fundamentals,eagle ford,permian basin

Good morning all'

well seeing as the "Back to Business" thread was somewhat spoiled, I thought it best if we try again to get back to our old ways and hammer home the good stuff.

Also, there is a new statement that was placed on the investorgroup website last night. Here is the link and you will then find the link "Letter to the Board"


NEWS LINK




Here is a little about the EF that was published last night.



I apologize for not getting more information to you guys on a consistent basis. By nature, I like to be thorough with everything I post, which leads to fewer posts but better information. Moving forward, I’ll try to post data points such as the graph below which can be useful to you during times when I’m not writing as much.

Source: Texas Railroad Commission.
*BOPD number includes oil and condensate.

The above graph was prepared using information provided by the Texas Railroad Commission (TRC). Based on the data I’ve looked at, Lavaca County has been the source of the highest production rates in the Eagle Ford to date. Note that the sample size for Lavaca isn’t as large as some of the other Counties due to lack of drilling, but I would expect it to be an active County moving forward. Also note that while Lavaca saw the highest rates, it’s also the deepest of the above counties (see table below) on average with depth to the top of pay at around 11,471'. This implies that Lavaca is also the most expensive county to drill in. While Webb is the most prolific Eagle Ford County on a BOE basis, its production is mostly gas and condensate. The TRC classifies all of Webb’s production as either gas or condensate and at this point I’m assuming any oil produced from Webb is being lumped into condensate (my inquiries to clarify this issue with the TRC haven’t been successful to date).

Below is an Eagle Ford map which you can use to reference county locations.

Chesapeake (CHK) drilled a number of wells in Webb County (SW Eagle Ford) between 2008 and 2010 and has since (along with the rest of the industry) focused the majority of its drilling in the formation’s oilier counties. The best counties in the Eagle Ford appear to be Gonzales, Karnes and Lavaca, which are towards the Northeast of the play (the highlighted counties North of Fayette are an extension area which hasn’t seen much development to date). I know EOG Resources (EOG) and Halcon Resources (HK) both have acreage in Leon County so results there will be something to pay attention to.

The table below shows depths by County as well as the operators I looked at in each county for this analysis. The far right column shows the wells by county used in the graph above.

Drilling costs in the Eagle Ford are ranging from $6 to $9 million depending on the operator. EOG and HK are the lowest cost producers I’ve seen in the play, with most companies spending between $7 and $9 million. Compared to the Bakken, the wells are less expensive but also contain lower oil content. The Eagle Ford does have several advantages over the Bakken, including smaller spacing units (EOG is experimenting with 60 to 90 acre spacing) which lead to more well locations (thus a higher recovery factor of oil in place) and close proximity to trading hubs including the St. James terminal in Louisiana where companies are currently receiving a $10+ premium to WTI.

One thing to caution with the Eagle Ford is the best acreage is probably being drilled first, much like the Parshall field in North Dakota’s Bakken. Either way, its a monster play with a number of counties that are producing very consistent results.