Pioneer Natural Resources Expanding Use of Pad Drilling in 2013

Pioneer Eagle Ford Update Map

Pioneer Natural Resources' (PXD) Eagle Ford drilling will come from centralized pads 80% of the time in 2013. That's up from 45% of the time in 2012 and will allow the company to drill 130 wells with just 10 rigs. Pioneer saves $600,00-700,000 per well when utilizing pads. Approximately 130 wells were drilled in 2012 with an average of 12 rigs running.

Pioneer plans to spend $575 million of its $3 billion 2013 capital budget in the Eagle Ford.

“Pioneer plans to spend $575 million of its $3 billion 2013 capital budget in the Eagle Ford.”

Pioneer will be using the savings from pad drilling to extend the lateral reach of its average well. Horizontal laterals averaged 5,700 ft in 2012, but PXD will be targeting 6,200 ft in 2013. The extra 500 ft of reservoir contact will cost about $500,000 to drill and complete. In general, longer laterals decrease the number of wells needed over the life of the play.

White sand completions will be tested in deeper areas of the Eagle Ford in 2013. PXD has been monitoring the use of white sand completions in shallow wells for the past two years and is now confident enough to test the practice in deeper areas with higher pressures. To date, the company has test 97 wells completed with white sand and has saved an average of $700,000 per well.

PXD has 11 central gathering plants in place and expects to bring one more online in late 2013.

Production grew from an average of 12 mboe/d in 2011 to 28 mboe/d in 2012. In 2013, the company has issued guidance of 38-42 mboe/d.

Murphy Oil's Eagle Ford Production Hits Milestone

Murphy Oil Eagle Ford Production

Murphy Oil surpassed 25,000 boe/d at the end of 2012 and annualized production averaged 15,000 boe/d. With an exit rate above 25,000 boe/d, the company is in a nice position to meet or exceed its production target of 30,000 boe/d in 2013.

Murphy is working 10 rigs and three frack crews around the clock. The company has drilled 216 wells to date and has brought 163 to production. Total time spent to drill and case wells is averaging 11-13 days across the play.

Most of the crude the company produces is moved by truck (86%) -

Roger Jenkins, COO stated "There's many places to unload the trucks, many depots, many options. We're doing very well with our crude. Murphy's land situation is not a condensate one. For black oil, 41, 42 degree API, we've been getting a $13 positive margin to WTI there for some time. And people want our crude in that area and we're doing very well with the marketing quality of crude because we have very little condensate in our business."

The company will continue to push downspacing to 80-acres across all three areas operated in the Eagle Ford. Testing down to as little as 40-acres per well might take place late in 2013.

Watch for test results from the company's first Pearsall Shale well near the end of the first quarter of 2013. Two horizontal Pearsall wells are planned in Atascosa County in the first half of the year.

Expect to see operational costs come down as the company begins drilling four wells from each pad. Pad drilling will allow for the Murphy to allocate facilities in a more efficient manner.

Plains All American - Chesapeake Reach Deal for Eagle Ford Gathering - $125 Million

Chesapeake Eagle Ford Rig Map

Plains All American (PAA) added another deal to Chesapeake's list of midstream sales. The companies agreed to a $125 million deal for crude oil and condensate gathering assets located in Webb and Dimmit counties. This follows a Chesapeake deal with Access Midstream Partners for $2.16 billion that also included Eagle Ford assets.

The assets include 40 miles of crude oil and condensate gathering lines with capacity to move 50,000 b/d, 150,000 bbls of storage capacity, 300,000 bbls of storage capacity under construction, and a truck unloading terminal.

Chesapeake also made acreage dedications including future production as part of the sale (CHK's Eagle Ford acreage is highlighted in the map above). The gathering assets will now connect with PAA's existing assets in the area.

CHK's CEO Aubrey McClendon made the following comment as part of a press release related to a larger midstream package:

“We are pleased to announce further progress towards our asset sale goals for 2012-13. We look forward to completing additional asset sales and achieving our goals of strengthening our balance sheet, tightening our asset focus and increasing returns to shareholders.”

Read the press release at paalp.com

Access Midstream - Chesapeake Reach $2.16 B Midstream Deal (Eagle Ford Included)

Chesapeake Eagle Ford Rig Map

Access Midstream Partners (ACMP) has agreed to acquire additional midstream assets from Chesapeake for $2.16 billion. The deal adds natural gas gathering and processing assets across the country. Assets included expand Access Midstream's position in the Eagle Ford, Utica and Niobrara plays, as well as expanding the company's existing position in both the Haynesville and Marcellus dry gas plays. ACMP also negotiated an extension of its exclusivity period for Chesapeake's Mid-Continent assets.

Concurrently, Williams acquired a 50% general partner interest and a 23% limited partner interest in Access Midstream from Global Infrastructure Partners. Access Midstream's GP interest was owned by Chesapeake until June 2012, when it was purchased by Global Infrastructure partners for $2 billion.

J. Mike Stice, Access Midstream Partners’ CEO, commented,

“The acquisition of these midstream assets is a transformational opportunity for Access. Following this transaction, Access will become the largest gathering and processing MLP as measured by invested capital and throughput volume and will have a substantially diversified portfolio with a critical midstream position in the most prominent liquids-rich basins in the United States...

Aubrey K. McClendon, Chesapeake’s CEO, stated,

“We are pleased to announce further progress towards our asset sale goals for 2012-13. We look forward to completing additional asset sales and achieving our goals of strengthening our balance sheet, tightening our asset focus and increasing returns to shareholders.”

Read the full press release at AccessMidstream.com

Teak Midstream's Eagle Ford Gathering & Processing Begin Operations

Teak Midstream Eagle Ford Map

Teak Midstream has started operations at its South Texas gathering system and its Silver Oak (200 mmcfd) cryogenic processing plant. Teak has long-term midstream agreements with Comstock Resources, Statoil, and Talisman. With significant commitments, the company already plans to expand its gathering system by 200 mmcfd by the first quarter of 2014.

At the center of the development is Teak's Silver Oak Processing Plant, which is located near the community of Pettus, between Beeville and Kenedy in Bee County. The plant is specifically designed to handle high concentrations of liquid-rich gas. From the plant, residue gas will be transported by a 20-inch, 57 mile pipeline to various interstate pipelines and NGLs will be transported by a 12-inch, three mile pipeline to DCP's Sand Hills Pipeline. The Sand Hills pipeline ultimately delivers NGLs in Mont Belvieu.

“Teak Midstream is well positioned to serve new and existing customers who are pursuing liquids-rich gas in the Eagle Ford and other formations in South Texas. The proximity of our extensive gas gathering systems to escalating drilling activity is ideal, and our processing plant has extremely high NGL recoveries, making it one of the most efficient facilities in the region, which can improve wellhead value for our customers,” said TEAK Co-Chief Executive A. Chris Aulds. “

Teak Midstream's new gathering system actually includes two separate systems:

• One system is 178 miles of 24-inch and 16-inch pipelines that moves wet gas from Dimmit through Webb, La Salle, McMullen, and Live Oak counties on to the Silver Oak Plant
• The second system is 22-miles of 20-inch pipe moving rich gas from the Karnes area to the Silver Oak Plant in Bee County