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Released April 23, 2018 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--U.S. oil and natural gas explorers expect their borrowing ability to increase over the next few months, leaving them open to invest in new shale assets, particularly the Eagle Ford and Austin Chalk formations in Texas, a survey by corporate law firm Haynes and Boone LLP (Houston, Texas) found. Industrial Info is tracking $867 million in active drilling-related projects in the region.
Not all of the projects will go forward as planned. Industrial Info assesses projects as having a high, medium or low probability of moving forward as scheduled.
More than 80% of the respondents said their borrowing bases--or credit availability backed by collateral--will likely increase as banks conduct their biannual reviews. The Permian Basin and Oklahoma's myriad reservoirs, including the STACK and the SCOOP--aka the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties, and the South Central Oklahoma Oil Province--remain top development destinations. But the Eagle Ford Shale and nearby Austin Chalk, may be the "next big play," the study said.
Industrial Info will present a complimentary webinar on the spending outlook for the Oil & Gas Industry in the Americas on Tuesday, April 24, at 9 a.m. CDT (10 a.m. EDT). Among the topics to be discussed will be the potential for additional LNG infrastructure in the region, including where and why. Click here to RSVP.
The Eagle Ford shale is unconformably bound by the overlying Austin Chalk formation and runs 400 miles from Southwest Texas to East Texas. While the formation produces only about a third as much crude as the Permian Basin--the country's most prolific field--Eagle Ford is closer to the Gulf Coast's network of refineries and pipelines, and drilling rights are cheaper. Of the $867 million in active drilling programs, $691 million are located in Eagle Ford, and Austin Chalk is home to $176 million.
With U.S. benchmark West Texas Intermediate up 28% in the past six months, pressures have eased on debt-loaded oil producers. They've used that to lock in prices. Between 50% and 60% of their 2018 production has been hedged, the survey noted. Producers will use cash flow from operations, bank debt and private equity as their main sources of capital this year, the survey said. Bankruptcies "are showing a drop-off," it said.
Among the largest projects in the Eagle Ford is Encana Corporation's (NYSE:ECA) (Calgary, Alberta) $54 million drilling program in the Wessendorff A Unit Oil Lease, featuring 18 wells. The company has five other active drilling programs in the Karnes Trough section. For more information, see Industrial Info's report on the Wessendorff program and January 18, 2018, article - Encana, Apache's Efforts in Permian, Eagle Ford Help to Offset Losses from Weaker Assets.
Click on the image at right for a graph showing the top 20 Eagle Ford operators by well count in 2017.
Another big Eagle Ford player, Carrizo Oil & Gas (NASDAQ:CRZO) (Houston), has eight active drilling programs, each valued at $50 million. These are located in the:
William Arnold, a professor in the practice of energy management at Rice University's Jones Graduate School of Business (Houston), said the shale play, in general, brought in new investors who wanted to stake qualified management teams who were unencumbered by legacy assets. They sought returns that were closer to 20% than the more modest returns of the majors.
"What we now have is a wider range of investors with risk profiles along a spectrum. Some want steady income, stock buybacks and reliable dividends," Arnold told Industrial Info. "Others want even less volatility and may settle for utility returns, which they see as possible as domestic oil production takes on manufacturing characteristics. Still others want to support higher-risk return investments, whether in West Texas or East Africa.
"A classic form of energy lending is reserve-based, and exploitable reserves are a function of price expectations, so it is likely that good operators will have increasing access to resources," he added.
U.S. shale oil production is expected to increase in May for the fourth consecutive month, the U.S. Energy Information Administration (EIA) (Washington, D.C.) said in its monthly drilling productivity report, boosted by higher output in Eagle Ford and record production in the prolific Permian Basin.
Production in Eagle Ford is set to rise by 24,000 barrels per day (BBL/d) to 1.3 million BBL/d--the most since May 2016. In the Permian, production is expected to jump by 73,000 BBL/d to 3.2 million BBL/d, the largest according to EIA records dating back to 2007.
In its 2017 Eagle Ford shale economic impact report, the University of Texas at San Antonio (USTA) (San Antonio, Texas) Center for Community and Business Research concluded that while the area may never see high rig counts it did in 2015, production of crude and condensates remain consistent.
To-date, more than two billion barrels of oil and condensate have been extracted from the Eagle Ford, USTA data showed. Revised estimates indicate that total recoverable reserves will be between 10-12 billion barrels. Dependent upon prevailing prices of oil and gas, the Eagle Ford continues to have a lot of life left in it--albeit with periodic ups and downs, the report concluded.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle TM, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com
Not all of the projects will go forward as planned. Industrial Info assesses projects as having a high, medium or low probability of moving forward as scheduled.
