A ‘Unicorn:’ EOG Ropes Last Large Undeveloped Eagle Ford Oil Block

EOG Resources’ 30,000-net-acre Eagle Ford addition brings 120 new 3-mile-lateral locations to its position across the play’s oily fairway.

“This essentially was a hole in our acreage and it's the largest remaining block of largely undeveloped core Eagle Ford acreage out there,” Keith Trasko, EOG senior vice president, E&P, told investors in a May 2 earnings call.

The 47-net-square-mile property was surrounded by EOG, Crescent Energy’s Javelin Energy Partners E&P unit, Marathon Oil and Murphy Oil, according to a Texas Railroad Commission (RRC) map.

The $275 million seller was not identified. Jefferies analysts said the owner of the acreage was Arrow S Energy Operating, based on Enverus data.

The property is producing between 2,000 boe/d and 3,000 boe/d, 85% oil, EOG reported.

Sitting within two large EOG blocks in Atascosa County, the buy closes a gap in the EOG’s oily runway in South Texas.

In that lightly developed pocket, Arrow S Energy Operating was producing about 2,000 bbl/d earlier this year, according to RRC data and a GIS viewer.

Also in the pocket, Pillar EFS produced 2,329 bbl/d in January; it did not file an RRC report yet for its February production. Beginning in 2021 through January, Pillar produced more than 2.17 MMbbl from about 20 wells, all in Eagleville (Eagle Ford-1) Field.

Arrow S Energy’s output is from a single lease, ASE South, which is also in Eagleville. It was brought online in January 2023 and produced 2.9 MMbbl through February.

Longer laterals

Closing the hole “allows us to extend wells that we had previously planned on our acreage footprint,” Trasko said. “There are 35 of those wells that we're able to increase by one mile on average [now].”

What brought EOG, which rarely acquires property except via leasing, to the buyer’s side of the M&A table was that “we're very familiar with the acreage held and what's available in the area,” Trasko said.

“We’ve been active in the Eagle Ford for 15 years now,” he noted. “… We're very familiar with the geology of the area. We have geologic data, seismic, well results on both sides of the acreage. We understand the area very well.”

EOG also has existing gathering and other infrastructure there. “So you're talking about less indirect dollar investment that's needed,” he said.

The E&P produced 593,000 bbl from Atascosa County in February, according to the RRC.

Other large oil producers in Atascosa are Marathon with 641,000 bbl in February; Exxon Mobil’s XTO Energy, 344,000 bbl; and Crescent’s Javelin, 189,000 bbl.

Trasko said the property has a high net revenue interest (NRI) but did not describe the percentage NRI to EOG. He also said the proved developed producing it brings “is fairly modest” but did not detail the amount of PDP reserves booked on the property.

Drilling is not expected until later in 2025 as it plans to upgrade some facilities “to EOG spec,” Trasko said.

‘The unicorn’

Charles Meade, an analyst for Johnson Rice, said in the call that the acreage block is “the unicorn left in the play with that big undeveloped position.”

“Are there other deals like this out there and is this the kind of thing that we should be expecting more of from EOG either in the next year or in the next 18 [months] or 24 months?” he asked.

Trasko said EOG is always looking.

“This one just really checked all the boxes and, as you noted, it is largely undeveloped and it's a fabulous piece of acreage that we are really confident in because we have results and data on all sides of it.

“We will always be looking, but I wouldn't expect something to be quite this large and [un]drilled as far as any future bolt-ons.”

Arun Jayaram, analyst for JP Morgan, found that the wells EOG acquired underperform EOG’s production metrics.

He noted, though, that “our analysis of the acquired acreage includes only 21 wells in the data set.”

Also, he expects “EOG will likely be able to enhance well productivity or sustain high returns through D&C efficiency gains and shifting to longer lateral lengths.”

Leo Mariani, analyst for Roth Capital, found the deal “looks quite cheap at around $6,000 per undeveloped acre, if we assume EOG paid $42,500 per flowing boe for the production.”

Subash Chandra, analyst for The Benchmark Co., noted that 120 locations are the equivalent of one year of Eagle Ford drilling inventory for EOG.