Drilling Info Open To Explore. Eagle Ford Shale Overview Ramona Hovey, SVP Analysis and Consulting February 23, 2011

Transcription

1 Drilling Info Open To Explore Eagle Ford Shale Overview Ramona Hovey, SVP Analysis and Consulting February 23, 2011

2 EAGLE FORD SHALE OVERVIEW 2

3 Eagle Ford History Geologists have known about Eagle Ford Shale for several decades, but technology did not exist to produce economically Conoco drilled first well in Sugarkane Field in 2006, however, early production was more Austin Chalk than Eagle Ford Apache also started producing from Eagle Ford Shale in Most wells were vertical wells and focus was Austin Chalk. October 2008 Petrohawk STS #1 in Hawkville Field was first true Eagle Ford Shale well. Promising initial results help lead to increase in Eagle Ford Shale Activity Early development was in more gas rich areas, but recent activity is almost entirely in liquids rich areas June 2010 Shell acquires 105,000 acre lease in Oil Window for $1 Billion USD and 25% royalty 3

4 Setting / Depositional Environment Sub Basin of the Gulf Coast Basin. Covers an area 40 miles wide and 400 miles long, extending from Maverick County in South Texas to Brazos County in East Texas. Deposited during the Cretaceous Period (approximately million years ago) Underlies the Austin Chalk and Edwards Limestone and is above the Buda Lime. The Eagle Ford shale is the source rock for oil and gas in the Austin Chalk Divided into lower transgressive and upper regressive layers. Transgressive shales have optimium oil prone potential; regressive shales are gas prone 4

5 Eagle Ford Geologic Overview Maverick Basin Stratigraphic Column Period Cretaceous Formation Escondido Olmos/CBM* San Miguel Anacacho Austin Chalk* Eagle Ford* Buda* Del Rio Georgetown* Pryor McKnight Glen Rose Pearsall* Pine Island *currently producing Jurassic Sligo Hosston Map Source: Geologic Map of Texas, Bureau of Economic Geology

6 Eagle Ford Structure Map 6

7 Eagle Ford Isopach 7

8 Reservoir Characteristics Fracs Like a Dream Age Cretaceous Permeability up to 0.13 md Porosity 4% to 15% TOC 4.5 to 5.5% Frac Nature Brittle, high calcite, fracs easy Thickness ft Depths 4,000 14,000 ft Pressure Gradient 0.6 psi/ft Thermal Maturity 0.5 to 2.2% Vitrinite Reflectance Primary Production Dry Gas / Wet Gas / Oil windows 8

9 Eagle Ford Geologic Overview Three main areas of production The northern part of the play is the oil window, with lower pressure and high volumes of oil. The middle section is the wet gas or condensate window The deeper section farther south (=>15,000 feet) is the dry gas window Note: Gas/Oil Windows based on public data (EOG, HK) and internal analysis

10 EAGLE FORD SHALE ACTIVITY AND PLAYERS 10

11 Two Waves of Leasing Peak: 2Q10 880,000 acres with majority in liquids phase 1.5 million acres leased in

12 Leasing By Quarter (Windows) Average term historically around 36 months (3 years) Operators will begin to drill up expiring acreage in 2010 Could present problems for operator s with assets in multiple shale plays Royalties slightly increased over time in each window Dry Gas royalty (22%) higher than Oil and Wet Gas (21%) in

13 Eagle Ford Leasing Movement into Oil Window 2 nd First wave wave occurs of leasing Slow early movement in 2010, 2008, in core mostly area s in oil 2007 into quickly more /wet leased gas up phase, oily slowing Low area s natural land rush gas by the prices end pushes of 2010 companies further into oil window Early leasing in Gas rich area s 13

14 Large Leases Available Early, but Little Left LaSalle & McMullen Counties represent some of the earliest and best wells almost entirely leased up Shell 105,000 acre lease. Paid $1 Billion USD in 2010 along with 25% royalty St. Mary L&E 65,000 acre lease 14

15 Top 10 Grantees 2006 to current EOG large leaseholder, but focused entirely in Oil phase Some lease positions in North East Eagle Ford, but largely undeveloped and uneconomic wells Laredo small private company in Dry Gas window 15

16 Expiring Acreage May Present Opportunities First wave of leasing set to expire in 4Q11 if not drilled Expiring acreage mostly in liquids rich areas 16

17 Top 10 Grantees Expiring Leases EOG, Griffith, Cinco all have significant potentially expiring position in oil phase 17

18 2010 Operators Change from Acquisition to Drill Up Over 90% of new permits are in oil or gas condensate window 18

