Unconventional Oil & Gas Activity and Its Implications for Texas Real Estate Harold Hunt, PhD Real Estate Center @ Texas A&M College Station, Texas hhunt@tamu.edu

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 High organic matter content The right maturity window Sufficient brittleness Sufficient natural fractures 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.

Source: SPE International 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 Rock 6,000 ft. Source: U.S. Energy Information Administration

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) Gonzales Co. Uvalde Co. Wilson Co. Pop. 20,045 Pop. 26,752 Pop. 44,370 Atascosa Co. De Witt Co. Pop. 20,465 Cuero Zavala Co. Maverick Co. Karnes Co. Pop. 15,233 Pop. 11,961 Pearsall Pleasanton Pop. 55,365 Frio Co. Karnes City Crystal City Pop. 17,702 Pop. 46,446 Victoria Co. Goliad Co. Pop. 7,351 Pop. 89,269 Goliad Cotulla Tilden George West Dimmit Co. McMullen Co. Bee Co. Pop. 10,461 La Salle Co. Pop. 32,527 Pop. 7,109 Live Oak Co. Pop. 726 Pop. 11,664 Jim Wells Co. Webb Co. San Diego Nueces Co. Pop. 259,172 Pop. 41,339 Pop. 347,691 Laredo Duval Co. Pop. 11,754 Source: U.S. Census and Real Estate Center

Eagle Ford Shale Thickness Source: Geology.com

Eagle Ford Shale Depth Source: Geology.com

Completed Wells in the Eagle Ford As of Aug, 2011: 263 Producing Oil Wells 394 Producing Gas Wells Source: Texas Railroad Commission

Completed Wells in the Eagle Ford 11 Months Later… As of July, 2012: 1,690 Producing Oil Wells 710 Producing Gas Wells An Increase of: 1,427 Producing Oil Wells 316 Producing Gas Wells Source: Texas Railroad Commission

Completed Wells in the Eagle Ford 12 Months Later… As of July, 2013: 3,868 Producing Oil Wells 1,681 Producing Gas Wells An Increase of: 2,178 Producing Oil Wells 971 Producing Gas Wells Source: Texas Railroad Commission

Completed Wells in the Eagle Ford 9 Months Later… As of Apr., 2014: 5,858 Producing Oil Wells 2,896 Producing Gas Wells An Increase of: 1,990 Producing Oil Wells 1,215 Producing Gas Wells Source: Texas Railroad Commission

Technology Improvements

Several Technological Improvements Will Affect the Number of Wells Drilled 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. Drilling rigs that “walk” or move along rails will significantly reduce the downtime between drilling a well. The well spacing continues to tighten, leading to more producing wells on a given amount of acreage. 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