EOG Resources Poised for Long Term Success

EOG Resources Poised for Long Term Success

One of the largest independent exploration and production companies in the United States, EOG Resources (NYSE: EOG), is an operator that many look to in the current environment to model their well designs and cost saving techniques. The operator is seeing similar returns in parts of the Eagle Ford as they were in 2012 with oil being $35 dollars less and has more then doubled returns in the Permian at $60 compared to $95 in 2012.

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EOG Resources’s  capital plan of $4.7 to $4.9 billion for the 2015. The company spent $4.3 billion in the first three quarters of the year. That is about $1.7 billion lower then last years three quarter spend of $6.5 billion. EOG is projected to to drill 570 net wells and complete 450 net wells during the year

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Deferred Completions Set-Up Strong 2016 Start

The company continues to focus in the Eagle Ford, Permian and Bakken, deferring completions to next year where hopefully there will be a more favorable commodity pricing environment. The operator expects to end the year around 320 drilled but uncompleted wells (DUCs), substantially higher then the normal amount of around 100 wells. The large amount of DUCs will allow them to use less capital in the first half of 2016, being able to see better returns on the wells.

Focused on Placement Not Lateral Length

EOG has challenged the industry’s thinking of longer laterals and more sand will equal a better well. The company has focused on two things to get the best returns for their wells, one being their completion technology and the second being the landing spot where the lateral will be placed. The chart below shows their activity in La Salle county in the Eagle Ford during 2015 showing the variety of laterals they have drilled this year ranging from below 5,000 feet and north of 7,500 feet. EOG continued to increase their use of proppant over the year now averaging above 7,000 tons per well in the Eagle Ford with 2-well pads.

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Infrastructure Investments Pay Off

The Bakken infill program is using shorter laterals with tighter well spacing to reduce costs. An example of their infill programs success is a three well pad using an average lateral of less then 6,000 feet and having tighter well spacing, at 500 feet, reducing costs while effectively stimulating the reservoir. The operator has reduced LOE by $5 a barrel in some parts of the Bakken by investing in key infrastructure like water gathering systems. Current well costs in the Bakken are about $7 million for an 8,400-foot lateral, a reduction of 20% from 2014, and are targeting a well cost of $6.5 million.

 

Ready for the Long Haul

EOG is executing a strategy for long term success instead of near term growth. The company has set themselves up for the 2016 year with a large inventory of uncompleted wells and the technology to gain the best returns. During the downturn, EOG increased their drilling inventory in the Permian and Bakken to ensure years of high quality acreage.

 

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