This American Energy Player Is A Buy...
Last week we covered two of America’s upcoming energy hotspots: North Dakota’s Bakken formation and the Eagle Ford in Texas.
Today I’m back with some pressing information pertaining to the Eagle Ford.
In fact, as I type from San Antonio, TX (a few miles north of the profit-packed Eagle Ford) there’s a new company that I want to make sure you have on your radar…
If you’re not familiar with the Eagle Ford formation in South Texas, now’s the time to get caught up.
From what I’m hearing today this American power play is set to sustain current levels for many years to come. According to DrillingInfo’s Allen Gilmer, the Eagle Ford is one of the “greatest geo-political advantages” our country has ever seen. And here’s the kicker, Gilmer believes this hotspot could sustain drilling at current rates anywhere from “40” to “300” months.
That’s a wide range, I know. But considering the boom that’s happening here today, I’m shocked to hear that drilling activity could last as long as another 25 years!
Regardless of the exact timeframe for this drilling activity (but trust me it’ll be decades), it shows this massive wealth-building opportunity is for real…and it’s knocking on our doorstep.
Important for our purposes today, Gilmer also revealed a fairly common occurrence in oil and gas booms. In particular “some companies are going to get very wealth where others aren’t” he says.
That’s one of the reasons I rushed to get this write-up out to you – today I want to make sure you know about a handful of companies that are set to rise to the top of this long-term play.
These “cream of the crop” players are proving their ability to leverage real world know-how and technology. This, in turn, gives them profit opportunities other companies only dream of.
In previous discussions about the Eagle Ford, we’ve covered a handful of these companies – Statoil (STO), EOG Resources (EOG) and ConocoPhillips COP) to name a few.
From what I’m seeing here in San Antonio at the Eagle Ford Developing Unconventional Oil & Gas Conference, these companies are all still leading the pack in the Eagle Ford.
Statoil is moving right along with development. In fact, today Torstein Hole, a Senior VP at Statoil, unveiled breaking news that the company is moving along with plans to fully operate 50% of its Eagle Ford joint venture (with Talisman Energy.)
Statoil will be operating the Eastern section of its JV with Talisman – this is a unique oil-filled area that should allow Statoil to utilize its expertise in tight, high-pressure oil (something many companies simply don’t have the know-how to accomplish profitably.)
Moving forward I also heard great stuff about EOG Resources. Although there wasn’t a representative present, DrillingInfo’s Gilmer acknowledged that EOG has a “critical advantage” over other companies in lower grade zones.
Simply put, while other companies try to eek out a margin, EOG is making it happen on a large scale.
Not to mention, EOG was also put in the spotlight by Bank of America’s Director Of Energy Investment, Mark Sooby. He noted that EOG not only sits in the “sweetspot” of the play, but the company also enjoyed the highest initial production of any Eagle Ford wells (over 4,000 barrels per day.) Needless to say, things are looking great for EOG.
Another company that I heard from directly offered some eye-opening stats about their Eagle Ford position…
ConocoPhillips is currently enjoying a breakeven around $37 per barrel of oil equivalent in the Eagle Ford. Wow! Hadn’t heard that stat before! (To put that in perspective with the big picture, the Eagle Ford as a whole could soon be producing 1.5-2 million barrels per day, up from over 600k today. If other producers are anywhere near the breakeven of Conoco this could be huge news. Stay tuned.)
With $37 breakeven, it’s no wonder Conoco is on track to pour $2.5 billion of direct investment into the Eagle Ford this year alone. That’s quite a premium to the $600k (each) that it’s putting into both its Bakken and Permian assets.
So to say that the Eagle Ford is “the” hottest shale play these days, is not an understatement for Conoco.
Plus as Don Hrap, President of Americas for ConocoPhillips, says we have a “phenomenal position in North America” and addressing the Eagle Ford in particular he says it’s a play that will “be around for decades.”
Add it up, and there’s plenty of reason to respect Conoco’s future production, and of course its 4.6% dividend.
There is, however, one company that I failed to mention recently.
The way I see it, when you talk about the Eagle Ford, along with the companies mentioned above, you also need to talk about Pioneer Resources (PXD.)
Pioneer was one of the first movers in the Eagle Ford back in 1991 with conventional drilling. Then in 1999 it began unconventional horizontal drilling. Today, Pioneer is one of the leading “technology” producers in the formation.
Their long-term know-how in this play is really starting to pay off, too.
According to President and COO, Tim Dove, the company has a “tremendous technical advantage” in the Eagle Ford. The data backs up his claim, too. 80% of Pioneer’s wells are above the median estimated ultimate recovery (EUR.) Simply put, that means Pioneer knows how to get more oil out of the ground that its competitors.
Better yet, the company is doing it at ever-decreasing costs!
Here’s an example that proves my point.
One of Pioneer’s recent accolades is increased EUR from “choked” wells. Choking a well is a process where you throttle back the production rates in the beginning of the well’s life.
While testing this process, Pioneer found that, 180 days out, these “choked” wells were producing much more total oil. Quite a breakthrough! The company name is quite apropos, too.
Better still, at the same time it’s developing new ways to increase EUR, Pioneer is still finding new ways to cut costs.
The most recent cost-saving technique didn’t use any new technology at all. While a lot of the industry is moving to ceramic sand (used as a propant to help oil and gas flow underground) Pioneer challenged this practice in the Eagle Ford.
Now, instead of following the industry to higher cost, manmade sand, Pioneer reverse engineered the process and found a way to use natural white sand with the same efficiency. The savings? Over $700k per well.
Year to date Pioneer is up a modest 17%. But, If there’s one take-away from my time here in San Antonio it’s that Pioneer should be on your list of Eagle Ford “buys.”
This company is using real-world technology, to produce more oil, at lower costs…something any investor would like to see.
Keep your boots muddy,
Original article posted on Daily Resource Hunter