My Focus at the REC

Unconventional Oil & Gas Activity and Its Implications for Texas Real Estate

Harold Hunt, PhDReal Estate Center @ Texas A&M

College Station, [email protected]

My Focus at the REC

Addressing these two questions:• How is “unconventional” drilling different from conventional

drilling?

• How long will (drilling activity in) the Eagle Ford Play last?

What Countries Have the Most Shale Oil and Shale Gas Reserves?

Major and Minor Shale Plays

Active Drilling Rigs in Texas(As of April 4th, 2014)

Source: Baker Hughes

Rig Counts(Land Rigs Only as of April 4th, 2014)

Area Total Gas Oil• U.S. 1,814 316 1,498

• Texas 877 81 796

• Permian 438 3 435

• Eagle Ford 224 10 214

• Granite Wash 58 10 48

• Haynesville 45 44 1

• Barnett 25 14 11

Source: Baker Hughes

Characteristics of the Best Shale

1) High organic matter content

2) The right maturity window

3) Sufficient brittleness

4) Sufficient natural fractures

5) Good porosity

Definitions

• Porosity - the percentage of void space in a material.

• Permeability – The property of a porous material to permit a liquid or gas to pass through it.

Permeability of Shale

Source: SPE International

What Shale Rock Looks Like

The pct. of O&G being recovered from the shale is relatively small.

The Difference in Conventional and Unconventional Drilling

Source: U.S. Energy Information Administration

6,000 ft.

Source Rock

Equipment to Fracture a Well

Fracfocus.org Fluid Disclosure by Well

Source: Fracfocus.org

A Look at the Eagle Ford Shale

First Wells Drilled: 2008

Area: 20,000 sq. miles or 13 million acres

Most Active Eagle Ford Counties in Red(2012 Population Estimates)

Dimmit Co.Pop. 10,461

Source: U.S. Census and Real Estate Center

Webb Co.

Victoria Co.Pop. 17,702

Pop. 259,172

De Witt

Co.

Gonzales Co.

Karnes Co.

McMullen Co.La Salle Co.

Pop. 7,109 Pop. 726

Pop. 15,233

Pop. 20,045

Pop. 20,465

Frio Co.

Atascosa Co.

Pop. 46,446Pop. 89,269

Live Oak Co.Bee Co.

Pop. 11,664

Pop. 32,527

Wilson Co.Pop. 44,370

Maverick Co.Pop. 55,365

PleasantonPearsall

Laredo

TildenCotulla George West

Cuero

Karnes City

Jim Wells Co.

Uvalde Co.

Zavala Co.Pop. 11,961

Crystal City

Pop. 26,752

Pop. 41,339

Goliad Co.

Pop. 7,351

Goliad

Nueces Co.

Pop. 347,691Duval Co.

Pop. 11,754

San Diego

Eagle Ford Shale Thickness

Source: Geology.com

Eagle Ford Shale Depth

Source: Geology.com

Completed Wells in the Eagle Ford

Source: Texas Railroad Commission

263 Producing Oil Wells

394 Producing Gas Wells

As of Aug, 2011:

Completed Wells in the Eagle Ford

Source: Texas Railroad Commission

1,690 Producing Oil Wells

710 Producing Gas Wells

As of July, 2012:

An Increase of:

1,427 Producing Oil Wells

316 Producing Gas Wells

11 Months Later…

Completed Wells in the Eagle Ford

Source: Texas Railroad Commission

3,868 Producing Oil Wells

1,681 Producing Gas Wells

As of July, 2013:

An Increase of:

2,178 Producing Oil Wells

971 Producing Gas Wells

12 Months Later…

Completed Wells in the Eagle Ford

Source: Texas Railroad Commission

5,858 Producing Oil Wells

2,896 Producing Gas Wells

As of Apr., 2014:

An Increase of:

1,990 Producing Oil Wells

1,215 Producing Gas Wells

9 Months Later…

Technology Improvements

Several Technological Improvements Will Affect the Number of Wells Drilled

1) Drilling one well to “hold a field by production” giving way to “pad drilling” where multiple wells are drilled from one drillsite, saving time and money.

2) Drilling rigs that “walk” or move along rails will significantly reduce the downtime between drilling a well.

3) The well spacing continues to tighten, leading to more producing wells on a given amount of acreage.

4) Tapping other pay zones will also extend the life of fields.

1) Pad Drilling

Pad Drilling Example

Karnes Co. Drilling Pads

Gonzales Co. Drilling Pads