Record Eagle Ford Oil Production
Catching Up to the Bakken
Eagle Ford keeps surpassing expectations.
Crude production from the shale deposit reached above the 500,000 barrels per day threshold—a 77 percent increase from March of 2012. Nine fields comprising the majority of the Eagle Ford generated an output of 298,266 bpd in March of 2012 and increased to a recent estimate of 529,874 bpd, Bloomberg reports.
The Eagle Ford shale covers over 20 counties and extends from South Texas into East Texas. The region is known for its diverse reserves of crude in northern counties and natural gas in the south.
Eagle Ford has attracted energy companies of different backgrounds, but most of the drilling activity is coming from crude production.
According to yearly estimates from the Texas Railroad Commission, average production for crude in the Eagle Ford was 381,317 bpd in 2012. From January to March of 2013, estimation had been 512,455 bpd—an impressive feat for a region that first began producing 352 barrels a day in 2008.
Analysts expect an investment flow of around $28 billion to be concentrated on Eagle Ford for 2013. With so much capital pouring into the region, chances are high that South Texas oil output will rise beyond the 77 percent mark in 2014 and beyond.
Eagle Ford Investment
In 2012, the Eagle Ford created 116,000 jobs in South Texas.
Investment in South Texas has brought an abundance of wealth and prosperity to an area that had once been notorious for low wages and few job opportunities. The pay is lucrative, and some workers can rake in an annual salary of $100,000, depending on the company and job description.
Drilling consultants can make an average $1,500 per day, and even entry level jobs in oil and gas locations can start at $14-16 an hour. Even employers outside of the energy sector are able to pay workers a better wage as well.
But the problem that many energy employers encounter is not finding enough qualified workers. In the past few years, oil and gas employers have sifted through more than enough applicants who failed drug and background screenings. Energy employers have even scaled back their standards—hiring employees who have no commercial license and know nothing of the energy industry.
Training is provided, but such an investment in worker potential takes time. And housing shortages in South Texas are somewhat of a burden to employers looking for more workers.
But those who can land a job in South Texas are likely to make a good living, especially within the transportation industry. Truck drivers are in such high demand that a high school graduate can make more money than many college graduates in other fields. So much activity takes place in oil transportation that state and local governments are struggling to keep up with road maintenance.
South Texas Roads
South Texas roads have not received much attention, but they are vital in maintaining the oil and gas economy in the Eagle Ford and other energy-rich areas. Whether in the form of roadways, pipelines, or trains, reliable and safe transportation methods will prevent backlogs, price decreases, and accidents.
County officials believe the amount of oil trucks using country roads is the equivalent of 8 million commuter cars. Without quality roads, production and transportation will be severely hampered. Some roads in the Eagle Ford are in such disrepair that there are stories of residents scraping the bottoms of their cars against deep potholes.
That is why the state of Texas is addressing the issue by setting aside $225 million from the state’s budget for counties in South and West Texas—an unusual measure for a state government to pay directly for county roads.
However, Texas lawmakers know just how vital energy production is in the state. Investing more in road repair will pay off in the long-run, given how much extra revenue flows into state and county coffers from petroleum drilling.
Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
Aside from energy and economical standpoints, it is also in the interest of public safety. Crumbling roads can lead to damaged vehicles or accidents. And those large potholes could be enough to cause mishaps involving tanker trucks.
Local counties are expecting 24,000 wells to be operating by 2022—something that will place even more stress on roadways.
Road repair has been an issue in Texas, but at least the state and local authorities are addressing the situation to avoid messy entanglements in the future.
It remains to be seen if maintenance will continue as oil production continues to increase.
Having to invest more in roadways than the average state is just one small price to pay for the numerous benefits that the Eagle Ford is bringing to local communities, and it will certainly come as a relief to energy companies with large investment stakes.
Eagle Ford Companies
The Texas Railroad Commission lists the top 20 producers in the Eagle Ford, with a specific eye on crude. Some of those companies include EOG Resources (NYSE: EOG), Chesapeake Energy (NYSE: CHK), ConocoPhillips (NYSE: COP), Marathon Oil (NYSE: MRO) and Anadarko Petroleum (NYSE: APC).
EOG Resources and ConocoPhillips-owned Burlington Resources are two of the largest producers.
EOG Resources has the largest acreage presence in the Eagle Ford, with 639,000 net acres under its belt. In a May 2013 press release, 27 production wells reached over 2,500 bpd, and an additional nine wells exceeded peak levels of 3,500 bpd.
In February of 2013, the company increased its reserves in the Eagle Ford from 600 million barrels of oil to 2.2 billion. EOG plans to drill 425 new test wells this year.
In 2006, Burlington Resources was acquired by ConocoPhillips for $35.6 billion. Conoco was able to acquire most of its South Texas assets through the purchase, and now the company holds over 220,000 net acres through Burlington. Some of the most active counties for Burlington are Karnes, Fayette, DeWitt, Austin, and Colorado.
Chesapeake Energy, a company traditionally known for its focus on natural gas, has also made a play in the Eagle Ford for crude. Chesapeake also has some of the largest net acreage in the area, holding 485,000 acres. Such a massive amount of land can be credited to former CEO Aubrey McClendon’s land-grabbing days.
The company has recently shifted focus to crude after suffering from the higher production costs and low domestic prices of natural gas. We’ll see if new CEO Robert Douglas Lawler will commit to more crude exploration in the future.
And while natural gas has suffered lately in the U.S., Mexico is upping natural gas imports from Texas. Eagle Ford is the perfect location for companies that want to focus on traditional crude or cleaner burning natural gas.
If you liked this article, you may also enjoy: