There are nearly 1,400 wells in the Eagle Ford Shale that have been drilled but not completed, according to new analysis from the firm IHS.
Oil prices are hovering around $50 per barrel, down by half since last summer. And some Eagle Ford oil producers have been drilling but not fracking wells. The delay in completing wells avoids sending new barrels of oil into a cheap market.
For a small handful of operators, IHS reports that the drilled-but-not-completed wells will give them a big advantage over competitors.
Nearly 40 percent of those 1,400 delayed wells have a break-even costs below $30 per barrel, according to IHS.
The operators include BHP Billiton, Chesapeake, Anadarko Petroleum, EOG Resources, ConocoPhillips and Pioneer Resources. (The remainder of the delayed wells belong to 33 other operators).
“In this low oil-price environment, operators in the Eagle Ford and other U.S. shale plays are focused on optimizing the value of their assets and managing their costs, and these drilled, but uncompleted wells enable them to do that more effectively for several reasons,” said Raoul LeBlanc, senior director of research at IHS Energy, and the lead author of the analysis, in a press release.
“First, the drilling costs of these wells were already incurred by operators prior to 2015, and the completion costs — which comprise the majority of well costs — can be negotiated at a cheaper rate since completion crews are now both available and available at cheaper rates. Second, if completion costs are fairly consistent in the play, then it stands to reason that wells with higher production will yield better returns on capital.”
IHS thinks three companies operating in the northeastern core of the field have the biggest upside from the delayed wells.
The report estimates that BHP, ConocoPhillips and Pioneer Resources have better potential in their delayed wells “than their current producing well portfolios, providing them the greatest available options going forward of any operators in the play.”
Things aren’t quite as rosy to the west, where the delayed wells aren’t expected to be as productive. Those operators “may be challenged during the low-price environment and a few may delay completions until oil prices rebound,” IHS says.
In a year, completions of the so-far delayed wells could add 123,000 barrels of oil equivalent to Eagle Ford production, or as much as 269,000 barrels of oil equivalent, according to IHS.