Eureka Energy (ASX: EKA) is an oil & gas exploration and development company with an interest in the Sugarloaf Area of Mutual Interest, located centrally within the Sugarkane Gas & Condensate Field which is onshore in southeast Texas, USA.
Eureka Energy (ASX:EKA) has said the Sugarloaf Area of Mutual Interest onshore Texas has made the transition to full scale development drilling with 65 wells expected to be spudded this year.
Operator Marathon Oil (NYSE:MRO) is targeting a sizeable increased in proved (1P) reserves and increased production rates with the accelerated drilling program, which targets the Eagle Ford shale.
Sugarloaf had produced 438,021 barrels of condensate and 1.36 billion cubic feet of gas during the December 2011 quarter from 24 producing wells.
With Eureka estimating that the number of producing wells in the project would exceed 70 by the end of this year, this could work out to total daily production of 14,000 barrels of condensate and 42 million cubic feet of gas per day.
The drilling program will also evaluate optimum well spacing, fracture stimulation design and the potential to appraise additional production horizons within the Sugarloaf AMI.
During the current quarter, 12 wells will be drilled while the second, third and fourth quarters will see 22 wells, 18 wells and 13 wells drilled respectively.
Eureka has prepared well for this program, having secured a US$50 million (A$46.6 million) debt facility from Macquarie Bank to pay the share of costs for its 6.25% stake in the Sugarloaf AMI.
The first S$15 million tranche of the 3-year facility provided by Macquarie Bank is immediately available to Eureka.
Additional funds will be made available based on achieving reserves milestones.
Marathon had previously flagged it would spend half of its US$2.7 billion North American exploration and production budget on the Eagle Ford shale.
This include ramping up to 17 rigs and drilling 200 to 210 wells along with adding two additional fracture stimulation crews.
The Eagle Ford Shale area is considered to be one of the premium shale plays in North America, with around 200 rigs reported to be operating.
Total production from the Eagle Ford shale is currently estimated at over 200,000 barrels of oil equivalent per day (boe/d) and is expected to increase to over 1.2 million boe/d within the next 5-6 years as various operators accelerate development of the estimated resources of 3 billion barrels of oil and 20 trillion cubic feet of gas.