Visualizing Eagle Ford Shale Oil Production
By way of introduction, this is Enno Peters excellent website, shaleprofile.com, which can be seen in its entirely by clicking here: https://shaleprofile.com/index.php/2017/09/12/eagle-ford-update-through-may-2017/
Enno has created a rather unique way of presenting actual realized shale oil and shale gas production data from various regulatory authorities throughout the United States; in Texas, for instance, from the Railroad Commission of Texas. Enno has developed some amazing tools on his website that can be used to review actual production data by specific operators, in various counties, even on a lease by lease basis. One can see exactly how much gas has been produced from the lease, can follow GOR trends as well as water production. I recommend that anyone wanting to know the truth about unconventional shale oil production in America learn to use his site. Its truly amazing.
In Enno's current update on shale oil production from the Eagle Ford play in South Texas we can see that longer lateral lengths, more frac stages and more pounds of frac sand per stage has improved the initial production rates of Eagle Ford wells since 2015. Those higher IP180+ (initial potential plus 180 days and longer) production rates are increasing EUR's. Using known historical decline rates from other Eagle Ford production across the basin those EUR's now appear to have increased from 165K BO to 250K BO.
The Eagle Ford shale oil industry, however, in numerous investor presentations and public press releases, is now claiming 1 million barrel BOE EUR's, 70% of those EUR's being oil. It is then, generally speaking, touting that increased "technology" (longer laterals and more frac sand), is creating wells that will ultimately produce 600,000-700,000 BO. Actual realized production data filed at the Texas Railroad Commission, and presented by Enno Peters, does not support those claims. Its important to remember a typical Eagle Ford shale oil well declines at the rate of 46% per year for the first three years of its life and that approximately 70% of all EUR's are actually recovered in the first 48 months of the well's life cycle.
Some simple arithmetic is in order, please: at the moment most shale oil producers still have their oil prices hedged in the $47.00 per barrel range. After severance and property taxes, royalty burdens, operational expenses per incremental BO, general administrative (corporate overhead) costs and interest expenses on existing long term debt is deducted from that $47 barrel of oil, the shale oil company's "netback" price, or as one might say, it's take home pay, is about $19.00 per BO. So, 250,000 BO X $19.00 = $4,750,000. Natural gas and natural gas liquids, in Mike's opinion, adds another 20-25% to the total net revenue stream for a probable total return of $5,875,000 over the complete life cycle of the well. Current well costs in the Eagle Ford shale play, with bigger fracs and longer laterals, exceeds $7,000,000.
So generally speaking, save the occasional really good well, the current average shale oil well being drilled in the Eagle Ford shale play At $47 oil, will NOT even payback drilling and completion costs, much less make a profit. And the profit that shale oil companies NEED to make to be able to pay down massive amounts of long term debt and work off net cash flow from existing production to drill new wells, in lieu of borrowing even more money, must be very high.
The shale oil revolution is failing financially. For it to play an important role in America's energy future it must be profitable to extract. It is not. Its time to start telling the truth about unconventional resources in our country. and to begin to ask ourselves...how are we going to pay for it?