Investors following the North American oil and gas industry should be aware that oil production volumes from the Eagle Ford shale play have blown past expectations this year.
According to the Texas Railroad Commission, crude oil production from the Eagle Ford region averaged more than half a million barrels per day for the first quarter of 2013. This is a whopping 34% increase from 2012 production levels and is also the highest since the south Texas play hit oil in 2008. Energy research firm Wood Mackenzie estimates that total Eagle Ford capital expenditure will hit $28 billion in 2013. It’s pretty evident that the value extracted by major operators is exceeding expectations. However, this shouldn’t come as a big surprise, either. In the last couple of years, exploration and production companies have been quietly raking up acreage in this shale play.
The movers and shakers
Marathon Oil Corporation (NYSE:MRO) increased its stake to 330,000 net acres in the liquids-rich window of the Eagle Ford. For the first quarter, average net sales volumes from this acreage stood at 72,000 barrels of oil equivalent per day – a fourfold increase year over year. Still in the growth phase, the company should be further increasing production where this property is concerned. This shale play should have a major role in increasing Marathon Oil Corporation (NYSE:MRO)’s overall production volumes in the next three years.
The recently spun off E&P major ConocoPhillips (NYSE:COP) is another key operator in the Eagle Ford region. With 227,000 net acres under its belt, the company is sitting on an estimated 1.8 billion barrels of oil equivalent. Over the next five years, ConocoPhillips (NYSE:COP) is expected to invest $8 billion in this region and add 130,000 barrels of oil equivalent.
1 company to watch
While Marathon and ConocoPhillips (NYSE:COP) should become major players in the Eagle Ford in the next few years, it’s Houston-based EOG Resources Inc (NYSE:EOG) that has the best position in this shale play. The stock rose an incredible 43% in the last 12 months.
Holding acreage in the Gonzalez County helped the company dramatically increase its liquids production. According to CEO Mark Papa, the biggest profit driver during the first quarter was its increasing oil production in the Eagle Ford that exceeded expectations. Gonzalez County turns out to be the sweet spot for EOG Resources Inc (NYSE:EOG). In the first quarter, 27 new wells that came online had initial production rates, or IP rates, above 2,500 barrels of oil per day. Of these, nine wells had IP rates streaking past the 3,500 bpd mark. This is an amazing performance in shale oil drilling. However, unlike the Bakken shale play, the decline rates aren’t so steep for the Eagle Ford wells.