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From 2015 to 2017 the production rate of the top operators in Eagle Ford, including EOG, Marathon Oil, Pioneer Natural Resources, Exxon Mobil (XTO), Conoco Phillips, EnCana, BHP, Devon, Noble and Matador, declined by 19% or 0.28 million barrels of oil equivalent per day (mmboed). This contrasts with their Permian production which observed a 68% increase or 0.38mmboed. In 2018 this same group is forecast to ramp up production in Permian by 47% or 0.45mmboed, whereas their production growth in Eagle Ford is expected to be only 10% or 0.12mmboed.

Production trends in conjunction with well productivity analysis shows that in general new generation wells in Permian yield a larger recovery and profit per dollar than a modern Eagle Ford well.

A main reason for the disparity in well performance is Permian’s higher number of productive target zones such as multi-level Bone Spring and Wolfcamp intervals. These zones are up to 3 times thicker than target zones in Eagle Ford providing an opportunity for drilling deeper and comingling flow from several overlying formations.

Percentage change in Eagle Ford and Permian daily production from 2015 to 2018

Source: Upstream Analytics                                                                                                                                                                                     © GlobalData

Value delivered by more productive and longer lasting wells in the Permian basin is reflected in the breakeven price for operators currently ranging from US$24 to US$62 per barrel which is lower than in Eagle Ford at US$30 to US$67 per barrel.

In spite of the current pipeline bottlenecking in the Permian and the ongoing cost increases due to the higher demand in services, top operators have a clear strategy in strengthening their positions in Permian at the expense of other shale formations such as the nearby Eagle Ford play. After all, takeaway limitations and other infrastructure constraints are issues that can be resolved in a relatively short term. In contrast, Permian’s undeveloped acreage with its expectation of better geology and highly profitable wells, provides a stronger incentive for operators to increase their inventory of wells in this prolific basin.

 

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