High liquids-rich content benefits the Eagle Ford Shale in South Texas

No shale play has been hotter this year than the Eagle Ford Shale in South Texas. This is due in part because the subsurface formation has such a large liquids-rich component, and oil and natural gas liquids command much better prices these days than dry gas. Another big advantage of the Eagle Ford is that it is close to existing transportation and processing infrastructure on the Texas Gulf Coast, although there is significant expansion occurring in the midstream sector as well due to vastly increased volumes from new wells in the play.

A key trend in the Eagle Ford and several other shale plays is the arrival of major integrated oil companies and foreign-owned companies, most of which have formed joint venture agreements with large independents to share in the high cost of field development. This is a win-win for companies such as Anadarko Petroleum and Chesapeake Energy because their cash-rich partners, many of which are state-owned, pay most of the development costs for the first few years. The benefit for the foreign companies is that they gain access to North American energy markets and also acquire expertise in shale drilling and completion, which they can apply elsewhere.

Houston-based Petrohawk Energy, an early entrant into the Eagle Ford shale play and the largest producer there, announced on July 14 that it was being acquired by Australian mining giant BHP Billiton for US$15.1 billion. Petrohawk is one of the largest shale gas and oil producers in the US with 2010 proved reserves of 656.3 MMboe. The corporate buyout by BHP Billiton is expected to close in the third or fourth quarter. BHP Billiton also bought the Fayetteville Shale assets of Chesapeake Energy earlier this year, although Chesapeake will continue to operate those assets for BHPB for some time.