These days, petroleum prices are a calamity at best, but according to a new projected capital analysis, energy companies will spend $20 billion in the Eagle Ford Shale this year.
The new projections come from a recent study from research firm Wood Mackenzie. Last week, the firm stated that even with severe reductions in activity, the Eagle Ford remains resilient and continues to draw more investments than any other shale play in the nation.
Other regions— such as the northern Bakken/Three Forks and the neighboring Permian Basin— are projected to see far less spending. According to a recent San Antonio Express News report, The Bakken region can expect 12.8 billion in new spending while the Permian’s Wolfcamp formation can expect $12.5 billion.
“The big players in the Eagle Ford are some of the most stable companies in U.S. onshore markets,” Wood Mackenzie analyst Jeremy Sherby said. “Overall, Eagle Ford production growth is not dependent on the smaller, more financially vulnerable companies.”
If oil prices can remain around a minimum of $55 per barrel, Wood Mackenzie expects the Eagle Ford to reach a production level of 2 million barrels per day by 2020. Express News stated that an estimated 2,700 new wells will start delivering oil and gas to market this year, although that is down from about 4,000 new wells in 2014.
However, given that oil recently reached a 6-year-low at $39, it’s difficult to take really any projections to heart. The global oil glut, pending Iranian oil, sluggish growth in demand, the oil export ban and the countless other geopolitical variables are all factors influencing the rise in crude prices.
“If you’re a producer in Texas, that threshold in the $30s was reached a few weeks ago, probably $35,” Amarillo-based oil and gas economist Karr Ingham said. “The question becomes, given downward pressure on prices, how soon do we see a number with a two instead of a three in front of it? I’m afraid it’s a possibility.”
Sherby noted that much of the $20 billion has already been spent. Many projects from 2014 carried over into the new year prior to the near halving of oil prices from $100 per barrel last summer. In addition, even if production slows in the last months of 2015, Sherby stated that many Eagle Ford operators are hedged for 2015, having locked in higher prices for this year’s production.
“It buys you time to figure out what your next move is going to be as a corporation,” Sherby said. “2016 will be a different story. “
Check out the full story from Jennifer Hiller of The San Antonio Express News here.