SAN ANTONIO─Surviving the downturn depends on how far operators can extend their runways. E&Ps are set on regaining altitude—if they have enough running room.
Making operations and cash stretch means lowering drilling and completion costs as much as possible.
Halcón Resources Corp. (NYSE: HK) has done that in the El Halcón, its East Texas portion of the Eagle Ford in Burleson and Brazos counties, Texas.
At Hart Energy’s sixth annual DUG Eagle Ford conference, Halcón president Steve Herod said that a year ago, the company’s Eagle Ford well costs were at $9.5 million.
Everything has come down since then: “…pipe, tank batteries, consultants; rope, soap and dope,” he said. “So now, we are spending about $6.75 million [that includes completed well costs] for a three-string well.”
Three-well pad drilling is expected to lower costs more, brining wells costs in under $6 million on a consistent basis, Herod said.
“We’re going into full pad development,” he said.
Halcón’s drilling group, with more than 100 wells under its belt, continues to work its magic in El Halcón.
“Every time I think our drilling group has hit the max on efficiency improvements, they are able to go a bit further and reduce the spud-to-rig release time another three or four hours,” Herod said.
A year ago, DUG Eagle Ford would have been filled with talk about completions: how to space frack clusters, how much sand to use. That’s changed.
“Now it’s about all these meetings with your bankers,” he said. “We’ve done a lot actually to help extend our runway.”
The company’s El Halcón Field east of the main Eagle Ford fairway consists of 100,000 net acres and proved reserves of 41.7 million barrels of oil equivalent. About a third of total company volumes come from the Eagle Ford with the rest of production originating in the Bakken Shale.
Halcón has only one rig running in El Halcón but the quality of the rock is significant.
“You could put a rig in [Texas A&M’s] Kyle Field’s end zone and probably make a 1,000-bbl/d well,” Herod joked.
Herod knows the area well—he was second in command at Petrohawk Energy Corp. when the Eagle Ford play discovery well was unveiled in La Salle County, Texas, in October 2008. What emerged, the Hawkville Field, set off a surge in drilling from Webb County, Texas, to the Louisiana state line. Petrohawk’s assets were subsequently acquired BHP Billiton.
In 2014, the Eagle Ford was running 216 rigs, according to Baker Hughes Inc. (NYSE: BHI). That’s fallen to about 64% to 77 rigs.
The Eagle Ford is producing about 1.8 MMbbl/d and the economic impact on Texas has been huge. With the downturn in oil prices, Eagle Ford production is decreasing, with the latest data showing a reduction of about 62 Mbbl/d in September alone, Herod said.
“I have to think this 70 or so rig count is going to be here for a while and production will come down,” Herod said.
With its single rig working in the second and third quarters, Halcón expects to spud 12-15 gross operated wells in 2015 in the El Halcón.
The company spudded four wells and put eight wells online during the quarter ended June 30, and on average, the performance is in line with Halcón's type curve of 452 thousand barrels of oil equivalent on a per lateral foot basis, Herod said.
The company expects completed well costs to decrease by up to an additional $1 million per well in the near-term as it begins the transition to development mode (multiple wells per unit/pad).
Leslie Haines can be reached at lhaines@hartenergy.com.
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