Credit rating agency Standard & Poor’s has released a report that seeks to answer an important question: are there any more big, profitable shales on the order of a Bakken or an Eagle Ford to be found in the US?
The primary feature of the two plays that makes them so attractive is their oil yield. “That is the biggest thing, is that oil is the biggest component of production,” S&P Primary Credit Analyst Ben Tsocanos, author of Can U.S. Exploration And Production Companies Find the Next Eagle Ford?, told Breaking Energy.
The Eagle Ford has an additional leg up, owing to its proximity to an existing – and expanding – infrastructure system. “The Eagle Ford does have an advantage over the Bakken, just because it’s closer to markets and there’s more transportation capacity, mainly in terms of pipelines,” Tsocanos said.
There seems to be no shortage of shale acreage around the country, and companies are still in the process of snapping it up and determining different plays’ individual characteristics. But for now, it is unclear whether any of the more recently discovered formations hold the same promise that the Bakken and the Eagle Ford do.
“It’s surprising just how hard it is to find a really premier competitor to something like the Eagle Ford,” Tsocanos said. “It seems like there have been a number of disappoinments so far, and a number of plays that had a lot of hype, but seem to have had setbacks.”
Some of these plays “could still wind up being real contenders, but they have a ways to go”, Tsocanos said.
S&P listed four promising prospective plays in the report, outlining their potential strengths and weaknesses, and singled out one in particular – the Permian Basin. “The next big source of oil could also be one of the oldest: the Permian Basin in West Texas,” the report said.
“[The Permian] seems to have a lot of things going for it,” such as repeatable, consistent well performance, Tsocanos said. And the report notes that its production stream is 70% oil (see below).
The Permian Basin has been the subject of glowing commentary from exploration and production companies, and recent research from consultancy Wood MacKenzie highlights two specific parts of the area – the Wolfcamp and Bone Spring – as the likely sources of an output surge. Tudor, Pickering & Holt also has high expectations for Permian production. But “we still do need to see more data before it’s going to be obvious”, Tsocanos said.
Prospective Plays: Key Metrics
Utica Shale:
- Estimated Ultimate Recovery: Up to 800,000 barrels of oil equivalent per well
- Well Costs: $8-9 MM per well
- Oil Yield: Wells drilled in the area so far, which offer a somewhat small sample, suggests it may yield more gas and NGLs than oil, according to the Ohio Department of Natural Resources
- Infrastructure: Buildout needed
- Expected 2013 E&P Spending: $2.3 bln
Niobrara Shale:
- Estimated Ultimate Recovery: 350 MM boe per well
- Well Costs: $5 MM per well
- Oil Yield: What was once a gassy play is now producing more oil and liquids, but oil accounts for less than half of the output stream
- Infrastructure: Buildout needed
- Expected 2013 E&P Spending: $4 bln
- Additional Considerations: Water sourcing, handling and disposal
Mississippi Lime:
- Estimated Ultimate Recovery: 350 MM boe per well
- Well Costs: < $4 MM per well
- Oil Yield: About 30%
- Infrastructure: Unspecified in the report, but other information suggests that buildout is needed
- Expected 2013 E&P Spending: $10 bln
- Additional Considerations: Variable geology yields variable well results, which sometimes include salt water requiring disposal
Permian Basin:
- Estimated Ultimate Recovery: Up to 50 bln boe total, 450,000 boe per well
- Well Costs: $8 MM
- Oil Yield: 70%
- Infrastructure: Proximate and well-developed
- Additional Considerations: Proximity to oil & gas expertise and labor
- Expected 2013 E&P Spending: $12.6 bln
