends on the porosity and uniformity of the formation).   Only 147 acre feet of water would be used for oil and gas drilling on the whole 640 acre section, that’s assuming it will all come from the Carrizo Wilcox, which is not going to be the case. Surface water, from large “tanks” or stock ponds will also be used as frac water, once a normal rainfall pattern returns to South Texas.

Darrel Brownlow, a geologist and former member of the Evergreen Water District, offered a presentation to McMullen County residents recently. Brownlow estimated that there will be between 20,000 and 25,000 wells drilled in the Eagle Ford shale in next 20 years, resulting in water usage of up to 300,000-365,000 ac/ft. That breaks down into 15,000 ac/ft per year or roughly 1,250 ac/ft per the 12 counties that pull water from the Carrizo Aquifer. (That’s assuming it all comes from groundwater sources and not surface sources such as ponds and that no water is recycled.)

A slide in Brownlow’s presentation noted that the 1,250 ac/ft per county includes the drilling and subsequent fracking of “roughly 80 to 100 wells per year per county.”
Brownlow stated that 1,250 ac/ft of water is about the same amount of water that it would take to farm  625 acres of corn.

I love to see detailed information such what Mr. Brownlow presented but would also like to see more studies  to confirm these numbers. For example, I’m skeptical about the amount of wells drilled per county that he offers, I think it will end up being a lot more than that. There have been over 200 permits issued for LaSalle county alone from Jan to Sept 2011.  For more reading, you can find the Carrizo – Wilcox Aquifer report here:  TCEQ Report

Is Recycling Frac Water The Answer?

Recycling frac water in the Eagle Ford shale is one way to reduce the impact on the Carrizo aquifer. There are a number of companies specializing in cleaning up used frac water, removing all chemicals, etc., from it so it can be used again for any number of purposes. This is a great technology and has been used with success in the Barnett and Marcellus shales. Companies are already setting up facilities in some areas of the Eagle Ford shale to clean used frac water. One reason that recycling frac water may not catch on as much in the Eagle Ford shale as it has in other shale plays, is due to the fact that there is favorable geology in much of the region for disposal wells to be used. Disposal wells are utilized to inject used frac and other produced water deep underground into non-productive zones far below  fresh water aquifers. The cost to treat frac water and return it to municipal water or agricultural water standards runs somewhere between $1.50 to $2.00 a barrel. (Correct me if I’m wrong and your company has developed a cheaper method).  In the end, any contaminants removed from it still must be disposed of, in disposal wells, etc.  If an oil company can frac a well with pond water or from the Carrizo aquifer for a few cents per barrel, then inject it into a disposal well for around 50 cents a barrel (add in trucking costs of about $1.00 a barrel), then the economics are simply not that favorable for treating and reusing frac water in those areas of South Texas where disposal wells can be drilled. (On a related note, it has been reported that cities such as Carrizo Springs are selling treated sewage plant water to oil companies for fifty cents a barrel).

In Texas, haulage and disposal costs average $1.47 per barrel. In the more populated East, the costs range from $1.68 to $2.10 per barrel. Source: U.S. Dept of Energy. 5/31/11

Even if treatment costs were on par with disposal costs, and used frac water was treated at a facility somewhere in the area, it still has to be trucked there, stored and then somehow transported to the next well for reuse, however far away that might be.  Six million gallons equals about 142,857 barrels, or about 1,098 vacuum truck loads just to frac one well.  I may be wrong on this one, but  the consensus I’ve been getting from  drilling consultants that I’ve spoken to is that it’s not yet economical in much of the Eagle Ford shale area to treat and reuse frac water. (At least not in those areas where the geology exists to drill disposal wells and obtain well water from the Carrizo aquifer.) This is  a subject I’m very interested in, so feel free to e-mail me if you have more insight on the economics of disposal vs. treatment in the Eagle Ford play.

