What’s 400 miles long and worth nearly $50 billion to about half a million Texans?
I’d like to give you three guesses, but I have a feeling you might only need one, maybe two — both of which got kick-started about five years ago…
If you think about it, October 2008 wasn’t the best time to have an oil and gas boom. After all, it took until October 7, 2008, for the Treasury Secretary to acknowledge that the housing bubble burst. By then, crude oil prices had begun their precipitous drop as demand plunged nearly 10% between July and October.
Yet, the implosion of crude prices served only to mask two major events for the Texas oil and gas industry that year: the resurgence of activity in the Permian Basin and the birth of the Eagle Ford Shale.
The latter took place on a single drilling pad in La Salle County.
Specifically, it was a small, relatively unknown company called Petrohawk Energy and their rig crew who drilled the STS-241-1H well in the South Texas…
Over 14,000 feet and two million pounds of proppant later, the well was placed on production at a rate of 9.1 million cubic feet of natural gas equivalent per day. Soon after, a second well affirmed what we suspected: that Petrohawk had discovered a new shale gas field.
The discovery sparked a massive drilling rush that effectively mapped out the Eagle Ford’s southern gas and northern oil windows:
And things have been good in South Texas ever since.
Up, Up, and Away
Oil production in the Eagle Ford throughout 2008 was trivial at best. In total, only about 352 barrels of oil were produced from the formation that year. If you aren’t aware, that’s an absolutely pitiful amount for a Texas oil play.
Fortunately, things have changed quite a bit since then…
During the first quarter of 2013, oil output in the Eagle Ford Shale averaged 512,455 barrels per day.
At that production rate, more than 92 million barrels of oil have flowed from Eagle Ford wells so far this year.
During 2012, output from the play averaged 381,317 barrels of oil per day. If crude prices averaged approximately $94.12 per barrel that year, then production from the formation was worth roughly $13 billion on the market.
And it doesn’t stop there — because the Eagle Ford’s contribution to more than half a million Texans living in fourteen counties encompassing the Eagle Ford far outweighs that amount…
Beacon of Light for Economic Recovery
$46.2 billion.
That’s the economic impact the Eagle Ford Shale had in 2012 alone, according to a report out of the University of Texas at San Antonio.
Activity in the area supported 86,000 full-time jobs for more than a dozen counties, with over $3.2 billion paid out in salaries and benefits to workers, helping Texas’ unemployment rate dip below 6%.
Of course, that doubles the economic footprint the Eagle Ford Shale left in 2011.
And even more growth is on the way…
Remember, production in the play is projected to double to more than one million barrels per day by 2016.
And believe me when I tell you that we aren’t the only ones with a vested interest in South Texas…
Foreign Invaders Want Shale
Some of you might recall a few deals in the past that highlight foreign interest in the Eagle Ford. There’s the $1.3 billion that Japan’s Marubeni Corp. paid for its 35% stake in Hunt Oil. Or consider the $2 billion China’s CNOOC shelled out for one-third of Chesapeake’s Eagle Ford assets.
Just last month I showed you that the South Texas play has received the most overseas investment during the last two years — and for good reason…
Chesapeake, for example, believes it’ll recover well over 300 million barrels of oil equivalent from the 600 wells they’ve drilled into the play thus far.
And what you may not realize is that it’s not just where they’re drilling, but also how they’re doing it.
You see, the future success for these Eagle Ford companies lies in the shift to multi-well pad drilling.
By next year, Chesapeake has stated that three-quarter of their wells will be on multi-well pads.
As the U.S. oil boom continues (we’re now over 7.2 million barrels per day!) this drilling strategy will become the norm for any company trying to stay competitive.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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