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October 2, 2017

Eagle Ford Output Rebounds After Harvey

IPI expert referenced: Merrill Matthews | In The News | Media Hit
  Platts Gas Daily

After an initial sharp drop in natural gas supplies coming out of the Eagle Ford Shale play of South Texas following Hurricane Harvey, gas supplies from the basin are bouncing back, a month after the storm made its first landfall on the Texas Gulf Coast.

Several producers active in the basin have reported that their estimates for third-quarter and full-year 2017 production are close to or slightly above their previous guidance released before the storm.

Merrill Matthews, an analyst with the independent Institute for Policy Innovation, said while Harvey "was certainly a disruption event, the remarkable thing it wasn’t more disruptive," to energy markets.

"The people I talk to say their production was down a day or two," Matthews said in an interview Friday. He added that the shale revolution of recent years had helped to mitigate the impact that a storm hitting the Texas Gulf Coast would have on total US gas supplies.

He noted that with multiple sources of gas from basins across the country, the market is less reliant on the Texas Gulf Coast region for gas supplies than would have been true a decade ago. "That’s good news; the fact that we’re much more resilient," he said.

Harvey’s impact to gas production volumes in Texas is likely to be transitory, Tudor Pickering Vice President Sameer Panjwani said in an interview Friday.

"It doesn’t seem like, from the companies we’ve heard from so far, that there’s going to be any lasting impact. Most of the operators are already up and running," he said. "The biggest issue is the downtime of third-party midstream operators and some of the pipelines that bring the products to the Gulf Coast."

In the Permian Basin and the Eagle Ford shale, where producers focus more on the production of oil rather than natural gas, flooding in refineries and other midstream facilities resulted in a back-up of liquids production to the well site.

The Eagle Ford got hit harder: Panjwani

"The Eagle Ford definitely got hit harder, anywhere from three to five days of downtime in the eastern part of the basin, which is closer to Houston, while in the Permian there was very marginal downtime from the pipelines that connect into the Gulf Coast," Panjwani said.

Parsley Energy on Thursday became the latest E&P company to update its previous production guidance, reporting that it was on track to deliver volumes consistent with earlier guidance despite the impacts to operations from Hurricane Harvey, which slammed into the Texas coast on August 25.

The biggest effects the producer felt from Harvey were the result of production curtailments enforced by the company’s midstream partners, Parsley said in a statement.

"Diligent cross-functional efforts limited the impact of these curtailments and other hurricane-related disruptions to approximately 2,000 barrels of oil equivalent per day (boe/d) on average in the third quarter of 2017, approximately 80% of which was oil," the producer said.

Parsley added that all of its production and sales processes have been returned to normal levels following the storm.

Accounting for curtailments, as well as extended cycle times on several development projects, Parsley said it expects Q3 2017 net production of 70,000 – 71,000 boe/d.

The producer also said it would narrow its estimated full-year 2017 net production guidance slightly, from a range of 67,000 – 73,000 boe/d to a range of 67,000 – 68,000 boe/d and narrow its estimated Q4 net production guidance from a range of 80,000 – 90,000 boe/d to a range of 80,000 – 83,000 boe/d.

"Hurricane-related production curtailments disproportionately reduced oil volumes, as the company was in many instances able to sell gas even as oil sales slowed or ceased," Parsley said.

Parsley said it expects crude oil to constitute 65 – 66% of Q3 net production and 66 – 68% of Q4 net production, which would put oil as a percentage of full-year 2017 net production at the low end of the previously provided range of 67 – 70%.

Sample production took a hit in wake of storm: Bentek

Platts Analytics’ Bentek Energy reported that — after showing signs of picking up in early July after steadily declining since early 2015 —sample production in the Eagle Ford Basin took a significant hit as a result of Hurricane Harvey plowing through the region.

Production had increased by nearly 220 MMcf/d from the few months prior to average 1.3 Bcf/d for the beginning of August. When Harvey made landfall August 25, sample production volumes in the Eagle Ford fell 773 MMcf/d, remaining low at an average 639 MMcf/d until September 30, when volumes began to return to pre-storm levels, Platts Analytics said.

Sample production since has mostly recovered, averaging 1.2 Bcf/d over the month of September, Platts Analytics said.

Several E&P companies, including Chesapeake Energy, Anadarko Petroleum, Abraxas Energy and Sanchez Energy had previously reported on the impacts that Harvey would likely have on their production.

In an interview Friday, Kevin Smith, vice president of investor relations at Sanchez Energy, said the producer has operations in Dimmit and LaSalle counties, far to the south of the worst of the devastation from Harvey. Although the company did not have to shut in any production, it was forced to delay some completion activity because of the storm.

In a statement Tuesday, Sanchez said that despite the temporary suspension of some completion operations, "strong well results across all of our western Eagle Ford acreage have led to a steady increase in production," in the third quarter.

"We are currently producing at a rate of over 75,000 Boe/d, which has us on pace to deliver production results that are in line with our third-quarter 2017 forecast. Based on this performance, we reiterate our fourth-quarter 2017 production forecast of 80,000 – 84,000 boe/d," the statement said.

Also on Tuesday, Chesapeake Energy lowered its guidance for its expected production growth for full-year 2017 from an adjusted production growth of 0% – 4% to minus-1% – 1%. The producer blamed the lingering effects of Harvey, along with other factors.

Although Chesapeake lowered its Q3 guidance for both gas and oil production, it increased its guidance for natural gas liquids production slightly, to 19.5 – 20.5 million barrels versus the previous guidance of 19 – 20 million barrels.

The producer lowered its expectations for gas production slightly, to 855 – 875 Bcf, compared with the earlier guidance of 870 – 900 Bcf and for oil production to 32 – 33 million barrels compared with previous guidance of 33.5 – 35 million barrels.

In contrast, Noble Energy, which gave an update to its guidance for Q3 2017 on Monday, raised its expected sales volumes to 352,000 – 358,000 boe/d, representing a 3%, or 10,000 boe/d, uplift from the midpoint of its previously published expectations.

The company said it anticipates gas volumes during the quarter to average between 965 MMcf/d and 990 MMcf/d, while it expected natural gas liquids production to average between 63,000 and 65,000 b/d.

"The impact to production and operations, as a result of third quarter hurricanes, was limited and primarily related to third-party downstream issues," the producer said in a statement.

Jim Magill, Elizabeth McFarland


 

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