Eagle Ford crude selling for far above threshold

San Antonio — How low would oil prices have to sink before the music stopped in Eagle Ford Shale region?

The threshold level for drilling a profitable oil well in the South Texas oil and gas field is somewhere between $50 and $57 a barrel, an executive with oilfield service giant Baker Hughes said Wednesday at a meeting of the San Antonio Business and Economic Society.

Plains Marketing LP’s posted price for Eagle Ford oil Wednesday was $101.87 a barrel.

Read more: West Texas shale could dwarf Eagle Ford

Ted Reed, vice president of operational efficiency for Houston-based Baker Hughes, said he thinks that Eagle Ford activity will be lasting. “Go look at the Permian Basin. Go look at East Texas,” he said. “They were written off 30 or 40 years ago, and they’re still viable.”

Drilling has boomed in fields across the state. Texas has more than one-fifth of the world’s drilling rigs now, and the Texas Railroad Commission on Wednesday said it issued 1,978 original drilling permits in January, compared to 1,581 the same month last year.

Texas crude oil production in December reached 1.4 million barrels per day, up from just over 1 million barrels per day in December 2011, the agency said.
Reed said that improving technology and operational efficiencies are driving down the time it takes to drill wells in Eagle Ford.

Two years ago, it took more than 30 days from the start of drilling one well and to the start the next one in the Eagle Ford. Now it’s taking 16 days, on average, Reed said.

Read more: New pipeline to move Eagle Ford gas to Mexico

That means operators can run fewer drilling rigs, but drill just as many wells as they did previously, he said.

The most recent Baker Hughes Drilling Rig Count showed 233 rigs operating in the Eagle Ford as of Feb. 22, down two rigs from the week prior.
Reed said he thinks the Eagle Ford rig count may dip to around 225 to 230 rigs.

Eagle Ford wells now cost $6.5 million to $12 million to drill and complete, and pay off in three years on average, he said.

Initial production drops off about 78 percent in the first year. So a well that comes on at 1,000 barrels of oil per day would produce 220 barrels a day a year later.

“There are a lot of people making money out here,” Reed said. “Unless the oil and gas operators are making money, this doesn’t exist.”

jhiller@express-news.net
Twitter: @Jennifer_Hiller