Wednesday, October 4, 2023

HVS Report – Eagle Ford Shale: Current Upticks in Manufacturing and Lodging Efficiency

The Eagle Ford Shale, America’s second-largest shale area, has confronted rising prices, a frenzy of mergers and acquisitions, and recessionary issues since late 2022. Nonetheless, pure fuel and oil manufacturing, in addition to resort efficiency and transactions, have elevated out there.

The Eagle Ford Shale market has confronted rising prices, a frenzy of mergers and acquisitions, and recessionary issues since late 2022. Nonetheless, drilling exercise throughout the space has develop into worthwhile once more for many oil and fuel operators and lodging properties that home oilfield employees.

The variety of drilling permits issued for the Eagle Ford Shale between 2017 and 2019 averaged roughly 2,150 per yr. Following the consequences of the COVID-19 pandemic, this quantity plummeted to underneath 1,000 by year-end 2020. Related traits had been famous at resorts throughout the Eagle Ford Shale, with RevPAR registering important declines as hoteliers struggled to fill rooms. The relocation of a number of oilfield “man camps” from the Eagle Ford Shale to the West Texas Permian Basin supplied a lift for present resort homeowners and operators.
Drilling allow exercise elevated nominally in 2021, earlier than registering a 39% enchancment in 2022. This rise in drilling exercise, coupled with enhancing leisure demand traits, resulted in important RevPAR features. Occupancy for a gaggle of limited-service resorts in Karnes County illustrated a 99% enhance from 2020 to 2021, with occupancy surpassing 73% in 2022. Equally, ADR for these resorts skilled a 16% enhance from 2021 to 2022.
So far in 2023, the variety of drilling permits issued has remained comparatively secure in comparison with the identical interval in 2022. EOG Assets Inc., the highest producer within the Eagle Ford Shale with about 170,000 barrels of oil per day, is within the lead. This firm has 112 authorized permits for brand new horizontal wells this yr. RevPAR for a similar set of resorts in Karnes County elevated roughly 11% by March 2023.
A number of resorts all through the Eagle Ford Shale have transacted throughout the previous yr, following a interval of few resort gross sales. Notable transactions embrace the Vacation Inn Categorical in Kenedy, which reportedly bought in June 2023 for $4,200,000 ($62,000 per key) and the Microtel Inn & Suites by Wyndham in Gonzales, which transacted for $2,800,000 ($53,000 per key) in June 2023.

Texas Eagle Ford Shale Drilling Permits Issued 2008 although Might 2023

Supply: Texas Railroad Commision Drilling Allow Question (Contains New Drill and Re-enter Permits)

Current mergers and acquisitions of corporations that function within the Eagle Ford Shale are detailed under.

  • Marathon Oil acquired the property of Ensign Pure Assets in late 2022 for $3 billion. This all-cash deal concerned 130,000 acres within the core of the Eagle Ford Shale and considerably expanded Marathon’s footprint within the shale play to 290,000 internet acres. Moreover, Marathon estimates it gained 600 undrilled places and 700 present wells, representing important redevelopment potential.
  • In February 2023, Baytex Power Company agreed to accumulate Ranger Oil Company for roughly $2.5 billion. The Ranger stock represents about 741 internet undrilled places and roughly 12–15 years of oil-weighted drilling alternatives. Baytex believes it may possibly develop manufacturing modestly from the acquired property with two rigs and about 50–55 internet wells per yr. Furthermore, the deal provides roughly 162,000 internet acres to Baytex’s portfolio.
  • In September 2022, Devon Power Company accomplished its acquisition of Validus Power for a complete money consideration of $1.8 billion. This acquisition secures 42,000 internet acres adjoining to Devon’s present leasehold within the basin. Present manufacturing from the acquired property is roughly 35,000 barrels per day, which is anticipated to extend to 40,000 barrels per day on common.
  • Chemical maker INEOS agreed to buy property within the Eagle Ford Shale from Chesapeake Power Company for $1.4 billion. The deal, which was anticipated to shut by the tip of June 2023, includes roughly 172,000 internet acres with common internet day by day manufacturing of about 36,000 barrels of oil.

The rising value of supplies and labor have contributed to restrained income and manufacturing in recent times. Notably, the price of metal, coupled with a scarcity of frack pumps, hampered development at most of the main producers within the Eagle Ford Shale. Nonetheless, prior to now few months, oil and fuel drillers have reported seeing some aid from the rising prices. Based on an April 2023 article within the , a number of oil firm CEOs said that prices have been secure or declining in latest months. As reported within the article, “Paramount Assets Restricted CEO Jim Riddell stated […] that companies and different prices have began to say no, although they’re unlikely to tumble again to the lows reached throughout the early days of the COVID-19 pandemic.”

Whereas recessionary issues proceed to loom, drilling exercise, manufacturing, lodging traits, and mergers and acquisitions proceed at a wholesome tempo within the Eagle Ford Shale. Main shale play producers proceed to submit typically optimistic outcomes. And the counties with the most important footprint within the play—Karnes, Gonzales, De Witt, and La Salle—are experiencing a much-needed financial increase following the COVID-19 pandemic. Hoteliers within the Eagle Ford Shale report a scarcity of latest resort provide and elevated drilling exercise as optimistic attributes for the latest uptick in lodging traits. The enhancements and RevPAR features have piqued investor curiosity and resulted in a number of resort gross sales prior to now yr.
For extra info on the Eagle Ford Shale lodging market and resort traits, please contact David Bone with the HVS San Antonio workplace.

 Kevin Orland, Midland Reporter-Telegram, “Oil drillers see prices peaking in fields.” April 12, 2023. Retrieved July 3, 2023.

About David R. Bone

David Bone

David Bone is a Senior Vice President with the HVS San Antonio workplace. David earned his bachelor’s diploma from Texas A&M College and has front-line resort expertise with Omni Accommodations and Resorts. David works extensively within the south Texas area, with a specific give attention to the higher San Antonio metro space. He’s a state licensed basic appraiser. Contact David at (214) 629-0908 or

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