Ea­gle Ford mak­ing a quiet come­back

S. Texas play’s resur­gence is in shadow of Per­mian Basin

San Antonio Express-News (Sunday) - - Front Page - By Jor­dan Blum STAFF WRITER

CALD­WELL — Three years ago, Allen Startz found him­self in an un­wanted kin­ship with thou­sands of other oil field work­ers in the Ea­gle Ford shale — laid off with few prospects nearby.

He left his home in Bryan to work in the West Texas Per­mian Basin, mak­ing plenty of money, but grow­ing ex­hausted from the 450-mile one-way trip he made ev- ery cou­ple of weeks to visit his fam­ily.

To­day, he wakes up in his own bed and heads to a job op­er­at­ing oil field ser­vices trucks in the north­east­ern Ea­gle Ford, just 30 miles away.

“I fi­nally get to see my kids all the time,” said Startz, 52. “This is ac­tu­ally the first time I’ve ever worked and gone home on the same day. I’m get­ting back in the swing of things be­ing a dad.”

His vastly im­proved work-life bal­ance is the re­sult of a slow but in­creas­ingly sure come­back of the Ea­gle Ford shale, which, for most of the en­ergy in­dus­try’s two-year re­cov­ery, has been over­shad­owed by the boom­ing Per­mian.

On the 10th an­niver­sary of the first dis­cov­ery in the Ea­gle Ford this month, drilling is more ac­tive than at any time since the col­lapse of crude prices in late 2014.

Oil com­pa­nies, con­tend­ing with ris­ing costs and short­ages of work-

ers, ma­te­ri­als and pipe­lines in the Per­mian, are be­gin­ning to make new bets on the Ea­gle Ford’s 90 mil­lionyear-old shale rock.

In the com­mu­ni­ties sur­round­ing the for­ma­tion, which stretches 400 miles from north of Col­lege Sta­tion to the Rio Grande near Laredo, peo­ple of­fer a sense that the hard times are end­ing, even if the Ea­gle Ford no longer is the epi­cen­ter of the na­tion’s oil and gas in­dus­try, as it was in 2012.

“I’d say it’s a re­birth,” said Rick Sal­dana, pro­duc­tion su­per­in­ten­dent for SM En­ergy, a Den­ver com­pany drilling near Cata­rina, about 60 miles north of Laredo. “It’s not a boom, but there’s a resur­gence here in the Ea­gle Ford.”

Piv­ot­ing south

Ma­jor Texas en­ergy com­pa­nies such as Cono­coPhillips and Marathon Oil, which both have hold­ings in the Per­mian, are piv­ot­ing to the Ea­gle Ford. The British oil ma­jor BP, mean­while, is poised to be­come one of the top play­ers in the Ea­gle Ford when it closes a $10.5 bil­lion ac­qui­si­tion of the Aus­tralian min­ing com­pany BHP Bil­li­ton’s Texas shale hold­ings within the next few days.

About 100 drilling rigs are op­er­at­ing in the Ea­gle Ford, about half the ac­tiv­ity from 2014, but well above two years ago, when fewer than 30 were ac­tive.

Oil and gas pro­duc­tion from the Ea­gle Ford again ex­ceeds 2 mil­lion bar­rels a day of oil equiv­a­lent and should match the early 2015 peak of 2.6 mil­lion bar­rels a day by the end of 2019, said Lau­ren Droege, se­nior an­a­lyst for the re­search and con­sult­ing firm IHS Markit.

“The Ea­gle Ford is def­i­nitely still in great shape,” Droege said. “It’s not what it used to be, but there’s still a good bit of play left.”

The Ea­gle Ford’s ad­van­tage is that it’s much closer to Gulf Coast mar­kets and its oil is fetch­ing higher prices than that pro­duced in the Per­mian, where pipe­line short­ages and de­liv­ery chal­lenges have forced pro­duc­ers to deeply dis­count their crude.

The Hous­ton oil com­pany Wild­Horse Re­source De­vel­op­ment is tar­get­ing the north­east­ern sec­tion of the shale, near Col­lege Sta­tion, where it holds 400,000 acres and has five rigs op­er­at­ing.

The last boom went bust just as that part of the shale play saw a spike in drilling.

Wild­Horse views that as an­other ad­van­tage. The com­pany, which soon will open a sand mine close by, is ex­per­i­ment­ing with drilling longer wells, us­ing more sand and wa­ter in hy­draulic frac­tur­ing to re­lease more oil and gas from the shale rock, and em­ploy­ing fiber-op­tic mon­i­tor­ing to im­prove ef­fi­ciency and pro­duc­tion.

“We looked at this as an op­por­tu­nity to con­sol­i­date an area that had been lightly de­vel­oped in the Ea­gle Ford,” Wild­Horse Chief Fi­nan­cial Of­fi­cer Drew Cozby said.

Not far from Wild­Horse’s op­er­a­tion, along Texas High­way 21 in Cald­well, a sign hangs in front of the Gar­den Spot Café: “All rig work­ers wel­come here.” Michelle Boyd, who owns the restau­rant with her hus­band, said she opens at 6 a.m. just to serve break­fast to the in­creas­ing num­ber of oil field crews.

“It was a divine in­ter­ven­tion. I’ve tripled my busi­ness here,” said Boyd, who re­lo­cated the restau­rant to the prime high­way lo­ca­tion in May. “The oil is bring­ing life back to the town. It was a slow haul, but now things are re­ally start­ing to hap­pen.”

The sweet spot

The first Ea­gle Ford dis­cov­ery was made in La Salle County, but a so-called sweet spot was found to the east in what’s known as the “Karnes trough.”

