Wednesday, May 09, 2012

Booming Eagle Ford Shale: 47k "Shale-Ready Jobs" and $25 Billion in Economic Development in 2011

The Eagle Ford Shale in Texas is the "economic opportunity of a lifetime" and will potentially create 117,000 "shale-ready" full-time jobs by 2021.

From the Center for Community and Business Research at University of Texas-San Antonio:

"Development of oil and natural gas in the Eagle Ford Shale contributed $25 billion in total economic output to the region in 2011, according to a study released today by the Center for Community and Business Research.

"The Eagle Ford Shale has proven to be one of the most important economic engines in the state," said Dr. Thomas Tunstall, director of the UTSA Center for Community & Business Research, and the study‚Äôs principal investigator.  "In 2011 alone, the play generated over $25 billion in revenue, supported 47,000 full-time jobs in the area, and provided $257 million in local government revenue."

The study also concluded that in 2011 shale development:
  • Paid $3.1 billion in salaries and benefits to workers;
  • Provided more than $12.6 billion in gross regional product;
  • Added more than $358 million in state revenues, including $120.4 million in severance taxes;
  • And spurred a triple-digit sales tax revenue increase in various local counties.
"We view the Eagle Ford activity as an economic opportunity of a lifetime," said Mario Hernandez, president of the San Antonio Economic Development Foundation.  "The key goal is the increase in investment and jobs. And if the communities will partner with the private companies that are creating these jobs, it can be a win-win for everybody."

The increased revenue from the Eagle Ford Shale is rebuilding local communities.  New schools and new hospitals are being built, and new training programs have been launched to maximize hiring from the local workforce.  The study projects the creation of approximately 117,000 full-time jobs by 2021."


13 Comments:

At 5/10/2012 6:56 AM, Blogger VangelV said...

How wonderful. We have investors and lender pour money into the Eagle Ford areas. When new money pours in the people in those areas are huge beneficiaries of those money flows. And as the core areas are developed the investors have a chance of getting their money back.

Actually, scratch that last part. All of the cash flows have to go into further drilling because given the depletion rates rising production requires a massive amount of new drilling activity, some to deal with the depletion and some to bring new oil on-line. The trick is to see how well this works when producers move away from the core areas. Sadly, that will not be known until a few years from now and until then we will have to rely on the assumption that the estimated ultimate recovery numbers are correct. Given the incentives and track record that may not turn out to be a great assumption.

 
At 5/10/2012 7:14 AM, Blogger Rufus II said...

The Eagle Ford produced about 83,000 bbl/day in 2011.

We Imported 8.8 Million bbl/day last week.

The Eagle Ford accounted for about 1/2 of 1% of our oil use last year.

Put another way, it produced about 1/3 as much as ONE Platform (Thunderhorse) in the Gulf of Mexico.

Lookee, lookee. Another bright, shiny thang.

 
At 5/10/2012 7:15 AM, Blogger Rufus II said...

Linky-Poo to Bright, Shiny Thang

 
At 5/10/2012 8:09 AM, Blogger VangelV said...

The Eagle Ford produced about 83,000 bbl/day in 2011.

We Imported 8.8 Million bbl/day last week....


That is a very valid point. But what interests me from the investment perspective is how much money it took to produce so little oil.

I expect the naive optimists to start throwing around BOE numbers to make the prospect look a lot better. What will be lost in their postings is the fact that they use a 6:1 conversion ratio based on energy content rather than the approximately 35-50:1 price ratio that is more appropriate when calculating economic returns.

 
At 5/10/2012 8:43 AM, Blogger juandos said...

Well its seems that there is a hint of skeptism in the air here regarding Eagle Ford...

I've been skimming a collection of stories, releases, and what not from some of the players in that area such as Carrizo Oil, Sanchez Energy, Magnum, Pioneer, and so on...

They all 'seem' to be quite happy with the results they're getting to date...

One of the larger if not the largest player in the Eagle Ford area is EOG...

Consider the following as posted on Seeking Alpha from EOG: EOG Resources' CEO Discusses Q1 2012 Results - Earnings Call Transcript.

Its full of 'happy talk' and mirrors much of what the other companies are saying...

Is it all sales pitch/hype or is there a real pot of gold in their collective futures being discussed?

