Eagle Ford Shale Will Continue To Contribute Significantly Towards US Crude Oil Production Growth

Tuesday 14 January 2014, Amsterdam

Production from the Eagle Ford Shale – an unconventional resource play – will continue to grow in 2014, fueling a reduction in net crude imports and driving exports of refined products in the US to pre-1990 levels, says the new report. The company’s latest report* states that the Eagle Ford boasts an even larger resource than initially thought, as companies successfully down-space wells, creating more drilling locations with each well producing increasingly more.

Taryn Slimm, a Lead Analyst covering US Onshore, says: “With over 250 rigs operating in Eagle Ford, companies are expected to spend approximately $30 billion in capital this year, and nearly all of the major operators are projecting at least five years’ more drilling at the current rapid pace. The most efficient operators in sweet spots are achieving over 100% pre-tax Internal Rates of Return (IRR) with conservative pricing.”

According to the new market report, ConocoPhillips is one of these companies due to its operating some of the best acreage in the play. The company’s production in the play is forecast to peak at 225,000 barrels of oil equivalent per day (boed) in 2026. Similarly, BHP Billiton (BHP) is a key operator as its wells have boasted an extremely high IRR, despite reported costs of $10 million per well in 2011. BHP is forecast to hit peak production of 210,000 boed.

This report places EOG Resources (EOG) as the benchmark for operator performance. Its large acreage position has allowed it to make several long-horizon decisions, including spending $100 million on a rail spur and loading terminal in St. James, Louisiana, to access Louisiana Light Sweet crude (LLS)/Brent pricing. EOG’s production is forecast to peak at 370,000 boed.

While most of Chesapeake’s (CHK’s) acreage has been generally considered inferior, an advantageous joint venture with China National Offshore Oil Corporation has provided ample capital for development that is forecast to peak at 210,000 boed.

Slimm concludes: “While there are a number of bottlenecks in the Eagle Ford, such as strained pipeline capacity, this play will continue making a significant contribution to US crude oil production over the coming years, as strong economics cushion it from price volatility.”