Marathon May Have Increased the Value of Eagle Ford Leaseholders, Part 5

by: Michael Filloon

In this fifth part of the series I will conclude my list of Eagle Ford players. I have highlighted the Maverick Basin as a very good location with high IP rates, and expected EURs. There are several areas with very good production to the northern aspect of the volatile oil window. There are several counties in district 1 that produced over one million barrels of oil from March of 2010 to March of 2011.

  • Caldwell-1108416 barrels of oil
  • Dimmit-1800112 barrels of oil
  • Guadalupe-1086122 barrels of oil
  • Maverick-1100459 barrels of oil
  • McMullen-1478101 barrels of oil

PetroQuest Energy (NYSE:PQ) has 3200 gross and 1600 net acres in the Eagle Ford. These acres are located in Dimmit and LaSalle counties. It is running a three rig program in 2011. PetroQuest is completing a well in Dimmit County and drilling a well in LaSalle. The Dimmit well is right next to an Anadarko well, and its LaSalle well is near a Chesapeake (NYSE:CHK) and an El Paso (EP) well. It will drill 3 operated wells this year in the Eagle Ford. Petroquest's acreage could generate IP rates of 800 Boe/d to 1000+ Boe/d, based on other well results adjacent to Petroquest's acreage.

Gastar Exploration (NYSEMKT:GST) has 19200 net acres in the Eagle Ford. It is located in Leon and Robertson counties. Gastar had initially drilled this location for the deep Bossier. This had shown promise, but more important is Gastar's recent announcement to pursue oil production in the Eagle Ford. Gastar's current production is almost exclusively natural gas. For the size of the company, Gastar could have significant resource added through Eagle Ford production. More important to Gastar is its Marcellus acreage, which could create a significant move to the upside for this stock.

Goodrich Petroleum (GDP) has 40000 net acres in the Eagle Ford. 62% of 2011 cap ex will be spent here. 8 Eagle Ford wells have been completed with an average of 675 Boe/d. Two rigs are running and approximately 16-20 net wells will be completed here in 2011. 100 acre spacing will produce 400 net locations. Its Eagle Ford acres are located in Frio and LaSalle counties. Goodrich's leasehold is surrounded by very good oil and gas companies. These companies have had good results.

Cabot Oil and Gas (NYSE:COG)

  • Patrick West #1H had an IP of 305 Boe/d
  • Arminius Trust #1H and #2H had IPs of 925 and 550 Boe/d
  • Zella Cromwell Ranch #1H had an IP of 733 Boe/d

Chesapeake (CHK)

  • Traylor North 1H had an IP of 980 Boe/d
  • Brownlow 1H had an IP of 1220 Boe/d
  • Lazy A Cotulla 1H had an IP of 980 Boe/d

PetroHawk (NYSE:HK)

  • Mustang Ranch 1H had an IP of 350 Bbl/d
  • Mustang Ranch C 1H had a first 7-day avg. of 570 Bbl/d on pump

Goodrich Petroleum (GDP)

  • Pan Am C 1H (EFS) had an IP of 250 Boe/d
  • Pan Am B 1H (EFS) had and IP of 667 Boe/d
  • Burns Ranch A 5H (EFS) had an IP of 600 Boe/d
  • Burns Ranch A 9H (EFS) had an IP of 860 Boe/d
  • Burns Ranch A 7H (EFS) had an IP of 940 Boe/d
  • Burns Ranch A 1H (EFS) had an IP of 1010 Boe/d
  • Burns Ranch A 4H (EFS) had an IP of 600 Boe/d
  • Lancaster C 1H (BUDA) had an IP of 512 Boe/d
  • Pedro Morales 7H (EFS) had an IP of 460 Boe/d

Goodrich is the type of company I invest in. Analysts covering the stock have it growing fast in 2012, plus it has a low forward PE of 13.76. When oil stocks begin the next bullish move, Goodrich could very well be one of the biggest winners.

Comstock Resources (NYSE:CRK) has stated the Eagle Ford will drive its liquids growth in 2011. It plans to drill 21 wells in 2011, with emphasis on the oil and condensate windows. The Eagle Ford is estimated to increase its oil production 8% to a total of 10%. Comstock has 18000 net acres in the Eagle Ford. Its acreage is in McMullen, Atascosa, and Karnes counties. Comstock estimates its per well reserves to be 400 Mboe. It will spend $163.9 million of a total $610 million on the 2011 drilling program in the Eagle Ford. Comstock drilled 2 net wells during the first quarter of this year. Wells completed on its acreage had good results.

McMullen County

  • Swenson #1H-1264 Boe/d
  • RTH #1H-496 Boe/d
  • Carlson #1H-585 Boe/d

Atascosa County

  • NWR #1H-419 Boe/d

Karnes County

  • Coates #1H-538 Boe/d

Comstock is an interesting story and does well keeping costs down. The problem is its lack of liquids production. Until Comstock can increase liquids production significantly, it would be difficult to justify an investment.

Some companies working the Austin Chalk could have development potential in the Eagle Ford. The best example is Clayton Williams (NASDAQ:CWEI). It has 168000 net acres in the Giddings area with Eagle Ford exposure. Its Austin Chalk wells in Giddings have had good results. From March of 2011 to April of 2011 Clayton produced 50021 Bbl of oil in Burleson County. The Eagle Ford is also a possibility, but it seems Clayton will continue to develop the Permian as its highest producing location. It is currently evaluating the viability of this play by drilling four wells. I found information on one of these wells. For access to well information in Texas go here. Clayton's developmental wells were:

  1. Broesche Unit #1 produced 4540 Bbl of oil in the month of February 2010.
  2. Smalley-Robinson Unit #1
  3. Scallions-Lehman Unit #1
  4. Loebau Unit #1

Clayton Williams is just beginning to work the Eagle Ford in its Giddings Field acreage. Of its four wells planned, only one is in production. Apache (NYSE:APA) is also working the Eagle Ford from its Giddings Field locations. From March of 2010 to March of 2011, Clayton's Broesche Unit #1 produced 16807 barrels of oil. This was better production then any of Apache's wells for the same period of time. Total production from the Eagle Ford in Giddings Field for this time frame was 64627 Bbl of oil and 43092 Mcf. For more information of Clayton Williams go here.

Evolution Petroleum (NYSEMKT:EPM) has exposure to Giddings Field. Its plan is to develop the Austin Chalk, Buda and Georgetown first. No hydraulic fracs are needed in these three resource areas. In the Austin Chalk Evolution has 10 proved re-entries, which have an estimated average gross recovery of 146 Mboe. Its 3 proved and 2 probably grassroots drilling locations have an average gross recovery of 305 Mboe. Evolution estimates these wells will produce half of total reserves in the first two years. Evolution has given no estimates on its Eagle Ford holdings in the Giddings Field. It is difficult to know how productive Eagle Ford wells will be in Giddings Field, but Apache's results are promising.

There is no doubt the Eagle Ford will be a productive liquids zone for many years to come. This five part series focused on IP rates and EURs in the hopes of figuring the true value of this shale play, and why acres are selling at a premium to other comparable shales in the United States. Marathon's purchase of Hilcorp's acreage shouldn't raise questions about paying too much. It does make me wonder how much acreage is worth in areas like the Bakken, Anadarko Woodford and Niobrara.

Disclosure: I am long GST.