The Houston Chronicle reported today that the years of activity in Eagle Ford are expected to be a sweet 16 at least, particularly as drilling capabilities improve. There has been a lot of active investment in the 400 mile long shale formation in the last year, although uncertainty continues as to how long drilling will go on in the area. Entrance is actively protecting clients’ interests in Eagle Ford, helping solve some of the driving issues as the play matures and activity changes from proof-of-concept to optimization and repetition.
In an interview for the article, Harold Hunt, a research economist, stated that, “current estimates suggest 20,000 wells will be needed to produce the oil and gas available in the Eagle Ford. With about 1,250 wells capable of being drilled a year, it would take about 16 years to reach that capacity.”
In addition to the number of wells, how quickly the wells are drilled also makes in difference in whether a producer can turn a profit. Wells have a dropping return over time, as pressure changes cause fewer hydrocarbons to be captured. This means that the first year is key, leaving companies in a race to drill wells at a pace that can overcome that first drop in productivity.
Adding insult to injury, only the top quintile of hydrocarbon density/liquid areas is currently economically viable at current market rates. As a result, it’s not only drill as fast as you can, it’s drill intelligently as fast as you can, because there is a huge drop economically from the highest areas of gains and even the next best quintile. The included graph illustrates it best in showing how much difference there is between the first and second quintile’s profitability when gas price aren’t high.
Perhaps as drilling technology gets better and better, these issues will improve. No matter what Eagle Ford is exciting for Texas as a state and for the US as a whole, as we move toward energy independence, with more gas than we currently know what to do with! We look forward to hearing Kay Bailey Hutchinson’s views on this exciting topic on October 18th at the Texas Alliance of Energy Producers 21st Century Energy Technology Conference.
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