If there was a contest between which shale play would pump out one million barrels of oil equivalent per day, or boepd, first, the Eagle Ford would have won according to the U.S. Energy Information Administration (whose data differs from other sources). Even the Bakken wasn't able to beat it to the punch, even though it was very close behind.
One of the biggest Eagle Ford operators, EOG Resources (NYSE:EOG), is responsible for much of the success developing the field. With 639,000 net acres and ~4,900 potential drilling locations in the Eagle Ford, EOG Resources has been heavily leaning on the play to shift its production mix to mostly liquids. So far, it has worked extraordinarily well, with liquids growing from 21% of EOG Resources' production mix in 2006 to somewhere around 88% last year.
As EOG Resources brought 460 net wells (estimate for all of 2013) online it was able to raise output by 64% year over year for the first nine months of 2013 in the Eagle Ford. The next earnings report could shift that up or down, but due to EOG Resources ability to increase initial production rates by 20% since the first quarter of 2013, investors could be surprised to the upside. http://investor.shareholder.com/eogresources/releasedetail.cfm?ReleaseID=805125
In the future, EOG Resources is going to continue to use new techniques to boost liquids output. Downspacing helped EOG increase the amount of estimated recoverable reserves EOG had in the Eagle Ford by 600 million barrels, to 2.2 billion boe. Deeper laterals is another reason why EOG is boosting recovery rates and is also a major part in rising initial production levels.
With 25 rigs up and running in the area and drilling times nearing half their 2009 levels, EOG Resources will be able to bring more wells online this year than in 2013. Not only will EOG be able to bring more wells online, but it will be able to do so faster, cheaper, and with more oil coming out per well. This is why EOG Resources has led the Eagle Ford to the top and is one of the best ways to play the continued growth from the region.
Innovation and technological improvements yield great rewards, but so does plunking down hundreds of millions of dollars in the right location. If you have the necessary facilities that Eagle Ford producers want, then you can share in the nice warmth of earnings growth.
An upgrade and an expansion
Part of EOG Resources shift to liquids is due to rising natural gas liquids, or NGLs, production, which rose by 32% in 2012 and an estimated 17% in 2013. Plains All American Pipeline (NYSE:PAA) sees a window of opportunity opening up, and wants to be ready with additional NGL processing capacity via a new fractionator facility and an expansion of an existing condensate stabilization facility.
By slapping down $120 million, Plains All American Pipeline will have both operations ready by the second quarter of 2015.
The second quarter of 2015 will also see the expansion of Plains All American Pipeline's Eagle Ford pipeline that it made in a joint venture with Enterprise Product Partners. With the expansion comes more transportation capacity and an additional 2.3 million barrels of storage capacity, which compounds the cash generation possibilities.
A Texas native
Named after the wildlife, the Cactus pipeline is another one of Plains All American Pipeline's future Eagle Ford assets. The purpose of the pipeline is to link the Eagle Ford to the JV pipeline it is constructing. Coming online in the first quarter of 2015, Plains All American Pipeline will have just one quarter before the second part of its Eagle Ford ambitions come to fruition.
If you didn't notice, all of these projects come online in 2015. Next year is going to be huge for Plains All American Pipeline, and will allow for further investment from the likes of EOG Resources in the Eagle Ford.
The Eagle Ford is the "other Bakken" if you will, and is going to see production continue to climb as it smashes expectations. EOG Resources has impressed investors with its margins and cash flow growth over the past few years as it poured money into growing Eagle Ford production. Using better drilling techniques, EOG will be able to continue posting high double digit output growth from the region that is heavily weighted toward liquids.
In order for EOG Resources' growth story to pan out, Plains All American Pipeline needs to be able to deliver on its promises to expand infrastructure. If it is able to do so, expect major distribution growth in 2015, on top of the 10% distribution growth in 2014 that management is guiding for.
EOG Resources is the investment for those looking for growth and Plains All American Pipeline (with a distribution that carries a yield of 4.7%) is for those looking for income from the Eagle Ford. Both companies own high quality assets and are worth looking into for great returns.
Do either of these companies crack our Top 3?
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Callum Turcan has no position in any stocks mentioned. The Motley Fool owns shares of EOG Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.