Pioneer Natural Resources Crafts Solutions To The Eagle Ford's Challenges

Eagle Ford shale-oil and -gas production is having a "huge impact" on the U.S. energy industry, says Timothy Dove, president and chief operating officer for Pioneer Natural Resources Co. based in Irving, Texas. By current estimates, the play's resource potential could be as high as 25 billion barrels of oil equivalent, or about 150 trillion cubic feet of gas equivalent, and gross production could reach 3.5 million barrels of oil equivalent per day by 2020.

"The play is so huge that even downstream industries are beginning to focus on the play," said Dove, as he addressed some 4,000 attendees at the Developing Unconventional Gas (DUG) Eagle Ford Conference and Exhibition held in San Antonio, Texas, on October 10 through 12.

And he should know - as Pioneer holds some 300,000 gross acres in the Eagle Ford shale, with some 24 million barrels of proved oil equivalent from 2,000 drilling locations.

"Refineries are changing their operations to take advantage of the current liquids production from this play," he said. "And there are 180 rigs drilling in the play. But the play is not without its challenges," he says.

Some of the challenges of developing the play include the need to finance large capital commitments, secure liquids and gas-gathering, -take-away and -processing capacity, enhance technological expertise, ramp up drilling rigs and production, optimize drilling and fracturing designs, minimize execution risk in a tight service market and hire large numbers of quality people.

To overcome those challenges, Pioneer formed a joint venture with Reliance Industries, became a "first mover" in a midstream buildout, arranged long-term third-party take-away and processing agreements, implemented industry-leading technology, optimized completion techniques, reduced drilling time, employed vertical integration to enhance execution and control costs, and devised a successful hiring program.

"Pioneer has drilled 150 wells to date here, more than anyone else," said Dove, but noted that the statistic is not surprising, considering Pioneer has been working the play for 20 years. "We have a tremendous amount of data on the play." Pioneer has all of its data in 3D seismic, which is "critical to the play," he said.

Going forward, Pioneer plans to conduct a higher percentage of pad drilling, thus allowing multiple wells to be drilled using a single location. "Right now we are not doing that because we are having to chase lease lines," he said.

Currently, Pioneer is only 4% into developing its acreage, "so we have a long way to go," said Dove. "We plan to drill about 120 wells next year, and we will have 19 rigs working by 2014." He noted that the company has experienced a dramatic decrease of drilling costs-per-foot due to its vertical integration.

In fact, Pioneer is the fifteenth largest fracture-pumping service company in the U.S. so the "economics of pumping our own wells are fantastic, because some costs of third-party providers have gone up more than 100%," said Dove, adding that Pioneer is saving about $1.7 million per well completion. Beyond the cost-savings advantage, owning its own services allows Pioneer to execute its plan on schedule and "we know that our own employees will do an excellent job," he says.

The company currently employs some 285 field employees, about 400 contractors and 90 people in its Dallas office to focus on the Eagle Ford. "At one time, we had more than 1,000 people. We are making a major impact to employment in South Texas," said Dove. Pioneer also works the Spraberry and Barnett shales in Texas.

Contact the author, Jeannie Stell, at jstell@hartenergy.com.