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I N N O V AT I O N S • V O L . V I I , N O. 2 • 2 0 1 5

16

After all, as crude oil prices have fallen, so have

the number of active Eagle Ford rigs. In just the three

months since November 2014, the total dropped

about 27 percent, from 264 to 192, according to

Energy Information Administration (EIA) data

published in March 2015. And in light of continuing

weak global energy demand, the prospects for a quick

rig count turnaround seem unlikely.

But don’t cue the dirge quite yet. A decline in rigs

isn’t necessarily a predictor of falling production.

In fact, during the natural gas price plunge of 2008,

output actually increased, even as rigs came offline.

In short, rig counts can be misleading. At least

that’s the view of Citigroup commodity strategist

Anthony Yuen, co-author of a Citigroup research

note comparing the events of 2008 to today’s drop

in U.S. crude oil prices, which have fallen more

than 50 percent since the summer of 2014.

Yuen points out that the total number of U.S.

natural gas rigs peaked at about 1,600 in 2008

before falling to 672 by July 2009.

Today, the number of natural gas rigs is less

than half that, closer to 300. Yet the data indicates

that production is up 50 percent from when the rig

count was at its highest point.

Credit drilling and operating efficiencies for

the boost, says Citigroup.

Can boosting efficiency have the same effect in

the Eagle Ford? Can technology – automation in

particular – mitigate the drop in crude prices by

reducing operating costs, increasing product

flow, and helping to capture marketable

NGLs and condensates?

There’s ample evidence those types of

improvements are already in play. And

they’re having a big impact on operators’

P&L statements.

A Stutter Step in Rig Count

Doesn’t Mean the End is Nigh

Before 2008, the Eagle Ford shale formation

– a narrow, roughly crescent-shaped band

sweeping 650 kilometers (400 miles) across

Texas – hadn’t caught the eye of many oil and

gas companies. Although the area was known

to contain hydrocarbons, the rock unit’s

permeability was exceptionally low. It was

doubtful that oil and gas could flow through

to a production well.

Until, of course, it did.

The Eagle Ford success story is the

stuff of legends: 5-year-old independent

energy company Petrohawk combines two proven

technologies and cracks a formerly unyielding

energy deposit, demonstrating the area’s viability

with a well that comes in with an initial flow rate

of 7.6 million cubic feet of natural gas per day. By

September 2014, the Eagle Ford roll call includes

industry luminaries and lesser-knowns alike,

who, all together, are pumping out more than

1.5 million barrels per day of crude oil and light

condensate. Late in 2014, the Eagle Ford hits the

1 billion barrel mark, outpacing its North Dakota

rival, the Bakken. And projections for future

growth are impressive, with suggestions that the

region will produce 1.8 million barrels per day of

8

M

6

M

4

M

2

M

2007 2008 2009 2010 2011 2012 2013 2014

300

200

100

0

Eagle Ford Production vs Rig Count

Production

Rig Count

Rig Count

Natural Gas Production

in mcf/d

Oil Production

in bbl/d

Source: Energy InformationAdministration