EOG Resources joint venture with ZaZa in the Eaglebine is moving into phase two of three. EOG is expected to complete the first three wells this year and was expected to elect into phase two in early 2014. Instead, the company has accelerated its plans.

The deal includes several forms of consideration, so we'll break it out by company:

EOG receives the following:

• 20,000 net acres as part of agreeing to phase II
• The companies also agree that EOG will receive an additional 6,000 net acres if the company elects into phase II on or before January 31, 2014

ZaZa receives:

• $17 million
• Interests in 15 wells outside the current AMI in Madison County, with a PDP present value of $3 million
• Costs carry on 1 vertical well, two horizontal wells, and a $1.25 million credit toward land & operational expenses
• As part of phase III, ZaZa will receive additional interests in the Southern Madison County wells valued at $9 million
• Additionally in phase II, ZaZa retains 14,000 net acres that EOG can elect into on or before January 31, 2014

ZaZa also receives a 25% interest in approximately 19,000 net acres that have been acquired by EOG in exchange for $2 million plus additional acreage. ZaZa is assigning a 75% working interest in approximately 18,500 net acres in Walker and Madison counties.

While two wells are still waiting to be completed, I believe this deal signals that EOG is confident in what they've seen from operated and non-operated wells in the area. There would not have been a reason to accelerate the timeline without an optimistic outlook.

Watch to see if EOG elects into phase three later in the year or in January 2014. If they do, I believe we'll see the companies planning for development instead of exploration at some point in 2014.

Read the full press release at zazaenergy.com