The Eagle Ford shale currently supports more than 270 active drilling rigs and is considered one of the nation’s premier unconventional plays. Where other plays only have dry gas, the diverse hydrocarbon richness of the Eagle Ford shale is a gift that keeps giving.

“In May we reached about 800,000 boe/d from a little over 2,900 wells, which is 20% of the U.S. unconventional production and 7% of U.S. unconventional wells,” said Allen Gilmer, co-founder, chairman, and CEO of Drillinginfo.com.

In addition, as a tight shale formation play, the Eagle Ford shale has what Richard Mason, chief technical director for upstream technology at Hart Energy described as a “predictable mark of development,” in that each of the hydrocarbon plays presents its own unique development cycle.

Both speakers provided a quick look at the current state of activity in the Eagle Ford shale during Hart Energy’s DUG Eagle Ford conference on Oct. 15.

Leasing Slows While Permitting Speeds Up
Leasing activity peaked in 1Q 2010 and has since dropped off, Gilmer said. Three counties have experienced a year-over-year increase in leasing: Goliad, Fayette, and Burleson. All other areas in the Eagle Ford, according to Gilmer, have seen big drops in leasing activity.

In addition to these drops, leases on about 800,000 acres are set to expire in the next 12 months. There are no drilling plans proposed for these lease acres. Leases are set to expire on about 160,000 acres in 4Q 2012.

However, due in part to services being more available and increased efficiencies by companies, there is a “huge boom” going on now in permitting, Gilmer noted.

“Oil and wet-gas zones are experiencing the greatest increase in permitting, with the horizontal length of the leg being pushed further and further out,” said Gilmer. As for dry gas at this time, it is the “redhead stepchild in the shale play,” as he put it. “Nobody loves dry gas.”

Shale Development Life Cycle Observed Through Rig Type
Mason offers that there are three phases in the development cycle for tight shale formations. The first is for land, the second is the investment of money into the land, and the third is money out of the land.

“All tight formation shale plays have a predictable mark of development,” said Mason. “The Eagle Ford is a collection of multiple hydrocarbon plays, each with its own distinct development cycle.”

The discover/delineate phase is characterized by the leasing of land and the drilling of single wells with a standard rig because operators are “finding out what is really there,” said Mason. In the optimization phase the standard rig has been replaced with a technology rig as the operators are “trying to learn as much as they can about the play.” Mason adds that these two phases tend to be cash-flow negative for oil and gas operators.

As a play matures it enters the resource harvest phase. It is in this phase that operators begin to see a return on their investment. There is a move from technology rigs to fit-for-purpose rigs for pad drilling. “This is when you see the rigs ordered as newbuilds come into effect in the play,” said Mason.

He notes that the Eagle Ford oil window is a play reaching its maturity. This is realized in the types of rigs currently active. The downturn in gas drilling created an oversupply of equipment.

“A look at the Eagle Ford fleet shows that this is the largest concentration of technology rigs anywhere in the U.S.,” said Mason. “Nearly all growth in rig count in the Eagle Ford in the last 18 months has come from the migration or addition of technology style rigs. The Eagle Ford rig count is up by 70%, but the Tier 1 (technology) rig count is up to more like 144%.”

In addition, there was an “enormous effort in 2011 to order newbuild rigs, and a substantial number of those rigs were earmarked for the Eagle Ford,” he said.

Mason added that the rig count is likely to stay flat or trend lower until natural gas prices recover. “That may happen in 2014 for the optimistic or 2015 for the less optimistic,” he said. “We know it is going to happen. We just can’t say when.”