Eagle Ford land prices begin to rise – as oil companies exit

Statoil entered the Eagle Ford Shale in 2010 in a joint venture with Talisman Energy, but will take over the operations of properties in DeWitt, Karnes, Live Oak and Bee counties starting in July. Photo courtesy of Statoil.
Statoil entered the Eagle Ford Shale in 2010 in a joint venture with Talisman Energy, but will take over the operations of properties in DeWitt, Karnes, Live Oak and Bee counties starting in July. Photo courtesy of Statoil.

Is the Eagle Ford nearing an upswing?

Over the past two years, as oil prices fell, companies began consolidating operations, and many exited oil fields that cost more to drill or access than oil prices warranted. South Texas’ storied Eagle Ford was especially hard hit.

There, almost 10 years ago, drillers perfected techniques in horizontal drilling and hydraulic fracturing that revolutionized U.S. oil production. But since oil prices bottomed at around $26 last year, the play has seen only 15 rigs return. More than 130, by contrast, have begun drilling again in West Texas’ prolific Permian Basin.

The Eagle Ford, however, is now seeing an uptick in interest.

Chris Sheehan, a research director at IHS Markit, said deal values and activity there are “beginning to revive with the recovery in crude prices.”

RELATED: Anadarko tells Eagle Ford shale goodbye

Denver-based oil and gas producer SM Energy, for example, said this month that it was selling 37,500 net acres in the Eagle Ford for $800 million to Austin-based Venado Oil and Gas, so SM could focus cash on the Permian.

That price worked out to about $16,350 per acre, according to Sheehan, far more than the $3,500, on average, companies received last year in the play.

Add to that the Anadarko Petroleum Corp. announcement last Thursday: The Woodlands-based oil explorer said it will sell 155,000 net acres to Houston oil company Sanchez Energy Corp., backed by the New York private equity firm Blackstone Group, for $2.3 billion — or just under $15,000 per acre.

All of that is far less than the $33,000 per acre the Permian averaged last year. And far less than the $35,000 the Eagle Ford averaged in 2012, as the shale revolution was steaming ahead.

But the two 2017 prices still put Eagle Ford deals on track for their best year since 2013.

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