It’s been almost 50 years since Americans heard that famous line from The Ballad of Jed Clampett: “Oil that is ... black gold, Texas tea.“
For the rest of the world, the 20th century began on January 1, 1901. But for Texans, it started nine days later when the Spindletop well blew out drilling mud, gas and oil … Texas tea, as it soon became known.
The gusher spouted more than 100 feet into the air, and it took nine days to cap it. That single event transformed the Lone Star state from an arid cattle-herding wilderness into the nation’s premiere oil and gas supplier.
The Spindletop Field Discovery: Texas’ First Oil Boom
The discovery of the Spindletop field led to a flood of oil drilling and speculation. That ultimately resulted in even more discoveries, and the Texas oil boom got underway in earnest. Petroleum quickly displaced agriculture and cattle as the primary economic driver of Texas. Personal fortunes were made, and government coffers swelled with cold, hard cash.
Often the discovery of oil led to the formation of entire towns. It also led to the start of companies that later grew to become huge oil empires. The New Handbook of Texas has this to say about the discovery of the Spindletop oil field: “The discovery of the Spindletop oil field had an almost incalculable effect on world history, as well as Texas history.”
Eager to find similar deposits, investors spent billions of dollars throughout the Lone Star State in search of oil and natural gas. The cheap fuel they found helped to revolutionize American transportation and industry.
Shale Oil Fields Yield Vast Amounts of ‘Texas Tea‘
Recent data for the Foundation for Energy Education shows Texas has 28 of the top 100 oil fields in the United States, as ranked by proven reserves. In 2008, Texas had proven reserves of 4.555 billion barrels.
But that number could turn out to be low -- way low. You now see horizontal drilling and fracking techniques – pioneered by the natural gas industry – being applied to shale oilfields in Texas. The results are prompting experts to declare that Texas is on the verge of a second oil boom. This time however, it’s going to come from the state’s vast shale oil fields.
A RAND study conducted in 2005 indicated that crude would have to be in the range of $75-90 per barrel for shale oil extraction to be economical. We’re certainly beyond that. Even better, with technological improvements, shale oil can now be extracted for as little as $20-30 per barrel.
The Bakken field in North Dakota has been producing sale oil in ever increasing amounts. Over the past several years, production has reached 460,000 bpd. Estimates are this figure could increase to over 1 million bpd by 2020, or even sooner.
Why Eagle Ford Is the Texas Big Oil Shale Play
The Texas big oil shale play is of course, the Eagle Ford Shale formation. Many players who gained valuable experience in the Bakken have begun to set up operations in the Eagle Ford area.
Players in the Eagle Ford formation include:
- Marathon Oil Corporation (MRO)
- EOG Resources, Inc. (EOG)
- Whiting Petroleum Corporation (WLL)
- Apache Corporation (APA)
- Carrizo Oil and Gas, Inc. (CRZO)
Right now, production is just ramping up in Eagle Ford, and stands at a mere 50,000-100,000 bpd. Estimates are that this could quickly rise to 750,000-800,000 bpd in the not-to-distant future as more and more drill rigs are brought to bear on this lucrative oil field.
Investors who want to play Texas’ second oil boom should take a look at the companies listed above. They’re drilling like there’s no tomorrow in the Eagle Ford.