More than 80% of the respondents said their borrowing bases--or credit availability backed by collateral--will likely increase as banks conduct their biannual reviews. The Permian Basin and Oklahoma's myriad reservoirs, including the STACK and the SCOOP--aka the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties, and the South Central Oklahoma Oil Province--remain top development destinations. But the Eagle Ford Shale and nearby Austin Chalk, may be the "next big play," the study said.
Industrial Info will present a complimentary webinar on the spending outlook for the Oil & Gas Industry in the Americas on Tuesday, April 24, at 9 a.m. CDT (10 a.m. EDT). Among the topics to be discussed will be the potential for additional LNG infrastructure in the region, including where and why. Click here to RSVP.
The Eagle Ford shale is unconformably bound by the overlying Austin Chalk formation and runs 400 miles from Southwest Texas to East Texas. While the formation produces only about a third as much crude as the Permian Basin--the country's most prolific field--Eagle Ford is closer to the Gulf Coast's network of refineries and pipelines, and drilling rights are cheaper. Of the $867 million in active drilling programs, $691 million are located in Eagle Ford, and Austin Chalk is home to $176 million.
With U.S. benchmark West Texas Intermediate up 28% in the past six months, pressures have eased on debt-loaded oil producers. They've used that to lock in prices. Between 50% and 60% of their 2018 production has been hedged, the survey noted. Producers will use cash flow from operations, bank debt and private equity as their main sources of capital this year, the survey said. Bankruptcies "are showing a drop-off," it said.
Among the largest projects in the Eagle Ford is Encana Corporation's (NYSE:ECA) (Calgary, Alberta) $54 million drilling program in the Wessendorff A Unit Oil Lease, featuring 18 wells. The company has five other active drilling programs in the Karnes Trough section. For more information, see Industrial Info's report on the Wessendorff program and January 18, 2018, article - Encana, Apache's Efforts in Permian, Eagle Ford Help to Offset Losses from Weaker Assets.
Another big Eagle Ford player, Carrizo Oil & Gas (NASDAQ:CRZO) (Houston), has eight active drilling programs, each valued at $50 million. These are located in the:
- Connell-Wright A Oil Lease, featuring 8-10 wells; see project report
- Brown Trust Oil Lease, featuring eight wells; see project report
- Winfield-Raemay Oil Lease, featuring 8-10 wells; see project report
- Jasik Oil Lease, featuring 8-10 wells; see project report
- Wright Ranch E Oil Lease, featuring 8-10 wells; see project report
- Seal-Lehman A Oil Lease, featuring 8-10 wells; see project report
- Gran Torino A Oil Lease, featuring 8-10 wells; see project report
- Perrigo-Witherspoon A Oil Lease, featuring 8-10 wells; see project report
William Arnold, a professor in the practice of energy management at Rice University's Jones Graduate School of Business (Houston), said the shale play, in general, brought in new investors who wanted to stake qualified management teams who were unencumbered by legacy assets. They sought returns that were closer to 20% than the more modest returns of the majors.
"What we now have is a wider range of investors with risk profiles along a spectrum. Some want steady income, stock buybacks and reliable dividends," Arnold told Industrial Info. "Others want even less volatility and may settle for utility returns, which they see as possible as domestic oil production takes on manufacturing characteristics. Still others want to support higher-risk return investments, whether in West Texas or East Africa.
"A classic form of energy lending is reserve-based, and exploitable reserves are a function of price expectations, so it is likely that good operators will have increasing access to resources," he added.
U.S. shale oil production is expected to increase in May for the fourth consecutive month, the U.S. Energy Information Administration (EIA) (Washington, D.C.) said in its monthly drilling productivity report, boosted by higher output in Eagle Ford and record production in the prolific Permian Basin.
Production in Eagle Ford is set to rise by 24,000 barrels per day (BBL/d) to 1.3 million BBL/d--the most since May 2016. In the Permian, production is expected to jump by 73,000 BBL/d to 3.2 million BBL/d, the largest according to EIA records dating back to 2007.
In its 2017 Eagle Ford shale economic impact report, the University of Texas at San Antonio (USTA) (San Antonio, Texas) Center for Community and Business Research concluded that while the area may never see high rig counts it did in 2015, production of crude and condensates remain consistent.
To-date, more than two billion barrels of oil and condensate have been extracted from the Eagle Ford, USTA data showed. Revised estimates indicate that total recoverable reserves will be between 10-12 billion barrels. Dependent upon prevailing prices of oil and gas, the Eagle Ford continues to have a lot of life left in it--albeit with periodic ups and downs, the report concluded.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle TM, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com
