The 5 Companies Dominating the Eagle Ford Shale Play

By Markets Fool.com

Image source: ConocoPhillips.

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Discovered in 2008, the Eagle Ford Shale of Texas quickly rose to prominence because of its high oil content. Another unique feature of the Eagle Ford is its high carbonate shale content, which makes it more brittle and therefore easier to frack. That combination of easily frackable oil-saturated rocks fueled a remarkable production boom over the past few years, with Eagle Ford oil production skyrocketing from a mere 352 barrels per day in 2008, up to an astounding 1.2 million barrels per day by 2015. While production is in decline at the moment due to the oil market downturn, it is only a matter of time before producers reaccelerate drilling activities in this oil-rich shale play.

Eagle Ford Shale 101

The Eagle Ford stretches 400 miles across Texas, extending all the way from the Mexican border and up into East Texas and is about 50 miles wide:

Image source: EIA.

According to the most recent data from the U.S. Energy Information Administration (EIA), the Eagle Ford Shale contains 5.2 billion barrels of proved oil reserves and is second only to the Bakken Shale in tight oil reserves. In addition to that, it contains 23.7 trillion cubic feet of natural gas reserves making it the third largest gas play in the country. That said, ultimate recoveries could be much higher as producers learn the best techniques to unlock the vast hydrocarbons saturating this shale formation. While several companies are working to unlock these hydrocarbons, five stand out as the dominant players in the Eagle Ford.

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The leading Eagle Ford Shale producers

Eagle Ford Producer

Key Eagle Ford Statistic

EOG Resources

3.2 billion BOE in recoverable resources

ConocoPhillips

174,000 BOE/d in production last year

BHP Billiton

125,000 BOE/d in production last year

Chesapeake Energy

105,000 BOE/d in production last year

Marathon Oil

109,000 BOE/d in production last year

Data source: Company investor presentations.

Shale king EOG Resources (NYSE: EOG) is the top-dog in the Eagle Ford where it is the largest producer and leading acreage holder. As of the end of the second quarter, the company held an estimated 549,000 net acres in the play within which it anticipates drilling 7,200 future wells to extract upwards of 3.2 billion BOE of oil and gas. Further, the company recently started testing enhanced oil recovery techniques to coax more of the oil and gas still trapped near its legacy wells. It projects that it can boost the estimated ultimate recoveries from those wells by 1.3 to 1.7 times versus what it would have recovered using primary recovery techniques. Needless to say, EOG Resources is expected to continue dominating the Eagle Ford for years to come.

Leading global independent producer ConocoPhillips (NYSE: COP) is next in line in the Eagle Ford, which is its most prolific unconventional development at the moment. The company was one of the first companies to enter the play in 2009, enabling it to build up a low-cost acreage position that currently totals 216,000 net acres. That said, ConocoPhillips significantly pulled back on its development activities in recent years due to the weak oil price environment, which is causing its production to decline. However, the company has the capability to ramp production quickly when conditions improve.

Global resources giant BHP Billiton (NYSE: BHP) bought its way into the Eagle Ford when it spent $12.1 billion to acquire Petrohawk Energy in 2011. In doing so, it acquired the company that initially discovered the Eagle Ford in 2008 after Petrohawk successfully used the combination of horizontal drilling and hydraulic fracturing on the play. Currently, the Eagle Ford Shale is the single largest producer in BHP Billiton's petroleum portfolio where its rock bottom costs enable it to drill economic wells at current oil prices. That said, the company only has about 550 additionalwells left to drill, though it can extend the development program by another three to five years by refracking legacy wells.

Natural gas giant Chesapeake Energy (NYSE: CHK) is one of the top acreage holders in the Eagle Ford after it leased hundreds of thousands of acres in the play during the shale leasing boom a few years ago. The company currently estimates that its acreage holds 1.1 billion BOE of recoverable resources, 65% of which is calculated to be oil based on its current production mix. That said, due to its financial troubles brought about by the recent slump in commodity prices, Chesapeake Energy's production in the play is in decline and only averaged 92,000 BOE/d last quarter. Still, it has a superior resource base that's earning rates of return between 25% to 65% in 2016, which puts it in the position to really thrive if it can get through the downturn without having to part with its Eagle Ford position to survive.

Global independent Marathon Oil (NYSE: MRO) entered the Eagle Ford Shale in 2011, building up a position through a series of strategic acquisitions, including spending $3.5 billion to acquire privately held Hilcorp Resources Holdings. Marathon then invested heavily in developing its resource position, which fueled remarkable production growth. However, after producing 135,000 BOE/d a year ago, Marathon Oil's production declined to 109,000 BOE/d during the second quarter of 2016 after it pulled back the reins on spending. That said, with more than 180,000 net acres and declining well costs, Marathon Oil is well positioned to reignite production growth when oil prices improve.

Investor takeaway

Production out of the Eagle Ford Shale surged at a breakneck pace from its initial discovery in 2008 until oil prices started to collapse in 2014, thanks in large part to the billions invested by these five dominant players. While all five pulled back the reins on spending during the downturn, which is causing production in the Eagle Ford to decline, that does not mean the Eagle Ford's best days are behind it. There's still billions of barrels of oil just waiting to be unlocked, giving these producers a huge runway for future growth once prices improve.

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Matt DiLallo owns shares of BHP Billiton and ConocoPhillips. The Motley Fool owns shares of EOG Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.