Advanced drilling technologies boost Eagle Ford productivity

Oil price fluctuations and an expected increase in demand for U.S. LNG exports have led many operators in the Eagle Ford to switch to higher gas yielding acreage.

Productivity has been boosted by improved drilling techniques including geosteering technology, proppant loading, increasing horizontal well lengths, plus machine learning and real-time data analytics.

This improvement in average gas production per rig, combined with a greater focus on gas production over oil, has delivered a greater yield despite the lack of new drilling ventures.

“During the fourth quarter… Eagle Ford exceeded estimates due to strong new well productivity and solid base performance,” said Rick Muncrief, president and CEO, Devon Energy. [i]

Infill drilling — where additional wells are drilled between existing wells to increase recovery rates — has also greatly improved productivity since it began over a decade ago. [ii]

Refracs allow companies to increase the productivity of existing wells by accessing untapped oil and gas in existing wells through re-stimulation of the reservoir. In its recent fourth quarter results [iii], BP said its BPX division, which operates in the Eagle Ford, reports that refracs were now creating more flow than the original motherbores, contributing to triple-digit plus returns in the region.

Natural gas shift in the Eagle Ford

Over the past decade, a depletion in prime drilling locations led to a reduction in new wells being drilled.

Eagle Ford lateral well lengths are typically shorter than those in the Permian Basin and other regions due to geological and operational factors. Heavy faulting and varying reservoir pressures can make long laterals more challenging. In the Permian [iv], Delaware [v] and Bakken/Williston basins, companies frequently drill wells with lateral lengths of up to and over 10,000 feet, while lateral lengths in the Eagle Ford average closer to 7,500 feet. [vi]

Recent data suggests break-even prices are slightly higher in the Eagle Ford than in other U.S. shale regions [vii], raising the possibility that diminishing returns may set in sooner than in other regions due to the formation’s characteristics, despite increased production efficiency.

Anecdotal evidence suggests this has not started yet. For example, BP’s BPX still expects triple digit returns for now and ConocoPhillips notes its Eagle Ford wells are still competitive.

“We’re looking at the current well performance…. Eagle Ford looks very strong,” said Nick Olds, EVP, Lower 48, ConocoPhillips. [viii]

Natural gas prices at the Eagle Ford shale — as measured at the Katy or Houston Ship Channel (HSC) hub — tend to have a narrower differential to Henry Hub prices than Waha hub prices in the Permian, largely due to pipeline capacity. [ix]

This has led companies such as Crescent Energy to boost gas-focused drilling in the Eagle Ford in recent quarters.

“Our Eagle Ford position is cored up across oil, and what we call a mixed area and then into dry gas…there is a little bit more gas drilling in the portfolio this year off stronger gas prices,” said David Rockecharlie, CEO, Crescent Energy. [x]

Research [xi] by natural resource investors Goehring and Rozencwajg suggests shales are approaching a slowdown driven by depletion, rather than price or regulation, meaning higher prices may struggle to incentivize increased production. The researchers note that in the 1970s an increase in drilling in conventional oil and gas plays did not lead to an increase in production for a similar reason.

M&A can help firms consolidate resources and face this potential depletion issue with an improved portfolio of inventory and better drilling techniques because of pooled knowledge. ConocoPhillips’s acquisition of Marathon in 2024 gives the company control of the latter’s wells, the bulk of which were in the Eagle Ford.

Source: ConocoPhillips Investor Presentation, May 29 2024. Available via EE Documents.

The company plans to reduce the combined ConocoPhillips and Marathon capex spend in the Eagle Ford and Bakken by over $500 million in 2025 while maintaining flat production levels.

“We’re confident in our ability to achieve an optimal plateau level at lower levels of activities versus stand-alone companies. Or, simply put, we need fewer rigs and fewer frac crews to achieve the same outcome,” said Andy O’Brien, SVP of Strategy at ConocoPhillips. [xii]

Crescent Energy has realized synergies in excess of $100 million following its acquisition of SilverBow Resources in the Eagle Ford. It hopes for further value creation following five acquisitions announced in 2024, including a $905 million Ridgemar Energy acquisition, that combine to double the size of its Eagle Ford footprint. [xiii]

Source: Crescent Energy Investor Presentation, December 3, 2024. Available via EE Documents.

Source Information

i. Devon Energy Reports Fourth-quarter 2024 Results – Access here (EE Documents subscribers)

ii. EOG Resources Q1 2012 Results Document – Access here (EE Documents subscribers)

iii. BP Q4 2024 Financial Results Presentation – Access here (EE Documents subscribers)

iv. Permian Resources Announces Q4 2024 Results – Access here (EE Documents subscribers)

v. Exxon Mobil Continues to Increase Acreage in the Permian Basin – Access here (EE Documents subscribers)

vi. EOG Resources Announces Q2 2017 Results – Access here (EE Documents subscribers)

vii. TGS: A Glance at Shale Break-Even Prices Amid Declining Oil Prices – Access here

viii. ConocoPhillips Q4 2024 Earnings Presentation – Access here (EE Documents subscribers)

ix. EIA: Today in Energy, Aug 21, 2023 – Access here

x. Crescent Energy Q4 2024 Investor Presentation – Access here (EE Documents subscribers)

xi. Goehring & Rozencwajg Associates LLC: The Depletion Paradox – Access here

xii. ConocoPhillips Q3 2024 Earnings Presentation – Access here (EE Documents subscribers)

xiii. Crescent Energy Reports Q4 2024 Results – Access here (EE Documents subscribers)