Oil production in the the Eagle Ford shale fields of South Texas is soaring and will soon pass that of the rich Bakken formation in North Dakota and Montana, according to a new report. A large number of energy companies stand to benefit.

March shale oil production in Eagle Ford, also known as Eagleford, rose 77% from a year earlier, to 529,900 barrels per day, the Texas Railroad Commission said Tuesday.

RBC Capital Markets analyst Scott Hanold, citing the commission's report, in a client note Wednesday said, "While the trend is correct, we believe actual production in the Eagleford is higher than what is being reported." Hanold wrote that Eagle's production may have already topped Bakken's. If it hasn't already, it will do so in the near term, he said.


R.T. Dukes, managing editor of Eaglefordshale.com and a former oil company consultant when he was with Wood Mackenzie, agrees with Hanold.

"Yes, Eagle Ford is booming and will likely pass Bakken in terms of production," Dukes told IBD. He said their equivalent output levels are probably about equal now.

Petrohawk — now owned by mining giant BHP Billiton (BHP) — kicked off the modern Eagle Ford boom in 2008. Other major players include Anadarko Petroleum (APC), Apache (APA), EOG Resources (EOG) and Pioneer Natural Resources (PXD).

Anadarko fell 1% in afternoon trading on the stock market Wednesday, as crude futures and stocks overall retreated. EOG rose about 1%. Apache climbed 2% as Reuters reported it's mulling sales of some Gulf assets.

Oil majors Exxon Mobil (XOM) and Royal Dutch Shell (RDSA) also have a foothold in Eagle Ford.

Dukes also cited major Eagle Ford players Chesapeake Energy (CHK) and Marathon Oil (MRO) as likely winners when Eagle Ford passes Bakken in production.

"Billions are being invested in infrastructure there," so it will also benefit infrastructure companies such as Enterprise Products Partners (EPD) and Kinder Morgan Energy (KMP), he said. He also said pipeline company Plains All American Pipeline (PAA) may be a winner.

Dukes said the ripple effects of the shale oil boom are already being felt throughout the economy.

"We're producing more oil in the U.S. than in the last 20-plus years.

And it's bringing manufacturing back to North America, reversing a trend of decline over the past 30 years. You can now manufacture in the U.S. at low cost again because of low-cost energy sources," Dukes said.

RBC Capital's Hanold said well-by-well production data obtained from RBC's proprietary database has current oil production at a much higher rate than the railroad commission projects, as much as 800,000 barrels a day in March, in the same range as the Bakken output.

 


Comments

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