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The Eagle Ford Shale

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Re: The Eagle Ford Shale Today

Unread postby ROCKMAN » Mon 05 Oct 2015, 08:02:07

Syn - Exactly. Remember how front loaded the cash flow is based upon the high initial production rate. The ROR of any project is dependent upon the TIMING of the revenue stream: the longer it takes to recover the investment the lower the ROR. Every shale well evaluated used an estimated cash flow metric to calculate the ROR: reduce that revenue stream, especially in the very critical early days of a shale well, and you will kill many of those potential drilling projects. Also remember that for many operators they needed that early high production rate to generate revenue to pay for future wells to replace the rapidly declining earlier wells.

We all understand the Red Queen concept. Now imagine an operator intentional breaking its Red Queen's leg: exactly how is that beneficial to the operator?
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Re: The Eagle Ford Shale Today

Unread postby hvacman » Mon 05 Oct 2015, 10:44:14

Every shale well evaluated used an estimated cash flow metric to calculate the ROR: reduce that revenue stream, especially in the very critical early days of a shale well, and you will kill many of those potential drilling projects


The failure of LTO producers to anticipate the collective impact on the market of each drilled well producing at max flow rate is a classic example of Garrett Hardin's "Tragedy of the Commons". Each individual company made decisions and took actions based on projections of what the outcome would be for them individually, but their projections did not factor the collective impact of all their cohorts' own decisions, thereby flooding the market and negating each other's assumptions of the near-term future for the crude oil market. But as Hardin notes in his analysis, this is classic human behavior - whether it be the LTO market or individual shepards sharing a common pasture for their sheep.

From Wikipedia -
The tragedy of the commons is a term, probably coined originally by William Forster Lloyd[1] and later used by Garrett Hardin, to denote a situation where individuals acting independently and rationally according to each's self-interest behave contrary to the best interests of the whole group by depleting some common resource. The concept was based upon an essay written in 1833 by Lloyd, the Victorian economist, on the effects of unregulated grazing on common land and made widely-known by an article written by Hardin in 1968.


https://en.wikipedia.org/wiki/Tragedy_of_the_commons
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Re: The Eagle Ford Shale Today

Unread postby ROCKMAN » Mon 05 Oct 2015, 15:54:01

h-man: "Each individual company made decisions and took actions based on projections of what the outcome would be for them individually, but their projections did not factor the collective impact of all their cohorts' own decisions, thereby flooding the market and negating each other's assumptions of the near-term future for the crude oil market." I wonder if folks, including you, think I'm just kidding when I say that the price and shale boom collapse didn't come as a surprise to the oil patch. Honestly, I'm not shitting you. LOL. I've had numerous conversation with many of the pubco Eagle Ford players since the beginning of the boom: the business plan was simple = borrow as much money and drill as fast as possible so management can cash out before the very predictable bust.

There is a very, very old (about 100 years) and true saying: " There is a very old saying among land promoters regarding boom plays: "You roll into town with the first wagonload of whores and roll out before the first wagon of production equipment arrives." And that isn't hindsight: the Rockman posted those exact words 25 May 2010 on the Oil Drum...over 5 years ago.

(http://www.theoildrum.com/node/6488)

It was true then. It was true 100 years ago. And it's true today. Why would Petrohawk sold their undeveloped EFS acreage for $15 BILLION and walked away from the play if they thought they could turn a better profit drilling? Trust me: we might be mean and cutthroat...but we ain't stupid.
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Re: The Eagle Ford Shale Today

Unread postby hvacman » Tue 06 Oct 2015, 18:45:33

RM - thanks for the timeless reminder of the oil patch game and that of other "investment opportunities":)

It was true then. It was true 100 years ago. And it's true today. Why would Petrohawk sold their undeveloped EFS acreage for $15 BILLION and walked away from the play if they thought they could turn a better profit drilling? Trust me: we might be mean and cutthroat...but we some of us ain't stupid.