19 Permits By Quarter (Windows) Eagle Ford is actually 3 different shale plays with 3 different set of characteristics Operators beginning to drill up expiring acreage in 2010 Total Depth getting smaller in oil window but laterals getting longer Dry Gas window very little permit activity. Also, deepest area with largest total depth Wet Gas horizontal length the same as oil window 19

20 Permits by Year 20

21 Top 10 Permitters Focus on Oil and Wet Gas Window Chesapeake, Anadarko, and EOG in most shallow area Lewis only top permitter with any Dry Gas permits 21

22 Top 10 Permitters (2010 present) Operator Permit Count Avg Total Depth Avg Horz Length CHESAPEAKE 322 7,432 6,269 EOG ,693 5,091 ANADARKO 147 8,555 5,893 PETROHAWK ,636 6,116 CONOCO 84 13,097 5,196 LEWIS PETRO PROPERTIES 77 14,833 5,295 PIONEER 74 16,729 5,030 ENDURING RESOURCES 60 14,323 5,144 ROSETTA RESOURCES 57 9,448 5,890 EL PASO 47 10,066 4,977 Grand Total 1,183 11,981 5,490 22

23 Historical Production BOEPD (6:1) 2009 Represents First Significant Production October 2010 Production ~ 95,000 BOE/D Earliest production from commingled Apache wells Petrohawk s Hawkville and Conoco s Sugarkane first wells start producing in late

24 Liquids vs Gas Production 40,000 BBL/D 350 MMCF/D 24

25 Operator Quoted IP Rates Little Correlation to Production R^2 not significant when comparing IP Rate to 6 Month Cumulative Production 25

26 MaxIP Good Predictor of Cumulative Production R^2 increases significantly when using MaxIP (peak monthly production) instead of IP Rate 26

27 R Squared Continues to Increase When Comparing to 12/24 Month Cums 27

28 MaxIP Early Indicator of Core Areas Conoco, Petrohawk, Pioneer significant condensate production Great oil/condensate production in 2010 from Webb and Dimmitt Counties 28

29 MaxIP also Points to Gas Core Areas Conoco, Petrohawk, Pioneer also leader in gas production Hawkville best results for gas MaxIP 29

30 Top Operators All in Core Areas Lewis Energy assets gas oriented, but position is still close to significant liquids production 30

31 Top Operators also Represent Best in Gas Production 31

32 Creaming Curves Continued Useful for Comparisons Wet Gas best results of all three windows Dry Gas beginning cream over due to depressed gas prices and little focus in area Oil continuing to make gains in production 32

33 Eagle Ford Shale BEST PRACTICES 33

34 Operator Performance Eagle Ford 34

35 Operator Performance Eagle Ford 35

36 Big Savings In The Casing Design Forgoing Intermediate Casing Intermediate Casing is not necessary if the wellbore pressure can be controlled without it Swift Energy quotes a savings of $800k per well by not setting an intermediate string Surface casing is set to about 5,000, then a production casing or liner is set to TMD Source: Swift Energy Source: Petrohawk Energy 36

37 Percentage of EF Wells with Intermediate Casing Steady increase in percentage of wells without intermediate casing over time

38 Play Wide Trends (Squares have Intermediate Casing, Circles do not) Maverick Basin wells follow the Hawkville trend of not using intermediate casing. 60% of oil window wells do not use intermediate casing Sugarkane and Blackhawk have a higher percentage of wells with intermediate casing. Early wells in Hawkville Field used intermediate casing. Current wells are trending strongly towards not setting intermediate casing.

39 RELATIVE ECONOMICS 39

40 Relative Economics by Area Region B Factor EUR (Bcfe) 10 yrs Hawkville Dry Hawkville Wet Gas 1.1, Liq Sugarkane Blackhawk Gas 1.1, Liq Maverick Basin Gas 1.1, Liq

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42 How does the Eagle Ford compare with other unconventional plays? Geology Some of the best rocks Good areal extent and thickness Activity/Players Lots of activity Many players Best Practices Evolving quickly from a technical standpoint Strong economics for liquid rich part of play Questionable economics for gas part of play Infrastructure Service bottlenecks but better than most plays Restricted market access, particularly for oil/liquids Business Risks Not significant compared to other plays Opportunities Some undercapitalized leaseholders looking for capital Experienced operators looking for development partners Gas development opportunities for longer term players Good opportunity for well capitalized companies 42

43 What sort of opportunities does the Eagle Ford hold? Acreage Very little open acreage Expectations of high bonuses Significant amount of expiring acreage Attraction of drilling commitment Market access Leasehold Acquisitions Underfunded lease holders Condensate/oil bias Development potential upside Technology advances Better capitalized operators Re fracing possibilities Infill potential/tighter spacing Joint Ventures Underfunded operators Relative attractiveness Access to experience Established service company relationships Market connections Risk/Reward tradeoffs 43