Allen and Lynn Brown opened the spa­cious Jerry B’s restau­rant in Kenedy in Karnes County in 2006. Lynn, 72, de­scribed the first few years as a daily calamity set on repeat, with the lo­cals din­ing there just enough to stay open. Then came the shale boom.

“There were so many freak­ing Cadil­lacs here it looked like a deal­er­ship,” she said. “It was crazy.”

A wait­ress could make $500 a night in tips from oil field work­ers with cash burn­ing holes in their pock­ets. Ho­tels, shops and bars sprung up all around; many of them col­lapsed with oil prices.

In Karnes City, both Louisa Vil­lar­real and her hus­band found them­selves tem­po­rar­ily out of work when he was laid off from his oil field job and the bar she man­aged shut down.

With three teenaged chil­dren, she ad­mit­ted they — like so many oth­ers — took the good times for granted, think­ing the oil boom could last 20 years. They barely saved any money.

They strug­gled for months, and her hus­band found work at a lo­cal milling com­pany. Now, with the oil on the rise, he’s back on the job in the Ea­gle Ford. She’s man­ag­ing a restau­rant, the 5D Grill and Lounge, which opened in the same lo­ca­tion as her old bar.

“A lot of peo­ple have gone back to work, so things are much bet­ter,” Vil­lar­real said. “But peo­ple are afraid it could bust again, so we’re all fo­cused on sav­ing this time around.”

Back in La Salle County, the city of Co­tulla, pop­u­la­tion of 4,000, be­came the ho­tel cap­i­tal of the Ea­gle Ford dur­ing the boom times.

Co­tulla has more than 25 ho­tels, al­most all of which were built to house oil field work­ers. That’s about one ho­tel for ev­ery 150 lo­cal res­i­dents.

Rooms then typ­i­cally went for more than $200 a night. Now, most are just un­der $100 a night. But they’re all still open.

“Ev­ery­one com­ing to Co­tulla wanted to put in ho­tels, but we needed other things like res­tau­rants and shops,” said Patsy Leigh, man­ager of Co­tulla’s Main Street pro­gram. “In­stead, we ended up with 26 ho­tels.”

Back again

In Cata­rina, SM En­ergy em­ploys about 90 peo­ple — nearly match­ing the town’s pop­u­la­tion of just over 100.

SM is drilling near the Rio Grande in Dim­mit County, de­vel­op­ing up to six wells at each drilling site. SM has more than 500 well sites in the re­gion.

SM ac­quired a large swath of land in the re­gion in 2008, cov­er­ing what’s called the Ol­mos shal­low gas for­ma­tion. Lit­tle did the com­pany know that deeper un­der­ground were the siz- able nat­u­ral gas re­serves of the Ea­gle Ford. The ac­qui­si­tion, just as the ini­tial Ea­gle Ford dis­cov­er­ies were dis­closed, was mere co­in­ci­dence.

“Luck­ily, we were here just be­fore the Ea­gle Ford hit,” said Rick Sal­dana, SM’s pro­duc­tion su­per­in­ten­dent. “We were ac­tu­ally sit­ting on a gold­mine with­out even know­ing it.”

Sal­dana com­mutes ev­ery day from Laredo to lead SM’s ex­pand­ing drilling plans in the south­west cor­ner of the Ea­gle Ford.

As Sal­dana likes to point out, the cash flow com­ing from SM’s Ea­gle Ford nat­u­ral gas pro­duc­tion kept the com­pany afloat dur­ing the oil bust.

SM never com­pletely stopped drilling for oil dur­ing the down­turn.

The com­pany learned to turn a profit with oil prices at $40 a bar­rel, adding fiberop­tics to cal­cu­late frack­ing ef­fec­tive­ness and drilling hor­i­zon­tal wells up to 15,000 feet, or nearly three miles long.

Crude has climbed back near $70, and Sal­dana sees jobs and traf­fic re­turn­ing to the iso­lated re­gion.

The Ea­gle Ford’s re­cov­ery has come just in time for Bobby Bat­tle.

Bat­tle, 49, of Round Rock, lost his job of nearly a decade after the Dal­las mer­chant power com­pany Lu­mi­nant shut­tered its coal­fired Sandow power plant early this year and the as­so­ci­ated lig­nite coal mine, in large part be­cause coal no longer could com­pete with lower-cost nat­u­ral gas.

After work­ing odd jobs for the bet­ter part of the year, Bat­tle just started a new job — along with more than a dozen other for­mer Lu­mi­nant work­ers — at Wild­Horse’s sand mine in the north­east cor­ner of the the Ea­gle Ford, near Col­lege Sta­tion.

Bat­tle said he feels for­tu­nate to be em­ployed full­time again and able to help sup­port his fam­ily, in­clud­ing two daugh­ters and a grand­daugh­ter.

“It’s def­i­nitely a bless­ing,” Bat­tle said.

Michael Cia­glo / Staff pho­tog­ra­pher

Todd Mucha walks to­ward a pile of sand col­lected from the new Wild­Horse Re­source De­vel­op­ment sand mine for use in frack­ing.

Wil­liam Luther / Staff pho­tog­ra­pher

Allen and Lynn Brown opened Jerry B’s restau­rant in Kenedy in 2006. They’ve seen the ups and down of the oil mar­ket, with busi­ness slow be­fore the Ea­gle Ford boomed, good times at its peak, the sud­den dropoff and now the re­turn.

Michael Cia­glo / Staff pho­tog­ra­pher

Wild­Horse Re­source De­vel­op­ment en­vi­ron­ment, health and safety man­ager Romel Gon­za­les stands between pro­duc­tion tanks at a frack­ing site.

Wil­liam Luther / Staff pho­tog­ra­pher

A drilling rig rises be­hind a pas­ture a few miles out­side Kenedy. About 100 such rigs cur­rently are op­er­at­ing in the Ea­gle Ford.

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