The Eagle Ford Shale of South Texas was once one of the fastest-growing oil fields in the world. Production rocketed from a mere few hundred barrels per day (BPD) at its discovery in 2008 up to a peak near 1.7 million BPD by 2015. However, oil prices started crashing in late 2014, which caused drilling to slow. That resulted in the region's output dropping below 1.2 million BPD by 2016.
Crude production from the Eagle Ford is currently around 1.16 million BPD, along with another 517,000 BPD of natural gas liquids (NGLs). Those numbers, however, are expected to skyrocket more than 90% by 2025, according to an estimate by midstream giant Enterprise Products Partners. This outlook suggests that Eagle Ford Shale-focused producers are poised to deliver high-octane growth over the next several years. Here are three top Eagle Ford producers that could prosper as the region enters its next boom.
The king of the Eagle Ford Shale
EOG Resources (EOG 3.01%) is the largest acreage holder and producer in the Eagle Ford Shale. Last year, the shale giant pumped 171,000 BPD from the region. However, it has ample upside remaining since it still controls an estimated 2,300 undrilled locations, which is enough to last it a decade at its current pace. Overall, the company believes it can pump out roughly 3.2 billion barrels of oil equivalent (BOE) resources from the region.
These future wells will earn the company high investment returns since each should generate a minimum 30% after-tax rate of return at $40 oil. EOG Resources' focus on drilling for returns should enable it to grow production and cash flow at a double-digit annual pace as long as oil is above $50. That would give the company the fuel to increase its dividend at lightning speed, setting it up to produce market-smashing total returns.
Cashing in on the Eagle Ford
Marathon Oil (MRO 5.61%) is among the leaders in the Eagle Ford Shale. The company pumped 107,000 BOE per day from the region during the fourth quarter of 2018. Marathon's focus in recent years has been on improving its drilling efficiency. That was on full display last year as its oil output in the Eagle Ford rose 7% even though it bought 5% fewer wells online. This improved well productivity is helping boost Marathon's returns and generate free cash flow.
Marathon's focus in the Eagle Ford will be to continue increasing efficiency so that it can grow production at a healthy clip while generating a gusher of free cash flow. That will allow the company to reinvest in emerging areas elsewhere as well as return more money to shareholders. Marathon Oil is currently on track to grow its total oil output at a double-digit pace through 2020 while producing more than $2.2 billion in free cash over that timeframe given where crude prices are right now. That would give it the funds to buy back a significant portion of its outstanding shares, which could help propel its stock price skyward.
Making a bold bet on the Eagle Ford
Chesapeake Energy (CHKA.Q) has struggled to grow in recent years due to the mountain of debt it took on to buy land and drill wells across the country during the boom years. It has been slowly chipping away at this weight, which put it in the position to pounce on an opportunity to bolster its Eagle Ford Shale position. Chesapeake made that bold bet last year when it bought WildHorse Resource Development, which is one of the largest operators in the Eagle Ford.
The addition of WildHorse will help reaccelerate Chesapeake's growth engine. The company anticipates that its oil output will rocket 32% this year. Meanwhile, WildHorse hadn't yet drilled on more than 80% of its land, which gives Chesapeake a significant growth runway, especially when combined with its legacy position in the region.
About to soar like an eagle
Crashing oil prices upended the drilling boom in the Eagle Ford Shale a few years ago. However, with crude prices rebounding and drilling costs coming down, the Eagle Ford is set to soar once again. That coming boom has the potential to fuel big-time growth for the region's top producers, which is why investors might want to take a closer look at oil stocks with sizable positions in the play.