Eagle Ford Shale

SM Energy Sells Part Of Non Operated Eagle Ford Shale Position

SM Energy (SM) reported that it has signed an agreement to sell a 12.5% working interest in the company’s non operated position in the Eagle Ford Shale to Mitsui & Co., Ltd. for $680 million.

SM Energy said that the $680 million will be paid to the company through a drilling carry where Mitsui & Co., Ltd. will pay 90% of its future drilling and completion costs in the Eagle Ford Shale.  The company will also be reimbursed between $20 million and $40 million for the purchaser’s share of capital expenditures from 3/1/2011 and the closing date.

After the deal closes, SM Energy will have 46,000 net non operated acres in the Eagle Ford Shale.  The company reported average daily production of 43.5 million cubic feet of natural gas equivalents from its non operated leasehold as of 3/31/2011.  This production was 42% oil, 36% natural gas and 22% natural gas liquids.  Proved reserves totaled 52 billion cubic feet of natural gas liquids.

New York Times Slams Natural Gas Shale Boom

Anyone that invests in exploration and production stocks or works in the industry should look at this article published in the New York Times this past weekend.  The writer basically accuses the industry of lying to investors through overstating reserves, understating decline rates and the economics of natural gas shale plays. 

The infamous Art Berman is quoted in the article, but there are also nearly 500 documents from various industry insiders as well as from investment analysts on the buy and sell side.  An excerpt from the article is below:

Insiders Sound an Alarm Amid A Natural Gas Rush

“In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles.”

Penn Virginia Reports Eagle Ford Shale Well Completions

Penn Virginia Corporation (PVA) updated the company’s activity in developing the Eagle Ford Shale in Texas.  The company has six producing wells, is drilling three more and has three wells waiting on completion.

Penn Virginia Corporation said that the six wells that are on line are producing a combined total of 4,096 barrels of oil per day and 2.07 million cubic feet of natural gas.  The company said that these wells also yield 150 barrels of natural gas liquids for every million cubic feet of natural gas production.

Penn Virginia Corporation said that the Gardner #1-H well had a peak 24 hour production rate of 1,250 barrels of oil equivalent (BOE) and is currently producing 350 barrels of oil and 240,000 cubic feet of natural gas per day. This was the company’s first well into the Eagle Ford Shale and it has produced a cumulative 68,000 barrels of oil in 129 days.

Penn Virginia Corporation reported the name and peak 24 hour production rates on the other five producing Eagle Ford Shale wells:

Hawn Holt #1-H – 726 BOE, 650 barrels of oil per day

Hawn Holt #2-H – 986 BOE, 869 barrels of oil per day

Hawn Holt #4-H – 560 BOE, 514 barrels of oil per day

Hawn Holt #6-H – 711 BOE, 670 barrels of oil per day

Hawn Holt #9-H – 1,876 BOE, 1,652 barrels of oil per day

The Hawn Holt #1-H and Hawn Holt #4-H wells saw subsequent increases in peak rates to 830 and 582 BOE per day, respectively.