The flip side of that transaction - Petrohawk sold their acreage for $15 BILLION to ...whom?....someone in the oil patch who was mean, cutthroat AND stupid!(ie, someone rolling in WITH the production equipment).
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Re: The Eagle Ford Shale Today

Unread postby ROCKMAN » Wed 07 Oct 2015, 08:00:43

h-man: it was BHP Billiton (Aussies) that bought the Petrohawk acreage in July 2011. They bought the company for 65% more than the closing price the day before. Also: Earlier that year, BHP paid nearly $4.8 billion to acquire some shale natural gas assets from Chesapeake Energy. And how did those “investments pan out for them: before they did the Petrohawk deal the stock was trading for $102/share in April. After in August: $79/share. And since then: they had fairly stable price of around $60-$80/share. And today: $34/share. About 1/3 of their value before they bought Petrohawk.

And as of last September: BHP Billiton Limited (ASX: BHP) has been a big casualty in today’s heavy selloff. The miner’s shares have fallen 5.8%, compared to a 2.7% fall for the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Despite its staggering dividend yield, which has now climbed to 7.7% fully franked, investors continue to avoid the stock based on the headwinds facing the resources industry. Although BHP Billiton remains one of the lowest cost operators, and one of the industry’s most diversified, each of its primary commodities are under intense pressure. Copper and coal are both hovering near multi-year lows while iron ore and oil, which are BHP’s two most important resources, are also expected to fall further in the coming months.

I suppose the take-way there is no matter how well you run a company deflation will still cripple it in the end.
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Re: The Eagle Ford Shale Today

Unread postby Subjectivist » Sat 24 Sep 2016, 12:31:28

ROCKMAN wrote:h-man: it was BHP Billiton (Aussies) that bought the Petrohawk acreage in July 2011. They bought the company for 65% more than the closing price the day before. Also: Earlier that year, BHP paid nearly $4.8 billion to acquire some shale natural gas assets from Chesapeake Energy. And how did those “investments pan out for them: before they did the Petrohawk deal the stock was trading for $102/share in April. After in August: $79/share. And since then: they had fairly stable price of around $60-$80/share. And today: $34/share. About 1/3 of their value before they bought Petrohawk.

And as of last September: BHP Billiton Limited (ASX: BHP) has been a big casualty in today’s heavy selloff. The miner’s shares have fallen 5.8%, compared to a 2.7% fall for the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Despite its staggering dividend yield, which has now climbed to 7.7% fully franked, investors continue to avoid the stock based on the headwinds facing the resources industry. Although BHP Billiton remains one of the lowest cost operators, and one of the industry’s most diversified, each of its primary commodities are under intense pressure. Copper and coal are both hovering near multi-year lows while iron ore and oil, which are BHP’s two most important resources, are also expected to fall further in the coming months.

I suppose the take-way there is no matter how well you run a company deflation will still cripple it in the end.



Hey ROCKMAN, it has been about a year since this thread was updated, what do you observe going on now compared to a year ago? I see various posts about production collapsing as fast as it went up in the Eagle Ford shale, does that look right to you? Wth the amount of drilling and completions still being done will you hazard a guess where the bottom is for Eagle Ford production?
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Re: The Eagle Ford Shale Today

Unread postby ROCKMAN » Sat 24 Sep 2016, 14:06:47

Sub - Here's the best current snapshot of the Eagle Ford I know of:

https://www.eia.gov › drilling › pdf › ea...

It does show production dropping about as fast (even faster in the last 12 months...so far) as it increased. Surprises me a bit but in general due to higher production cost the the Bakken the EFS won't have as long a commercial life.

Not sure how to explain the increase in "legacy" well production. But the EFS drilled just before the rig count bust were longer and had a lot more frac stages so one should expect them to hold up better as they deplete. You can see that in the chart showing the increase in new well rates over time. But those newed wells did cost a lot more then earlier ones.

