Companies bet big on South Texas gas find
Last October, just as the economy was tilting into crisis, a small oil and gas company in Houston quietly announced the discovery of a mammoth natural gas field in South Texas that at any other time might have garnered bigger headlines.
Petrohawk Energy's find, however, did not go unnoticed in the oil and gas industry — and it didn't take long before oil companies large and small began making their moves.
Today, though the economy and natural gas prices remain weak, the Eagle Ford shale remains one of the hottest prospects in North America, and energy companies are moving forward there even as they're pulling back elsewhere.
That's because of what some companies suggest is a virtually recession-proof combination of highly productive wells and low drilling costs they say can yield profits even as natural gas prices hover near seven-year lows....
...$3.88 break-even point
While the Eagle Ford is among the smallest of the group, with some 19 trillion cubic feet of natural gas remaining, the economics is among the best, the firm said.
Producers in the Eagle Ford can break even when natural gas is priced as low as $3.88 per million British thermal units, the firm said, versus break-even prices of $5.18 in the Barnett, $3.74 in the Marcellus and $4.49 in the Haynesville.
Natural gas closed at $4.99 per million BTUs Monday in trading on the New York Mercantile Exchange, down from nearly $14 in summer of 2008, amid a recession-related drop in demand and bulging stockpiles. Consumption will fall by 2.4 percent this year and remain flat in 2010, according to the Energy Information Administration's most recent short-term forecast.
A potential boom
Yet that has not stopped companies from pushing ahead in the Eagle Ford play, which starts near the Mexican border and extends east below San Antonio across a string of counties including Webb, Dimmit, LaSalle, McMullen and Live Oak....MORE