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Page added on February 24, 2014

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New Frontiers: Eagle Ford vs. Permian, the great Texas oil showdown

Production

Production in West Texas’ Permian Basin has grown at a moderate clip over the last few years, but how does it stack up to its faster-growing peer resource plays? Two prominent operators in the biggest US unconventional oil plays traded thoughts recently on how it measures up to the giant Eagle Ford field, which has been called the “800-pound gorilla” among shale plays.

The prolific Eagle Ford, sited in South Texas, and the Bakken Shale in North Dakota/Montana each produce less than the Permian, but are the bigger plays, Bill Thomas, CEO of EOG Resources, said at the Credit Suisse Annual Energy Summit in Vail, Colorado last week.

What’s more, 80% of the US’ oil production that comes from horizontal wells, which are used chiefly in unconventional resource plays, comes from those two fields, Thomas said in webcast remarks.

“Because of the quality of the play, [the Permian] won’t be another catalyst like the Eagle Ford Shale and Bakken have been,” he said. “The Permian has a lot of reserve potential but it’s still in a very distant third place.”

Instead, Thomas sang the Eagle Ford’s praises, as EOG has for the last few years. “It’s growing very rapidly,” he said. “It’s the best play in the world at this moment.”

While there may be a “slight” improvement in Permian drilling over time, “it will never be a Bakken or Eagle Ford play,” said Thomas. “Therefore we don’t believe it will be a catalyst to continue to extreme growth rates we’ve been on” for US oil production.

According to data supplied by Platts unit Bentek Energy, the Eagle Ford was producing 123,000 b/d of crude in December 2010, which rose to 399,000 b/d in December 2011 and 772,000 b/d in December 2012, compared with the 1.2 million b/d in December 2013. That implies growth rates of 224%, 93% and 55% respectively.

For the Williston Basin, crude production was 405,000 b/d in December 2010, rising to 595,000 b/d in December 2011 and 840,000 b/d in December 2012 and 1.067 million b/d in December 2013, or growth of 47%, 41% and 27% respectively.

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On the other hand, the Permian produced 967,000 b/d of oil in December 2010, Bentek figures show, which increased to 1.092 million in December 2011 and 1.273 million b/d in December 2012 before rising to 1.4 million b/d in December 2013. That is output growth of 13%, 17% and 15%.

Industry was slower to develop the Permian on unconventional drilling and completion techniques, since the basin was more mature and vertical wells ruled the day. And the large amount of vertical Permian drilling that persists has kept large output growth spurts tamped down, Pioneer Natural Resources CEO Scott Sheffield said in a recent conference call.

But Sheffield, whose company is a Permian leader and has produced there for decades, told the conference that the real growth in that basin is yet to come.

“I’ve been trying to convince Wall Street for 30 years that the Permian is one of the biggest basins in the world,” he said. “So hopefully with all these IPOs [initial public offerings] and smaller companies helping us prove it up, I think you’ll see it continue to grow significantly.”

Sheffield and Wall Street believe that starting this year, an increasing number of smaller privately held Permian operators are expected to look to IPOs for money to fund growth—specifically the more expensive but also more productive horizontal wells—in the basin which features as many as a dozen “stacked” or layered pay intervals.

Case in point: RSP Permian, a small company that concluded its IPO last month, and which Wall Street has begun to notice.

The company, whose managers have 25 years of Permian experience on average, said on its website that starting last year it “turned the majority of capital to horizontal drilling…to maximize returns.”

Sheffield said the Permian’s Spraberry horizon, a major producing zone in the field for decades and sited at depths of 6,500-8,000 feet, was “always” considered a 1 billion barrel of oil equivalent field. But nearly a year ago, the company said the Spraberry plus the prolific Wolfcamp horizon was one of the world’s largest oil fields with 50 billion boe recoverable oil.

The company has about 11 billion boe of additional resource potential in the Permian, and “I’m guessing [that] will double over the next 10 years, more from downspacing and other zones,” said Sheffield. “There’s probably another seven or eight zones.”

Because of the relatively large number of pay zones, the CEO described the Permian’s Midland sub-basin as “essentially having 12 Bakken Shales or 12 Eagle Fords on top of each other,” he said. The Permian “will probably be the only growing oil play in the US until at least 2050.” — Starr Spencer in Houston

Platts



7 Comments on "New Frontiers: Eagle Ford vs. Permian, the great Texas oil showdown"

  1. rockman on Mon, 24th Feb 2014 5:44 pm 

    IMHO comparing the EFS with the Permian basin is a bizarre waste of time. First, the EFS is a single formation in the Gulf Coast Basin. If one wishes to compare basin to basin that fine. Or compare one Permian Basin formation to a GC Basin formation (or another formation in any other basin) that’s fine. And there are development efforts ongoing in other GC Basin formations besides the EFS and those are being excluded in the comparison.

    This is a classic case of comparing an apple to an orchard containing many different types of fruit trees. Exactly what is the point?

  2. Northwest Resident on Mon, 24th Feb 2014 8:12 pm 

    “Exactly what is the point?”

    Let me take a crack at that one. Answer: To get investors to dump their hard earned investment dollars into a start-up company called “RSP Permian, a small company that concluded its IPO last month, and which Wall Street has begun to notice.”

    Subtle hint. This small company has Wall Street’s attention, and they have a lock on that “50 billion boe recoverable oil” just in the Spraberry plus the prolific Wolfcamp horizon alone — so don’t delay, put your money right down boys.

    Without any makeup or lipstick on that pig: Oil companies are desparate for CAPEX, and it isn’t looking good for them. Resorting to lies and distortions to lure investment is no longer beneath them.

  3. Nony on Mon, 24th Feb 2014 9:13 pm 

    Here is a map that illustrates @Rock’s point:

    http://info.drillinginfo.com/wp-content/uploads/2014/02/Permian_Basin-IDMD.png

  4. Nony on Mon, 24th Feb 2014 9:15 pm 

    @NR

    Harold Hamm said he didn’t like the idea of going public because “you have to believe your own BS”.

    That said, they did it because it was needed to get the capital to make the move that they did.

  5. Northwest Resident on Mon, 24th Feb 2014 9:43 pm 

    Nony — I’ll take Harold Hamm at his word on that. Makes sense. Lots of companies go public to get the investment they need to position themselves for better growth/profit. So far, so good.

    My post wasn’t addressing the question of why Harold Hamm decided to go public. I was attempting answer rockman’s question, “Exactly what is the point?”

    That was in response to a nonsensical article that is clearly an attempt to attract investment for the great Permian oil play — “the only growing oil play in the US until at least 2050.”

    Surely, Nony, you see the wisdom in following this article’s advice and betting the farm on the only growing oil play in the US until at least 2050? Let me know how it works out for you.

  6. Nony on Mon, 24th Feb 2014 9:53 pm 

    I was agreeing with you that the article is promotional.

  7. Northwest Resident on Mon, 24th Feb 2014 10:02 pm 

    Promotional is a fair assessment of this article. “Fishing for suckers” is an even better one. My concern for you Nony is that due to what I view as your overly-optimistic faith in the “7/8’s” full NG glass, that you might end up getting the short end of some sharp stick when the reality comes home to roost. So I’m throwing a few punches your way, none of them ill-willed. Glad to know you won’t be betting the farm on that Permian oil play — “the only growing oil play in the US until at least 2050!!!” hahahaha

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