Why the Eagle Ford Oil and Gas Production Fell in August



Eagle Ford natural gas production

The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on September 14, 2015. The EIA estimates that the natural gas production at the Eagle Ford Shale reached 7.04 Bcf (billion cubic feet) per day in August. That’s 2% below July’s production level, but 7% higher than production a year ago.

According to the EIA, the Eagle Ford Shale’s natural gas production rose 329% in the past eight years. In August 2015, the region produced 7.04 Bcf per day compared to 1.64 Bcf per day in August 2007.

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Eagle Ford crude oil production

The EIA estimates that the Eagle Ford Shale’s crude oil production amounted to ~1.54 MMbpd (million barrels per day) in August. This is 3.60% lower than July’s production total. However, it’s a 2.40% rise over the production in August 2014.

Shale oil production at the Eagle Ford Shale rose from ~53,000 bpd (barrels per day) in August 2007 to ~1.54 MMbpd in August 2015. That’s a huge 28-fold rise in eight years.

What it means for energy companies

Major oil and gas producers in the Eagle Ford Shale in South Texas could see lower revenue led by lower production. Eagle Ford producers include EOG Resources (EOG), BP (BP), Matador Resources (MTDR), and Pioneer Natural Resources (PXD). Pioneer Natural Resouces forms 3.20% of the Energy Select Sector SPDR ETF (XLE). EOG Resources accounts for 0.24% of the SPDR S&P 500 ETF (SPY).

Lower Eagle Ford production can negatively affect midstream MLPs operating in the region like Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Williams Partners (WPZ).

Rigs and monthly additions from one average rig

The number of rigs working at the Eagle Ford fell from 110 in July to 108 in August. A year ago, there were 256 drilling rigs in the region. That said, there’s been a shift from predominantly natural gas-directed rigs to liquids-directed rigs in the Eagle Ford over the last few years. Natural gas rigs accounted for 43% of all Eagle Ford rigs in August 2011. Now, they fell to 14%.

The EIA calculates that the average Eagle FordSshale rig added production of 2.1 MMcf (million cubic feet) in August 2015—a 91% rise since August 2007. In the 12 months leading up to August 2015, the production addition per rig rose 31%. The higher production per rig benefits natural gas producers.

In the next part of this series, we’ll look at production at the Utica Shale.


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