Chasing Growth in the Up-and-Coming Eaglebine

Production in the Eagle Ford Shale is soaring, and companies are clamoring to drive production in South Texas up even further with each passing day. The buzz is palpable. But up in the eastern corner of the Eagle Ford, there are only a few companies exploring the sandy, organic shale that has become known as the Eaglebine.

Who's in?
The Eaglebine has attracted oil and gas companies with vastly different profiles, and we'll cover four of them today, beginning with Encana (NYSE: ECA  ) .

Investors know Encana as the Canadian natural gas giant that once played the liquids game, until it spun off its oil assets into Cenovus Energy. Natural gas prices collapsed shortly thereafter, and now Encana is desperately trying to get back in the game. It counts the Eaglebine as one of its emerging play opportunities.

Investors got some insight into the Encana's foray into the Eaglebine during last week's earnings call. First, new CEO Doug Suttles lent legitimacy to the play when he acknowledged that the company is allocating hard-earned savings to the sandy portion of the Eaglebine. No struggling company is going to throw money at a dead-end play. Encana's first two wells in the Eaglebine employed a new frac design, and are coming on line right now. We should know more about their production results soon, but Encana spent about $7.5 million on each well, drilling 7,000-foot laterals on both.

Make room for the little guy
At the other end of the spectrum we have tiny exploration and production company ZaZa Energy. The company just announced that it was selling about 10,300 acres in the Eagle Ford, but that did not include any of its Eaglebine acreage. CEO Todd Brooks went as far as to say, "We remain focused on monetizing select Eagle Ford assets in order to improve our balance sheet and we are currently pursuing other joint ventures in the area. In the Eaglebine, our joint venture is progressing as planned and we anticipate timely drilling of the first three wells as part of the Agreement."

ZaZa made headlines when it announced an Eaglebine development partnership with EOG Resources (NYSE: EOG  ) earlier this spring. EOG will operate the play and take up to a 75% interest, while paying ZaZa $10 million, on top of drilling and completion costs for three wells. That's not a bad deal for ZaZa, as EOG is the top producer in the Eagle Ford and management clearly knows what its doing.

Halcon Resources (NYSE: HK  ) is another small operator, but its run by the former leaders of PetroHawk, and experience matters a great deal in this game. The company drilled and completed two wells in the Eaglebine earlier this year, and they are producing 90% oil. Even more encouraging is that this is a heavier crude than what is typically produced in the Eagle Ford. Gulf Coast refining capacity for that standard, lighter crude is all but maxed out. There is plenty of room, however, for heavier crudes, which naturally bodes well for Halcon.

What about pipelines?
Now, so far we've got four companies drilling in this play, and not a mention of a single midstream player in the mix to make sure all of this production can actually get to market. Enter Sunoco Logistics Partners (NYSE: SXL  ) .

Sunoco Logistics launched a binding open season on its Eaglebine Express pipeline this past May. The line's initial capacity is slated to be about 60,000 barrels per day, which should be sufficient given the developmental nature of the play right now. The Eaglebine Express will carry crude out of the play to a Sunoco Logistics terminal at Nederland, Texas, which sits between Beaumont and Port Arthur. If everything goes according to plan, the line will be up and running by the middle of next year.

Bottom line
While many are busy bemoaning dwindling decline rates in the Bakken, the oil and gas industry is plowing full steam ahead into less talked about plays like the Eaglebine, which may drive significant growth down the road. It may not ever be as big as the Bakken, but it is certainly worth following.

Tired of watching your stocks creep up year after year at a glacial pace? Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, WITH YOU! It's a special 100% FREE report called "6 Picks for Ultimate Growth". So stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.

Read/Post Comments (1) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 04, 2013, at 8:08 AM, Ostrowsr wrote:

    Halcon bought GeoResources. They are an excellent with great growth and nearly perfect success rate over the last 5 years AND big company money behind them. I believe Halcon will be a huge success just based on the GeoResources purchase alone.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2570356, ~/Articles/ArticleHandler.aspx, 9/29/2016 2:56:42 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,204.47 -134.77 -0.73%
S&P 500 2,157.32 -14.05 -0.65%
NASD 5,288.70 -29.84 -0.56%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 2:40 PM
ECA $10.02 Up +0.64 +6.82%
EnCana CAPS Rating: ****
EOG $95.31 Up +1.35 +1.44%
EOG Resources CAPS Rating: ****
HK $9.87 Up +1.10 +12.54%
Halcon Resources CAPS Rating: **
SXL $27.78 Down -0.27 -0.95%
Sunoco Logistics P… CAPS Rating: *****