It’s Not Eagle Ford Shale Drilling That Will Deplete The Carrizo

Here’s what I believe is going to be  the greater threat to the Carrizo Wilcox aquifer  in the Eagle Ford shale play area. It’s not the amount of water that is going to be used by oil and gas companies to frac wells but rather  how all of the newly drilled water wells will be used by landowners after oil drilling is over with. Landowners often end up keeping and using water wells that oil companies drill on their land. In many areas of South Texas, where the Carrizo Wilcox aquifer lies at a depth of several thousand feet, only wealthy ranchers could previously afford to  drill Carrizo wells (which could cost as much as $50,000 or more each). The game changer now is that even small landowners with a few hundred acres could possibly end up with a “free” Carrizo water well worth thousands of dollars, courtesy of the oil company. Let’s just imagine that  one new Carrizo Wilcox water well is drilled for every 2 or 3 square miles of the Eagle Ford shale play. Will the rancher or farmer then decide to put in some kind of crop, and put a high volume pump on the well and use that water for years thereafter, or will they decide to sell their water rights to a municipality such as San Antonio who offers them a deal they can’t refuse? It’s going to be interesting to see how the future “water wars” play out.

Article by Nolan Hart

The FBR Capital Eagle Ford shale report  noted that the upper side estimates were dependent on things such as improvements in drilling and recovery technologies, which enable more oil and gas to be extracted. As a general rule, every doubling of wells in a shale play has resulted in a 15-23% increase in productivity.

How Much Oil Is In The Eagle Ford Shale?

In an earlier post on this site, “How Much Oil Is In The Eagle Ford Shale”, we did some rough calculations, based on EOG Resources, Pioneer Natural Resources and Petrohawk Energy’s early estimates. Using projected EUR’s (Estimated Ultimate Recovery) numbers from those reports we estimated that the Eagle Ford shale holds about 5 billion barrels of recoverable oil. New estimates, such as the one by FBR Capital, indicate the Eagle Ford shale holds at least 7 billion barrels of oil on the low side and 20 billion barrels on the high side.

In contrast, the large East Texas oilfield that began with the famous  Spindletop gusher near Beaumont, has produced about 5.2 billion barrels from over 30,300 past and present wells. (source: Wikipedia)  The East Texas field  was previously considered the largest oilfield ever discovered in the lower 48 states. Prudhoe Bay, the largest U.S. oilfield, was estimated to have originally held 25 billion barrels. Current estimates from the U.S. Department of Energy are that there are less than 5 billion barrels of oil remaining in all of Alaska.

South Texas Changing Forever

Folks, I can’t say it enough. The small towns that you once knew in South Texas, or for that matter, larger cities such as San Antonio or Corpus Christi, are about to be totally transformed as a result of the Eagle Ford shale. If you want to imagine what many cities and towns in South Texas will look in the coming months and years, drive to Midland or Odessa  and notice all of the oilfield businesses, equipment yards, rigs, pumpjacks, etc. out there. No longer will you be driving past miles and miles of unbroken brush covered ranch land in counties such as Dimmit, McMullen, LaSalle, Live Oak, Gonzales, Atascosa and others. The landscape of a 50 mile wide by 400 mile long swath of Texas will be filled with new well locations, pumpjacks, compressor stations, and  oilfield workers busy keeping it all running. Thirty years down the line, you’ll see more of the same.

You may not like all of those changes, such as increased traffic, higher food prices, and having a huge West Texas - style oilfield all around you, but many positive things will also result from it. For one thing, South Texas schools and hospitals are about to see big improvements as the tax base grows. Over a quarter of a million new jobs could be created by the Eagle Ford shale.

Small towns and cities in South Texas are already seeing a flurry of  business activity as companies scramble for a position in the new oilfield. Halliburton is reportedly searching for a location to build a “supersite” south of San Antonio. Also,  Schlumberger, Weatherford and Baker Hughes are all considering major industrial and office complexes in southern Bexar County. Corpus Christi and Three Rivers refineries are already switching from imported oil to local crude. Refineries in the  Houston area are preparing to do the same, once large new pipelines are completed by late 2012.  It’s that big. Not to seem overly dramatic, but the Eagle Ford shale is about to change life forever for residents of  South Texas. It’s going to be a wild ride, so hang on to your hat pardner!

Article By Nolan Hart, 09/03/2011

One of the most common questions that  landowners who have signed Eagle Ford shale oil leases ask is  “when will they drill an oil well on my land?’

