Investment firm makes Eagle Ford prediction
by Christina Rowland
Sep 06, 2011 | 5704 views | 0 0 comments | 14 14 recommendations | email to a friend | print
EAGLE FORD – There is no denying that the Eagle Ford Shale has had an appreciable impact on the 24 South Texas counties that it runs though. That impact is starting to spread to stock portfolios around the county as people look at oil and gas as an investment opportunity.

FBR Capital Markets, an investment firm out of Washington, D.C., is one of the first to release its opinion on the Eagle Ford and what it will do. The firm recently released a report in July titled “Eagle Ford: Predictable Nature of Learning Curve Portends Material Revaluation Yet to Come,” where employees gave their prediction on shale gas production and market worth.

“We believe that the Eagle Ford asset base could ultimately be worth somewhere between $85 billion (base case) and $200 billion (upside case) to the industry,” the report said. “The base-case value largely reflects current IPs/EURs, activity levels and margins. A key driver of the upper end of the range will be future learning curve or improvements in productivity.”

Analysts believe that the more wells that are drilled the more efficient production will become. They base this information on production trends that have taken place in other shales such as the Haynesville Shale in Louisiana and the Fayetteville Shale in Arkansas and the Bakken Shale in North Dakota and Wyoming.

“Our analysis indicates that every doubling of cumulative wells drilled in other shale plays has yielded 15 percent to 23 percent improvement in productivity as measured by increases in average 30-day production rate,” the report said.

To illustrate their analysis, they included the improvement rates of four other shales that had doubled well count. They took 30-day average of those. The Barnett Shale yields a 17.5 percent increase in initial production. The Haynesville Shale had a 15 percent improvement and the Fayetteville increased by 23 percent. For the sake of being conservative, the report chose to follow the pattern of Bakken production rate.

“Assuming that the Eagle Ford learning curve follows the same 15 percent path as the Bakken and taking into account the current forecast rig count, we would expect the 30-day average initial production rates in the oil window to increase to 850 Boe/day (barrels of oil per day) by the 4Q12 (fourth quarter 2012) and 1,100 Boe/day by 4Q15 ...”

That is more than double the production from the fourth quarter of 2010.

Another thing that will keep production rates growing is improved collection methods and technology advances. The report states that companies such as Anadarko Petroleum are testing longer laterals than they have previously used. Typical lateral lengths have been between 5,500 to 6,000 feet.

John Christiansen, director of external communication for Anadarko, confirmed that his company is currently testing laterals longer than 8,000 feet in the Eagle Ford. The longer laterals will allow for better contact with the reservoir.

The graphs and tables included in their report show capital expenditures, wells drilled, rig counts and production rates to continue to climb for the next eight to 10 years.

Since the shale is fairly new, production rates are difficult to estimate past that but people can expect new studies to come out every year with the latest prediction. However, for now, it is a safe bet to say this is just the beginning of what the Eagle Ford Shale will produce.
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