That link won't work. I always have a problem with PDF links. Here the link where I found it. It's the first result.

https://www.google.com/search?sclient=t ... 7BRc2mn1oI
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Re: The Eagle Ford Shale Today

Unread postby ROCKMAN » Sat 24 Sep 2016, 14:13:04

BTW BHP Billiton stock is selling for 70% less then it's peak when it bought out Petrohawk. Its stock began tanking long before the oil price collapse.
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Re: The Eagle Ford Shale Today

Unread postby Subjectivist » Mon 26 Dec 2016, 20:06:11

ROCKMAN wrote:Sub – “…what percentage of the depleted wells became strippers with very low but steady production vs what percentage just get capped off or plugged?” Difficult to put hard numbers on it. First I suspect you mean low volume producers and not “depleted wells” because depleted wells don’t produce anything. And a lot of low volume EFS wells were P&A because they cost a lot to pump and more to dispose of produced salt water. I was told back when oil prices were high that EFS wells didn’t have much more than a 5 or 6 year commercial life. But I just pulled this up: in July 2015 there were 618 EFS wells producing less than 30 bopd each. Of that number 283 were doing 10 bopd or less. On the flip side 1,245 were doing 200 bopd or more. But most are fairly recent: 426 of those wells are 1 year old or younger and are still in the relatively high decline rate period.

And a reminder: those counts are actually leases and not wells since Texas oil production isn’t reported by the well. So on a well basis all those numbers are too low to some uncertain degree.


If you slow the lifting rate way way down, to say just 10 barrelsof fluid a day, does theratio of water to oil change? Or is it fixed at a slowly rising percentage that just gradually keeps getting worse?

I ask because I used to work with a guy who knew some Ohio stripper well owners. He seemed to believe that slow stripper pumping rates gave more oil time to make it to the well but things I have read seem to contradict that.
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Re: The Eagle Ford Shale Today

Unread postby rockdoc123 » Tue 27 Dec 2016, 00:40:08

If you slow the lifting rate way way down, to say just 10 barrelsof fluid a day, does theratio of water to oil change? Or is it fixed at a slowly rising percentage that just gradually keeps getting worse?


unfortunately there is no universal answer to that. It all has to do with mobility ratios (oil versus water), wetability of the reservoir, reservoir drive mechanism and how all of that is affected by pressure drawdown. Each reservoir will have it's own unique rate at which you can pump and still keep the oil to water ratio appropriate for your facilities. Remember that Kern Field in California has been at 90% water cut for many years but the facilities can handle it economically. This might not be the case for other fields where the facilities are not able to handle large fluid volumes and hence to keep oil production high you need to fiddle with rates etc to make sure you optimize oil versus water production. Sometimes you have no choice. Every field has it's own story.
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Re: The Eagle Ford Shale Today

Unread postby ROCKMAN » Tue 27 Dec 2016, 00:57:44

Sub - "If you slow the lifting rate way way down, to say just 10 barrels of fluid a day, does the ratio of water to oil change?" Typically not in water drive reservoirs...especially in low oil producers. And in some odd cases it can actually increase the waterr cut a little. But some strippers have pressure depletion drives and we won't actually pump 24 hrs: the thing might be fully emptied by 6 hrs of pumping and then taking 18 hrs to fill back up. Such wells will produce only 10 bopd or less.

The problem for many stripper operators is that the revenue goes straight into their checking accounts. Accounts they pay their mortgages from, buy groceries, etc. Difficult to cut back production.
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Re: The Eagle Ford Shale

Unread postby Tanada » Thu 01 Feb 2018, 01:02:47

Apparently nobody cared about the Eagle Ford in 2017 SIGH, but here are the current stats.

EIA Eagle Ford Data

1,242,000 bbl/d estimated production for January 2018.

From this image we can see production went into steep decline in mid 2015 but by April 2016 it had already stabilized and started creeping up as soon as prices started passing $50/bbl.
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http://www.allaboutshale.com/wp-content ... Martin.jpg
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