EOG sees Eagle Ford shale as major US oil discovery

April 19, 2010
EOG Resources Inc. has accumulated acreage across six counties in the Eagle Ford play of South Texas where the Houston independent has drilled 16 delineation wells over a 120-mile trend.

EOG Resources Inc. has accumulated acreage across six counties in the Eagle Ford play of South Texas where the Houston independent has drilled 16 delineation wells over a 120-mile trend.

Mark G. Papa, EOG chairman and chief executive officer, said, "We believe the South Texas Eagle Ford horizontal crude oil play will prove to be one of the most significant United States oil discoveries in the past 40 years."

Although it's too early for official reserve estimates, EOG forecast its Eagle Ford recovery potential at 900 million bbl of oil equivalent, net after royalty, based on initial drilling and early production results on a 505,000 net-acre position.

The recovery could be obtained from hydrocarbons in place of 27-57 boe/sq mile because Eagle Ford's permeability in the oil window is as good as that of the Haynesville shale, EOG said.

Eagle Ford oil outlook

From early drilling, EOG listed potential recovery factors at 3.8% in the eastern area and 2.6% toward the west. It eyes gas at 15% of total recovery in the east and 8% in the west and oil 69% in the east and 88% in the west. The recovery estimates are based on 125-140-acre spacing.

Development of this oil play is under way. EOG has acquired acreage and-or drilled discovery or delineation wells in LaSalle, northern McMullen, Atascosa, Wilson, Karnes, and Gonzalez counties. The formation's oil window generally parallels the Gulf Coast inland of the wet gas window, which lies inland of the dry gas window. Besides the 505,000 net acres EOG holds in the play's oil window, it has 49,000 acres in the dry gas window and 26,000 acres in the wet gas window. The company envisions 1,360 net horizontal locations to be drilled in the east area and 1,480 in the west.

EOG reckons it could see after-tax rates of return as high as 66% from gross recoveries of 1.9 bcf/well and 318,000 bbl/well in the western part of the Eagle Ford oil play and 95% from recoveries of 2.9 bcf/well and 481,000 bbl/well in the eastern area compared with 27% in the play's dry gas sector.

Early completions

EOG said its Milton 1H discovery well in Karnes County found Eagle Ford to be 290 ft thick with 9% average porosity at 10,500 ft true vertical depth with 41.5° gravity oil at 7,350 psi initial reservoir pressure.

It was stimulated with a Barnett-style completion containing 2.1 million lb of sand in its 1,800-ft lateral and flowed 668 b/d of oil in April 2009. EOG termed the well's estimated ultimate recovery of 117,000 boe "encouraging but inefficient."

Milton-3H, its 2,400-ft lateral treated with 3 million lb of proppant, initialed at 909 b/d in mid-November 2009 and earned an EUR of 365,000 boe. It has yielded 40,000 bbl.

The company's presentation showed two wells—Marshall-2H in Gonzalez County and Darlene-1H in Karnes County—with 520,000 and 501,000 boe EUR, respectively.

EOG said it is still optimizing frac design and that the length of laterals will vary with the geologic setting at each well.

The company said its overall production growth over 3 years will be driven primarily by increases in crude oil, condensate, and natural gas liquids. EOG reaffirmed its plans to switch its focus from gas to crude oil and condensate.

In 2010, 50% of EOG's revenue is expected to come from liquids, and executives forecast that liquids will account for 65% of company revenue by yearend 2012.

EOG announced plans to divest $1-1.5 billion of US and Canadian noncore gas properties during late 2010 or early 2011. These asset sales will assist EOG in funding the 2010 and 2011 capital expenditure programs while maintaining a low debt-to-total capitalization ratio, Papa said.

Meanwhile, Carrizo Oil & Gas Inc., Houston, said it has acquired acreage and is leasing more land in the vicinity of EOG's Eagle Ford and northern Denver-Julesburg basin Niobrara shale plays and will pursue a strategy in crude oil and liquids-rich plays.

Carrizo said it acquired 6,800 acres already in the first quarter of 2010, mainly in LaSalle County, near discoveries by El Paso Corp. and EOG in the Eagle Ford shale (see map, OGJ, Oct. 19, 2009, p. 44). Carrizo plans to acquire at least 50,000 net acres this spring in the Niobrara play, including 47,000 acres near EOG's Jake discovery in Weld County, Colo. (OGJ Online, Apr. 7, 2010).

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