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The Eagle Ford has sparked a renaissance of sorts in the Texas energy industry. Yet only five years ago, most investors had never heard of it. So put on a helmet! Here are the top five mind blowing facts from the Eagle Ford.
1) The Eagle Ford could be the largest on-shore oil reserve ever discovered in the United States.
The Eagle Ford is a massive shale play of 20,000 square miles. The formation swoops across southern Texas from the Mexican border up into East Texas. Of its 12.8 million acres, EOG Resources (NYSE: EOG ) is the largest landowner with 639,000 acres.
While the true number of recoverable barrels under the Eagle Ford is unknown, the U.S. Geological Survey estimates the field holds between 7 billion to 10 billion barrels of oil. If these figures are accurate, the field would be the largest on-shore oil reserve ever discovered in the continental U.S.
2) The Eagle Ford is the fastest growing play in the world.
Keep in mind that when PetroHawk-now owned by BHP Billiton - drilled its first well in the Eagle Ford back in 2008, production was only 358 bpd. During that same year, the Texas Railroad Commission issued 26 well drilling permits.
By 2012, the commission issued 4,141 permits representing a 160 fold increase within four years. In May, Eagle Ford output hit a record 580,000 bpd-up 58% year-over-year. According to estimates by Bentek Energy, that figure could hit 1.6 million bpd by 2016.
3) The Eagle Ford is producing some of the most valuable crude in the world
There're two reasons why Eagle Ford crude is particularly prized buy refiners. First, it's exceptionally light and sweet making it cheap to refine. Second, the field is located just 100 miles from major refining hubs in Houston and Corpus Christi making it especially inexpensive to transport.
And unlike other formations, investors shouldn't have to worry about pipeline capacity issues popping up in the future. Platts estimates that new capacity from pipeline construction will outpace upstream production growth over the next four years. This is definitely not the case in other plays like the Bakken or Marcellus.
4) Drilling costs in the Eagle Ford are falling rapidly.
While production growth steals all the headlines, the more important development is the falling cost of doing business in the Eagle Ford.
At EOG Resources, average well costs have fallen to $5.8 million per completed well in 2013 -- a big difference from the $9.1 million spent per well in 2009. Management thinks it can shave another $300,000 from the figure by year-end.
Last month, Forest Oil (NASDAQOTH: SOGC ) reported average well completion costs fell 14% year-over-year to $6 million during the quarter. This adds up to substantial savings for investors. For Forest Oil, who expects to completed 30 this year, could save a pretty substantial $30 million. Given that the company had a $470 million funding gap last year, every bit of saving count.
What's driving this trend? Much of these cost savings can be attributed to improved drilling techniques, the falling price for hydraulic fracturing services, and experience operating in the play.
5) The Eagle Ford is the biggest investment bonanza on the continent.
Given the problems facing other energy plays, the Eagle Ford has emerged as the most attractive place for energy companies and investors to park their capital. According to estimates by Wood Mackenzie, the industry will invest $28 billion in the Eagle Ford this year.
Chesapeake Energy (NYSE: CHK ) the second largest landowner in the region, is one of those firms betting big on the play. The company is trying to transition away from low priced dry gas and into higher yielding liquid production. To accomplish this the Eagle Ford will account for over a third of the company's FY 2013 drilling and completion budget.
Foolish bottom line
The facts are clear: the Eagle Ford is one of the best shale oil plays in the U.S. Even more remarkable is the fact that it wasn't even on investor radar screens four years ago. Those companies operating in the region-EOG Resources, Chesapeake, Forest Oil-will enjoy their share of profits.
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