The outlook for Railroad Districts 1-6 remains promising as we look at the decision by OPEX and non-OPEX countries to cut production, combined with the new political climate in the New Year. Much needed relief has been provided to the gas market this winter with prices nearing $3.50 mcf. The Texas gas market trends upward as we continue to see increasing quantities of gas shipping to Mexico and to Gulf Coast LNG facilities. Contributing to this trend, the news of Raven Petroleum’s refinery project in Duval County, Texas with the capacity to process 50,000 barrels/day and store up to 4MM barrels of crude on site. Once complete it will be the first refinery built in the US since early 1970s and it will bring many jobs to South Texas. In other recent Texas news, TOTAL exercised its preferential right to purchase 75 percent of Chesapeake’s stake in their Barnett holdings where they were originally a 25% non-op joint venture partner prior to this election. More great news for Texas, Wildhorse Resource Development Corp. successfully raised $400MM in its initial public offering and bought Clayton Williams leasehold in the Giddings field. Anadarko sold its East Texas assets comprising 160,000 acres and midstream assets to Castleton Commodities for $1 bln. We have also seen a significant decrease in the number of companies filing Chapter 11 in the last several months. Many of the companies that previously filed for bankruptcy protection have now reemerged and are shedding their noncore assets while other companies selling assets in RR Districts 1-6 are raising money to invest in their core areas.
The rig counts in the Eagle Ford stands at 53. Karnes is the most active county with 14 rigs and LaSalle and Webb, 8 and 6, respectively. The lack of drilling is a result of capital reallocation to more economic plays like West Texas or the Scoop/Stack play in OK, and most leases being held by production. We anticipate drilling to pick up in 2017 as prices stay above $50 bbl causing balance sheets to become healthy and credit becoming more available to operators. Most of the early activity in the New Year will be on completing drilled wells and meeting lease and other contractual obligations. In addition to the Eagle Ford, the Austin Chalk formation is showing encouraging results after EOG’s announcement of several wells with high IP rates in Karnes county. In the Upper Texas Gulf Coast Eagle Ford (“Eaglebine”) there are only a few rigs running with Anadarko being the most active. Halcon has the largest position in the Eaglebine play and has no rigs running, most likely until oil price recovers.
What does the future look like for landmen in RR Districts 1-6? There hasn’t been much new land work in this area but there is a trend of relocation to West Texas for work. Projects appear to be smaller and shorter in duration with due diligence being the most common objective and lease renewing, curative and surface work being next. I see a lot of new technologies emerging to provide more and more land services online. I encourage you to stay current with technology, your certification, education and contacts. As the Chairman for AAPL’s Field Landman Committee, we are planning several seminars for the 2016-2017 year that will give landmen the opportunity to stay connected and current with certification requirements. The Field Landman Committee would like to hear from you on ways that we can do more for Field Landmen. Please feel free to reach out to me and I look forward to hearing from you.
by Randy H. Nichols, CPL. This article was originally published in Landman 2, American Association of Professional Landmen (AAPL). Mr. Nichols has been writing the Field Report for AAPL, covering the Texas region, since 2012.