Say “East Texas” to most oil and gas people and images of derrick-topping gushers, wooden crude tanks and Model T trucks come to mind. And rightly so, the East Texas play enjoyed its peak years during the Great Depression, then went on to float the Allies to victory in World War II.

The region’s heavy forests have grown quiet in more recent times, save for the occasional work-over of an aging conventional well.

But East Texas is back due to a geologic quirk and the technology that has stirred other mature plays.

The formation that triggered that first boom is the Cretaceous Woodbine formation, which by several estimates has produced more than 5 billion barrels (bbl.) of crude since the discovery well hit in 1930. Its source rock is another Cretaceous member, the Eagle Ford shale.

Yes, that Eagle Ford.

It’s no surprise that this geologic serendipity caused light bulbs to click on inside the heads of many explorationists. Surely the horizontal drilling and hydraulic fracturing that made the Eagle Ford into a substantial play on its own off in South Texas might work here, too.

Baird Equity Research rated the Woodbine among its “most attractive” plays in its year-end 2013 survey of buy-side
investor and industry sentiment.

ZaZa Energy Corp. may have been the first to coin the word “Eaglebine” to describe the emerging unconventional play—a combination of the Eagle Ford and Woodbine groups that represent strata from the base of the Austin chalk to the top of the Buda lime. Todd Brooks, ZaZa’s chief executive, tells Hart Energy, “it’s very oily.”

Complex geology

Unlike the comparatively flat and predictable Eagle Ford formation off to the south and west, the East Texas Eaglebine
is geologically very complex. Producers are still figuring it out, but the prospect of substantial oil in place makes the area very attractive.

And like the other historic plays, the area offers comparatively good midstream infrastructure and a local populace supportive of the industry. Plus, the Gulf Coast refining and petrochemical complex lies almost in the backyard.

ZaZa and other producers right now are taking the Eaglebine’s measure and figuring out how to make that complex geology pay. Midstream operators are close behind, repurposing the area’s immense infrastructure and putting new capacity in place to handle what all hope will be another unconventional success story.

Sunoco Logistics Partners LP has its Eaglebine Express project under way, which will provide 60,000 bbl. per day of new takeaway capacity when it goes online in the middle of this year.

Michael J. Hennigan, Sunoco’s president and chief executive, said in his review of fourth-quarter earnings that Eaglebine Express is one of several “projects [that] will provide additional takeaway capacity out of key domestic
production areas and will generate long-term ratable cash flows for the partnership.”

The project will convert an underused MagTex products line from Hearne, Texas, to the Nederland, Texas, terminal—
which serves the numerous Beaumont/Port Arthur, Texas, refineries and petrochemical plants. Sunoco acquired MagTex in 2008.

South Texas Eagle Ford lease prospects are mostly sewn up by now—not so for East Texas, creating a natural addition
to current Eagle Ford players or producers who were too late moving into South Texas.

Australia-based Aurora Oil & Gas Ltd. has interests in 22,200 net acres of the main, South Texas Eagle Ford play. It recently announced it has acquired 14,000 net acres in the East Texas Eaglebine area to complement its operations to the southwest. (Canada’s Baytex Energy Corp. acquired Aurora in February.)

SM Energy Co. is among the producers active in East Texas. It reports somewhat mixed results to date as it explores
that complex geology.

Mike Kelly, exploration and production analyst for Global Hunter Securities, rates SM’s first Woodbine well in Walker County, Texas, as “encouraging” after initial production of 873 bbl. of oil equivalent per day on a comparatively short, 2,500-foot lateral. An initial Eagle Ford well had strong flows, but was mostly natural gas. SM has five more Woodbine, two Austin Chalk and one more Eagle Ford well in its drilling program this year.

Looking for the next big thing

Meanwhile, Kelly said in another report that Anadarko Production Co., no doubt “trolling for the next potentially big thing in Texas oil development,” had two successful wells in Brazos County, Texas, generally to the west of the Woodbine’s best wells to date. One well with a 6,200-foot lateral tested as a rate of 654 bbl. of oil per day while a second well, with a 4,500-foot lateral, produced 592 bbl. of oil and 323,000 cubic feet of gas per day.

Contango Oil & Gas Co. had a Madison County, Texas, well average 1,254 bbl. of oil equivalent per day during the first 60 days of production, 80% oil. That well had a 20-stage, 5,492-foot lateral in the Woodbine. Contango in a recent investor presentation said it has average production of 23.9 million cubic feet (MMcf) per day equivalent in the region with proved reserves of 52.2 billion cubic feet (Bcf) equivalent. It plans to participate in 19 Woodbine and one Eagle Ford well this year.

All that drilling activity has piqued interest in midstream merger and acquisition activity. The biggest acquisition thus far was an announcement by Regency Energy Partners in December that it will buy Eagle Rock Energy Partners LP’s midstream business. The $1.3 billion acquisition will complement Regency’s core gathering and processing business, and when combined with the proposed acquisition of PVR Resources, it will further diversify Regency’s basin exposure in East Texas and other Texas plays.

Its East Texas midstream assets include 1,620 miles of pipeline, nine processing plants, gathering volumes of 191 MMcf per day and equity interest in 756,000 bbl. of natural gas liquids (NGL) and condensate.

Eagle Rock continues its East Texas upstream operations with an average production of 6.5 MMcf per day equivalent and 23 Bcf equivalent of proved reserves. Eagle Rock also retains an interest in Regency following
the deal.

Late last year, Azure Midstream Energy LLC completed the acquisition of TGGT holdings for an aggregate sale price of $910 million. As part of that deal, it acquired the East Texas Gathering System from Tenaska Capital Management, consolidating the two systems under one owner.

If the current trend continues, East Texas will boom again and create multiple midstream opportunities.

Steve Toon, Hart Energy senior editor, contributed to this report.

Paul Hart can be reached at pdhart@hartenergy.com or 713-260-6427.

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