Shale Oil And Gas EUR: Company Claims Compared To EIA Estimates | Seeking Alpha

Summary

The EIA claims EUR estimates that are roughly three times less than industry claims.

With oil prices in the $80 range and looking to stay low for a while, it is important to differentiate between companies in terms of EUR, because it affects profitability.

EIA data may be conservative but good for identifying companies with decent acreage and companies with lower-quality acreage.

This article is in part inspired by the interaction I had with my audience in the past year or so. I generally tend to snub company claims for EUR for shale oil & gas and prefer to refer to EIA or SPE numbers, whenever relevant data is available. When it is not available I tend to ignore the issue whenever covering an individual company or the overall industry. As a result, I have received some criticism from readers, since many seem to feel that because I did not mention the company EUR claims, I pick and chose data, or I am uninformed.

EIA numbers tend to be much lower than industry numbers, it therefore tends to deflate the bullish case on many shale oil & gas companies, so it is understandable why some people will find it to be upsetting. Looking at coverage of the shale oil & gas industry by other sources, I find that many people tend to do the opposite and report on industry EUR claims, without trying to reconcile the huge gap that exists between them and the more impartial, but perhaps somewhat conservative EIA estimates. With oil prices moving lower for the past few month and looking like the trend of weaker prices is here to stay for a while, the issue of EUR and therefore assumptions of shale profitability are more important than ever.

EIA data on EUR is available for the Bakken and Eagle Ford, and both fields have a long enough production history for us to be able to follow up on EUR claims. The fact that most shale oil & gas wells yield the majority of their production within the first few years, helps us get a better picture in terms of what we should expect to get out of an average well. For the Eagle Ford, I want to concentrate on Dimmit county, where Shell (NYSE:RDS.A) (NYSE:RDS.B)decided to write down $2.1 billion on its 106,000 acre play last year. The EIA estimated average EUR per well in Dimmit county at 137,000 barrels of oil equivalent.

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