In the oil business, decisions are most often made with two things in mind, maximizing profit and minimizing risk. One of the biggest risks for oil companies in the Eagle Ford shale play at the moment is having leases expire, with no oil and gas production to hold them, then having to face a much more competitive market to re-lease that acreage. Once a well is drilled, the lease is “held by production”, but with so much acreage to drill up, oil companies simply won’t be able to get to all of it before leases expire or come up for renewal. Many Eagle Ford shale oil leases contain an option for the oil company to extend them when the primary term expires. For example, the contract may enable the oil company to pay the same amount per acre to hold the lease for another two years. On large ranches, it may cost an oil company too much to renew leases, so they will make every possible effort to drill a well and “hold by production” the acreage. This is especially true in areas where the price per acre of Eagle Ford shale leases has been driven into the thousands.  If you have several hundred or several thousand acres in one of these areas, and you signed a lease with a primary term of three years,  there is a good chance that you’ll see a rig move in before it expires so the company doesn’t have to pay any more to hold the land.

Oil Companies Must Clear Up All Title Issues First

Before drilling begins, oil and gas exploration companies must clear up all title issues related to the properties involved. If a number of  parcels of land are involved in the proposed unit, it may take several months to track down all of the information required to establish genuine ownership of the minerals / surface. Tracts of land must not have issues such as disputed ownership or back taxes. In the case of property that has  a quitclaim deed, (the lowest quality deed), the company may need to get affidavits from neighboring landowners to help validate the claim of ownership. This is necessary to avoid large lawsuits once royalty payments, surface damage, etc.,  becomes an issue.

There are other factors at play in the Eagle Ford shale right now that may be affecting drilling in your area.  These factors include the ability of the Texas Railroad Commission to issue permits, the availability of drilling rigs, frac water, sand, road material, oil and gas pipelines and trucks, etc. “Takeaway capacity” or the ability to get oil and gas from new wells to market, will be an issue well into 2012, until new pipeline networks are finished. Also,  permitting for new wells has seen delays due to a staffing shortage at the RRC, which is down to 625 full time employees from 704 in ’09. Update: The Texas RRC has noted that as of Sept, 2011 drilling permit processing time is, according to them, “1 business day for expedited permits and 3 business days for standard permits.”

Putting On A Show For Wall Street

Some landowners, such as those with EOG Resources leases in McMullen and LaSalle counties, have been perplexed to see drilling rigs show up, then move on down the road a few months later.

According to one oil company executive that I spoke to, one of  the motives in relocating assets is to drill enough “super wells”  and get them online as soon as possible to impress Wall Street investors. This is most likely the reason that companies such as EOG Resources have shifted rigs away from the western Eagle Ford play toward counties to the east. According to the Schlumberger rig count, EOG Resources had, as of July, 28, 2011,  9 rigs drilling in Gonzales county,  6 in Karnes county, and 2 in Wilson county, (the eastern side of the play). At that time there were only two rigs drilling for EOG Resources in LaSalle County and none in McMullen or Dimmit counties. EOG Resources holds thousands of acres in those counties, with proven reserves. However, in order to focus on “big producers”, they have moved almost all of their rig fleet to the east, where they are bringing in wells producing more barrels of oil than those in the western province. In Gonzales county, EOG has wells such as the Hansen – Kullin #3H, which is producing 1,538 barrels a day, with shorter laterals than those in the west. While there have been some big wells drilled in LaSalle, Dimmit, McMullen and other counties to the west, those in the eastern side of the play are on the priority list. The aim is to boost production numbers and keep the investor’s money flowing in. For landowners wanting to see an Eagle Ford shale well on their property, patience is a virtue. Rumors are in the air of “massive drilling programs”, by the main players in the Eagle Ford shale, once a network of new pipelines is completed in 2012.

Update: 09/19/2011.  Judging from the two dozen or more new drilling permits recently approved for EOG Resources in LaSalle and McMullen counties, a shift of rigs back to the west side of the play will occur in the coming months in order to “hold by production” some of the larger leases, which are about to come up for renewal.

By Eaglefordshaleblog.com editor Nolan Hart, 07/28/2011