BHP Lowers Eagle Ford Capital Spending For Fiscal Year 2014

Petrohawk Eagle Ford Shale Map

BHP touted the strength of the Eagle Ford in its year-end results, but also announced plans to lower capital spending in the play to a little more than $2.9 billion over the next twelve months.

BHP's fiscal year 2013 ended on June 30th, so the company is reporting year-end results.

BHP is lowering its onshore U.S. oil & gas spending from $4.8 billion in fiscal year 2013 to $3.9 billion in fiscal year 2014. Approximately 80% of spending was allocated to the Eagle Ford and Permian in 2013 and approximately 75% of spending will be allocated to the Eagle Ford in 2014. The remaining 25% of drilling activity will be allocated in the Permian Basin and Haynesville Shale.

Approximately 75 per cent of operated drilling activity will be focused on our liquids rich acreage in the Eagle Ford.

At times over the past couple of years, BHP has had as many as 30 rigs running in the Eagle Ford, but plans call for 19 rigs in fiscal year 2014. This doesn't necessarily mean fewer wells will be drilled. While the company isn't as vocal about its operations, there is no doubt wells are going down much faster today than in years past. The company noted as much back in mid-July:

“An improvement in drilling productivity is expected to facilitate a reduction in our rig count in the 2014 financial year, while a lower level of capital expenditure for Onshore US will be increasingly focused on our liquids rich acreage in the Eagle Ford.”

BHP produced a little more than 32 million boe or close to 90,000 boe/d from the Eagle Ford in fiscal year 2013.

BHP has completely suspended drilling the Fayetteville Shale.

Copano Energy Expanding the Eagle Ford's DK Pipeline To McMullen County

Copano South Texas

Copano Energy announced an additional Eagle Ford pipeline and midstream expansion related to its DK Pipeline. The company is expanding the pipeline 65-miles southwest into McMullen County. The project will begin service in the first half of 2013 and will follow the same route as the Copano and Magellan Eagle Ford Condensate Pipeline.

Total costs are estimated at $120 million and the project is supported by a long-term fee based agreement with Petrohawk Energy, a subsidiary of BHP Billiton. Copano will provide midstream gathering and handling services in exchange for committed volumes of production from BHP in McMullen County. 

Read the full release at copanoenergy.com

BHP - Petrohawk's Red Hawk Zavala County Acreage Abandoned

Petrohawk has terminated any further investment in Zavala County's Red Hawk field. We've heard this was a possibility. Eagle Ford Shale Oil wells in the county have not outperformed expectations like many other areas of the play and Petrohawk has now stepped away from the asset. BHP is not expected to continue drilling, but I'm sure the company will consider whether or not the Zavala County Eagle Ford assets fit the company's overall portfolio. Watch for well results from Chesapeake in the eastern part of the county. It will be interesting to see if Chesapeake's acreage provides better returns. Petrohawk and Chesapeake were two of the earliest movers in the county.

Petrohawk announced Results in the Red Hawk prospect in Zavala County, Texas, failed to meet minimum expectations during the quarter. As a result, capital spending at Red Hawk will be terminated and capital budgeted for 2011 will be reallocated to other operating areas.

Kinder Morgan Expects Eagle Ford Shale Growth

Kinder Morgan expects future growth in its Eagle Ford Shale pipeline gathering and transport assets. The company expects the acquisition of Petrohawk by BHP to only enhance value across the Haynesville Shale and Eagle Ford Shale.

"On July 1, we closed on our agreement to buy Petrohawk's 50% interest in KinderHawk Fuel Services, and a 25% interest at Petrohawk's Gathering and Treating business in the Eagle Ford Shale in South Texas.  Now we own 100% KinderHawk, which has over 400 miles of pipeline in the Haynesville Shale play and approximately 2 Bcf a day of capacity. We have throughput that is now above 1 Bcf a day and growing. And we think this is just a tremendous long-term asset. We believe its value has been enhanced by the pending purchase of Petrohawk by BHP. And if you look at the BHP's presentation, we saw some pretty significant ramp up in dollars they expect to spend on their drilling program. Now that drilling program embraces Haynesville and Eagle Ford together with smaller position in the Permian. But we think this bodes very well for our assets, both in Haynesville and Eagle Ford.""We now own also the 25% of what's called EagleHawk Fuel Services in the Eagle Ford. That's 280 miles of gas gathering lines and 120 miles of condensate gathering lines. And we think the Eagle Ford Shale is an area that where throughput will grow dramatically as drilling down there continues to expand."

Read the full press release at SeekingAlpha.com

Bakken and Eagle Ford Lease Holders Good Investments?

Eagle Ford acreage is peaking the interest of oil & gas operators. First, Marathon spent over $20,000 per acre and then BHP acquire Petrohawk. The article below details a few reasons why it might be the right time to invest in Eagle Ford Shale operators and the companies who are active in South Texas. The liquids-rich and oil plays of the Eagle Ford and Bakken Shale have become the hottest real estate in the US.

"This (BHP-Petrohawk) buyout makes oil leases in these areas more expensive. It means demand for these leases is going up. It means many big leaseholders in the most desirable plays, the Bakken and the Eagle Ford, will likely see their share prices rise. This will be partially due to the short term increase in the value of their leases, but it is also due to the long term expected BONANZA nature of their holdings.

There is little doubt this will boost the companies small enough to be buyout targets. However, logic says the constant expectation of further buyouts (and the actuality of some) will even boost the big caps by extension, especially those who have large lease holdings in the Bakken and the Eagle Ford.

Given the approximate 50% premium to the stock price that BHP just paid for HK, it likely means the small companies are going to command big premiums. With this deal and the recent Marathon (MRO) deal for Eagle Ford acres, the going price for Eagle Ford leases seems to be about $20,000 per acre. This is a huge premium to the price those acres commanded just a few years ago."

Read the full news release at SeekingAlpha.com