On a personal note I grew up just south of the Eagle Ford area and right now I know people who I grew up with and have gone on to have pretty good lives and were moderately successful from a financial point of view have really jumped on this 'opportunity' and none of these people are younger than their late fifties...

There are a lot of ancillary niche services to be filled and many of the people are staking the personal fortunes they've made into companies they've set up to fill these needs...

This could be very interesting...

 
At 5/10/2012 8:59 AM, Blogger Rufus II said...

Juandos, I think many would agree with me when I say, this is good for the local area, and it's a positive for the country. But, they need to understand that there's a strong "Gold Rush, Boom and Bust" element at work here, and one needs to be careful.

 
At 5/10/2012 9:12 AM, Blogger juandos said...

"But, they need to understand that there's a strong "Gold Rush, Boom and Bust" element at work here, and one needs to be careful"...

Yeah rufus and on that particular score I would be the very last one to find an argument with that opinion...

I've been following Michael Filloon on Seeking Alpha since he seems to have a rather strong interest in these types energy adventures...

Hey has a vested interests in both Bakken and Eagle so he's made for some interesting reading...

I do worry a bit about my friends in Laredo who are involved with Eagle...

They're far to old go back home to mom's house if it all washes out...

 
At 5/10/2012 10:00 AM, Blogger Rufus II said...

It'll be good for several years, just not a "lifetime."

 
At 5/10/2012 10:59 AM, Blogger juandos said...

"It'll be good for several years, just not a "lifetime.""...

Yeah rufus you're probably right on the money there but you know technology can be a wonderful thing...

I have a brother-in-law who's an engineer for XOM and he's pipeline specialist...

Over the last few years he's been 'lent out' to a subsidiary to help with the development of some newer and more improved methods of extraction...

Teaching an Old Oil Field New Tricks

The in-law (25 years in the game) at first thought the whole thing was a dubious waste of money...

He's had quite a change of opinion over the last six or so months...

 
At 5/10/2012 11:05 AM, Blogger Benjamin said...

An even bigger boom in CA oil shale is coming. Oxy says it costs $3 million to put a rig up that throws off $12 million in oil in year one.

Even Vange will have to concede that is a worthy endeavor.

 
At 5/10/2012 4:38 PM, Blogger VangelV said...

They all 'seem' to be quite happy with the results they're getting to date...

Really? Then why are they looking to sell billions in assets? And why are the companies loaded with huge debt loads while they generate very little positive cash flow? Note that the operations are not self financing and that the reported profits and asset values depend on many assumptions that the company is allowed to make.

What happens if the company has to adjust its EURs and depreciate wells faster? The write down of the balance sheet would cause the debt/equity ratio to spike while the restatement of income would lead to major losses. Most of the companies would be out of business and the happy management would be out of jobs.

I suggest that you try to look at the bigger picture. Spending billions in an area that managed to produce 83,000 bpd does not make much sense unless the depletion rates are favourable and the assets are long lived. But we do not have enough data to show that would be true. And we do have a history of claims by the shale gas companies that proved to be wrong.

What happens if the SEC charges Aubrey with hiding debt off the balance sheet?

 
At 5/10/2012 4:41 PM, Blogger VangelV said...

An even bigger boom in CA oil shale is coming. Oxy says it costs $3 million to put a rig up that throws off $12 million in oil in year one.

Even Vange will have to concede that is a worthy endeavor.


A $3 million well is cheap. The low cost would mean that the area is prolific but that does not mean that your average formation has nearly the same characteristics. If the numbers were great it would be a worthy endeavor. But having been around the block once or twice I am skeptical of many of the numbers being thrown around.

 
At 5/10/2012 8:27 PM, Blogger juandos said...

"Really? Then why are they looking to sell billions in assets?"...

Exactly vangeIV, why do you think I had the word, "seem" italicized?

"Spending billions in an area that managed to produce 83,000 bpd does not make much sense unless the depletion rates are favourable and the assets are long lived"...

Now this also exactly what I was wondering...

The one guy I mentioned, "Filloon" in his postings was going on and on about width, depth, and length of various shales fields but for of a better way to describe it, Filloon seemed to be trying to hard to convince someone...

"What happens if the SEC charges Aubrey with hiding debt off the balance sheet?"...

Well that depends on what country Aubrey happens to be in in case such a situation arose...

It might also depend on what track record if any Aubrey's campaign contributions have...

 

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