Eagle Ford shows signs of revival
Oil exploration and production companies are showing renewed interest in South Texas’ storied Eagle Ford oil field, which was all but abandoned by drillers during the two-year energy bust as companies hunted for the most economical acreage.
Two big Eagle Ford deals this month have drawn price tags of about $15,000 per acre — roughly three times higher than last year’s average.
Deal values and activity there, said Chris Sheehan, a research director at research firm IHS Markit, are “beginning to revive with the recovery in crude prices.”
Clay Lightfoot, an analyst at the energy research company
Wood Mackenzie, agreed. “It could be a big year for the Eagle Ford,” he said.
Almost 10 years ago, Eagle Ford drillers perfected techniques in horizontal drilling and hydraulic fracturing in shale fields that helped reshape U.S. oil production. But as crude prices fell in 2014 toward last year’s $26-abarrel low, the costs of drilling the Eagle Ford became prohibitive. As prices came off the bottom, but remained low, companies moved operations to more productive fields, particularly the Permian Basin in West Texas, where they could drill more efficiently and profit at lower prices.
Oil has traded above $52 a barrel recently.
The number of active drilling rigs in the Eagle Ford plummeted from 259 in 2012, as the shale revolution was booming, to 29 in June last year, according to the Houston oil services company Baker Hughes. Since the bottom, drillers have returned 18 rigs to the Eagle Ford, compared with more than 130 in the Permian.
The sales of Eagle Ford land this month reveal both why some companies are getting out of the play and why some are focusing there.
Denver-based oil and gas producer SM Energy said two weeks ago that it was selling 37,500 net acres in the Eagle Ford for $800 million to Austinbased Venado Oil and Gas, so SM could focus cash on the Permian.
That price worked out to about $16,350 per acre, according to IHS Markit, far more than the $3,500, on average, companies received last year in the play.
Anadarko Petroleum Corp., which is also concentrating on the Permian, made a similar announcement last Thursday: The Woodlands-based oil explorer said it will sell 155,000 net acres to Houston oil company Sanchez Energy Corp., backed by the New York private equity firm Blackstone Group, for $2.3 billion — or just under $15,000 per acre.
All of that is far less than the $33,000 per acre the Permian averaged last year. And far less than the $35,000 the Eagle Ford averaged in 2012.
But the two 2017 prices still put Eagle Ford deals on track for their best year since 2013.
Sanchez executives called the Anadarko purchase “transformative.” With the new land, Sanchez will hold 400,000 contiguous acres and could increase production to 100,000 barrels of oil and gas a day.
“It’s like so many things in life: location, location, location,” chief financial officer Howard Thill said.
Venado did not return a call seeking comment.
Shares of Sanchez Energy rose $2.54, or 29 percent, on Friday to close at $11.24.
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