Just a few years ago, the emerging Eagle Ford play in South Texas was thought of as a gas and condensate play. But that view is dated. Today, the Eagle Ford is firmly established as an oil play, and is indeed so prolific that its production of crude is forecast to exceed 1 million bbl. per day by next summer.

That was the remarkable revelation of Subash Chandra, managing director, Jefferies & Co. Chandra spoke at Hart Energy’s 2013 DUG Eagle Ford conference. “The rate of growth going forward will be some 250,000 bbl. per day per year,” he said. “This is nearly the same oil production as from the Bakken.”

Another observation Jefferies made after studying today’s Eagle Ford results was that well quality varies widely by county. Overall, wells are getting better, but location definitely matters. Three counties stand tallest in the production of crude from the Eagle Ford—Gonzalez, Karnes and LaSalle. Combined, they account for half of total Eagle Ford oil production, which currently stands at some 800,000 bbl. per day. “I think what makes these wells work is a combination of strong reservoir pressures and high gas/oil ratios,” said Chandra. “We don’t see this changing, as the good keeps getting better.”

Chandra noted that production statistics from Jefferies vary from those in the public database available through the Texas Railroad Commission. That’s because Jefferies is primarily interested in black oil, so it excludes condensate production from gas wells.

Not surprisingly, internal rates of return (IRR) also show strong variability. In the core area, economics of Eagle Ford wells are sterling. At assumed reserves per well of 705,000 boe (56% oil, 21% NGLs and 23% gas), and an $8-million completed well cost, Jefferies figures break-even economics are $60 per bbl. at West Texas Intermediate (WTI) prices. The IRR are about 60%, at a price deck of $95 per bbl. of oil and $4 per thousand cubic feet of gas. Certain operators, such as EOG Resources, tally even more robust returns.

But when moving outside the core to Tier 1 acreage, returns are cut in half. “About half of the Eagle Ford oil production is coming from Tier 1. So we need $75 crude to get a wellhead return of 20%,” said Chandra. For its part, Jefferies is comfortable that oil prices will not sink to those levels, and it expects rig count to hold steady at about 170 throughout 2014.

This gush of new light, sweet Eagle Ford oil—combined with production from other resource plays—will likely cause regional supply imbalances, particularly in Petroleum Administration for Defense Districts (PADD) 2 and PADD 3. But the Eagle Ford will be advantaged in the scrap for prices, as the play has ample takeaway capacity as well as local refinery demand. In fact, Eagle Ford takeaway capacity is double current volumes, allowing plenty of room for increased production. “Usually in a high-growth basin, investors worry if takeaway will keep pace with growth. That’s not an issue in the Eagle Ford.”

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