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GlobalData: Eagle Ford crude oil production expected to decline by 10% during 2020–2021

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Crude oil production in the Eagle Ford is expected to drop by 10% year-on-year (YOY) in 2021, according to GlobalData. This is a result of shale operators slashing their planned CAPEX for 2020 in response to the oil price crash, leading to a decline in drilling and completion activity in the play.

A new report from GlobalData projects that the gross crude oil production in this play may average at 1.017 million bbl/day in 2021, down from 1.13 million bbl/day in 2020. The gross natural gas production also may decline to 5,873 million cu ft/day in 2021, down from 6,327 cu ft/day in 2020.

“The Eagle Ford shale experienced one of the most drastic drops in rig count, from 81 rigs in February 2020 to only 18 in October 2020 due to the COVID-19 pandemic and related energy demand crisis,” Andrew Folse, Oil & Gas Analyst at GlobalData, said. “This attributed to a sharp fall in crude oil and natural gas production from the play this year.”

With oil futures averaging $41.98/bbl for the first half of 2021, GlobalData forecasts that there will not be an uptick in oil activity in the Eagle Ford over the short term. On the other hand, natural gas futures are expected to average at $2.95 per thousand cu ft for the first half of 2021, which could spark some activity in the Eagle Ford and Austin Chalk formations.

“The short-term outlook for crude oil remains uncertain due to rising COVID-19 cases, and higher than normal global oil inventory that will restrict the upward pressure on oil price,” Mr Folse added. “However, natural gas prices in the US are expected to grow in the short term due to strong LNG demand trend from Europe and Asia, coupled with the slowdown in shale gas production due to reduced activity.”

Eagle Ford’s 16 major operators cut capital spending by 44% or $3.14 billion, cumulatively, from an initial CAPEX guidance of $7.07 billion in 2020. This had a bearing on the pace of drilling and well completions.

“The pandemic also forced some Eagle Ford operators, such as Chesapeake Energy and Freedom Oil and Gas, to file for Chapter 11 bankruptcy. Another prominent operator, Ovintiv, has reportedly put its Eagle Ford assets up for sale. Such developments may dampen the growth prospects in this play as long as oil prices remain below $50/bbl range,” Mr Folse concluded.

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