Eagle Ford interest soaring with Sun Resources, Texon Petroleum making mid week gains on the ASX Saturday, May 05, 2012 by Bevis Yeo Companies operating in the Eagle Ford are getting a second look following Aurora Oil & Gas' A$107 million bid for Eureka Energy.
Interest in the liquids rich Eagle Ford Shale in Texas has grown in the past week following Aurora Oil & Gas' (ASX: AUT) open market A$107 million takeover bid for Eureka Energy (ASX: EKA).
Aurora has outright said its interest in Eureka revolves squarely around the latter's interest in Sugarloaf area of mutual interest (AMI), 1 of 4 AMIs that make up the Marathon Oil (NYSE:MRO) operated Sugarkane field.
With the Aurora's share of Sugarkane proved and probable reserves standing at about 92 million barrels of oil equivalent as of the end of December 2011 and production of 319,000 barrels of oil equivalent for the quarter ending March 2012, it is little why the company is interested in Eureka's 6.25% interest in Sugarloaf, which will increase Aurora's stake in the AMI to 22.05%.
Eureka has since called on its shareholders to ignore Aurora's A$0.45 cash bid as opportunistic and undervaluing the company.
Shares in EKA have since risen to A$0.505.
Eagle Ford
So why the Eagle Ford?
The Eagle Ford Shale extends over 643 kilometres, stretching northeast from the Mexican border near Laredo to beyond Houston.
The shale is considered to be one of most prospective liquids-rich shale formations in the U.S. that give producers operating there larger ratios of higher value liquids at a time where natural gas prices in the U.S. remain depressed.
This holds true despite Eagle Ford wells costing more than their counterparts in the more gas prone Barnett Shale to the north due to the greater depth of the Eagle Ford.
Little wonder then that Marathon Oil considers the Eagle Ford to be one of its core areas with 17 rigs currently operating in its massive 300,000 acre (1214 square kilometre) portfolio with an eighteenth expected to start in the current quarter. 11 of these rigs are now operating in the Sugarkane field.
Its activity has delivered 16 to 20 well completions a month with production at the end of April reaching 20,000 barrels of oil equivalent per day (boe/d).
Marathon has targeted its Eagle Ford production to hit 30,000boe/d by the end of this year and 100,000boe/d in 2016.
Fellow North American independent Pioneer Natural Resources (NYSE:PXD) has built a large 310,000 acre Eagle Ford portfolio and has brought in Indian major Reliance Industries as its partner
Resources giant BHP Billiton (ASX: BHP) also owns a large 332,000 acre tract that it inherited from PetroHawk Energy, which it acquired in mid-2011, and has described the Eagle Ford as offering the highest economic return of all U.S. shales.
It is not surprising then that BHP, which had produces 52,000boe/d from the Eagle Ford in November 2011, is focusing its U.S. operations in the area.
Incidentally, PetroHawk is also credited as being the first company to drill a horizontal Eagle Ford well back in 2008.
Australian players
Besides Aurora and Eureka, there are a number of other ASX listed companies who have operations in the Eagle Ford.
We begin our round-up with AWE (ASX: AWE), which is also a participant in the Sugarloaf with its 10% stake in the AMI that it had snapped up as part of its acquisition of Adelphi Energy in September 2010.
While contributing just 18,000 barrels of oil to AWE's production of 0.85 million barrels of oil equivalent for the quarter ending March 2012, the company is leveraging the technical knowledge and experience it is gaining from Sugarloaf and applying this to its shale gas and tight gas project in the onshore Perth Basin.
The next through the gate is Sun Resources (ASX: SUR) which has built a 8347 acre Eagle Ford landholding in the Delta Oil Project.
Sun's goal is to build a 10,000 acre project in the rapidly expanding Eaglebine play within the broader Eagle Ford Shale. Nearby horizontal wells have produced oil at rates of more than 800 barrels per day.
Shares in Sun had hit a high of A$0.053 on Wednesday 3 May this week from a start of A$0.04 on Monday. Its stock is currently trading at A$0.048. Volumes have also being high, ranging from 20 million to 80 million shares trading hands.
Likewise, Texon Petroleum (ASX: TXN) saw its shares rise to A$0.605 on 3 May from A$0.585 at the start of the week though poor market sentiments have sent it down to A$0.58 today.
Texon has 4 producing Eagle Ford wells in McMullen County, Texas, and is currently preparing to drill its fifth well.
Despite the success of these wells, the company has put its Eagle Ford asset on the market, saying it was an established development project and that proceeds from its sale would be better used developing new plays that had the potential to create “Eagle Ford like” value.
Global Petroleum (ASX: GBP), which is the minority stakeholder in some of Texon's Eagle Ford assets, has also taken the same tack and has put its interests up for sale.
Heading on the opposite road is Golden Gate Petroleum (ASX: GGP) which has picked up a 10% stake in a 3400 acre Eagle Ford project that is expected to bring in early cash flow with the Cutlass West A-1 well that spudded on 29 April 2012.
The asset has resource potential of 15 million barrels of oil equivalent (1.5 million to GGP).
While shares in the company are down to A$0.018 today from A$0.019 at the start of the week, volumes have been high with up to 17 million shares changing hands on 1 May.
Last, but certainly not least is Austin Exploration (ASX: AKK), which started producing oil from its Eagle Ford acreage in March when its Krueger-1 vertical well flowed 95 barrels of oil equivalent per day (boe/d) during a 24 hour test from the Eagle Ford following successful hydraulic fracture stimulation.
This exceeded pre-drill estimates of 60boe/d.
Shares in Austin are currently trading at A$0.48, down from a high of A$0.525 on 3 May.
TXN Price at posting:
59.0¢ Sentiment: Hold Disclosure: Held
