EOG On Track With 2015 Spending Plan

EOG will resume fracking
EOG will resume fracking

EOG Resources released its first quarter earnings and operations report this week with hints about when they will return to fracking wells.

Citing low commodity prices, EOG announced a first quarter net loss of $169.7 million. They remain on track with their plans for a 40% capex decrease and are making substantial progress in reducing costs through operational efficiencies and service cost reductions.

85% of EOG’s spending for 2015 is allocated for the Eagle Ford, Delaware Basin, and Bakken. Their strategy is to continue drilling, but defer completions on a significant number of wells until oil prices improve. As oil prices recover, EOG predicts it will begin to begin fracking wells later this year when prices stabilize at around $65.

In an earnings conference call on Tuesday, Chairman and CEO, Bill Thomas announced that the first quarter results were “right on track” and that they are “quickly transforming the company to be successful in this low price environment.” Thomas went on to lay out the four basic objectives to EOG’s 2015 plan:

  1. Maximize 2015 returns on capital invested and position the company to resume strong growth when oil prices recover
  2. Focus on improving well productivity and operational efficiencies
  3. Protect the balance sheet by meeting our cash flow and CapEx expectations for the year
  4. Take advantage of opportunities during the down cycle to add acreage
We are using our exploration skills to define high quality acreage and are having good success capturing leasehold interest in emerging plays. Competition is down, acreage is available, and leasing costs are low compared to previous years, and we are optimistic more opportunities will materialize as the year progresses.
— Bill Thomas

EOG will reduce rigs in the Eagle Ford this year to 15 from 23 at year-end 2014 and will complete about 345 net wells. The company has  reduced completed well costs by 10% from an industry-leading $6.1 million average well cost in 2014 to a current well cost of $5.5 million.

 

EOG Reduces Eagle Ford Wells for 2015

EOG Eagle Ford Acreage Map
EOG Eagle Ford Acreage Map

EOG Resources, the largest operator in the Eagle Ford, announced its fourth quarterly earnings and revised capex for 2015. The spending plan includes a capital budget that focuses on the Eagle Ford, Bakken and Delaware Basin.

Read more about EOG Resources in the Eagle Ford

Despite falling crude prices throughout the fall months, EOG managed to finish with strong Q4 numbers. The company reported a quarterly net income at $445 million with an overall 2014 income of $2,915 million, compared to $2,197 million for 2013.

Production in the Eagle Ford was strong across several counties:

  • Karnes County: four wells that produced over 19,000 Bopd, 1,700 Bpd of NGLs and 10 MMcfd of natural gas, collectively
  • La Salle County: two wells with production rates of 2,460 and 2,850 Bopd, plus 165 and 190 Bpd of NGLs and 975 thousand cubic feet per day (Mcfd) and 1.1 MMcfd of natural gas
  • McMullen County: One new well brought online at an initial production rate of 2,535 Bopd, with 180 Bpd of NGLs and 1.1 MMcfd of natural gas

For 2015, EOG plans capital expenditures to range from $4.9 to $5.1 billion including projects for production facilities and midstream expenditures. This represents a 40 percent reduction compared to 2014 spending as the company takes a cautious approach due to continued low crude prices.

In 2015, EOG will execute a balanced drilling program across the length of its Eagle Ford acreage. Due to advancements achieved in the western acreage during the last two years, returns are competitive with the east and a balanced drilling program will maximize operational efficiencies. EOG plans to complete about 345 net wells in the Eagle Ford compared to 534 in 2014.

EOG Resources Increases Eagle Ford Reserve Potential 45%

EOG Resources Eagle Ford Reserve Potential
EOG Resources Eagle Ford Reserve Potential

In its second quarter report, EOG Resources revealed a 45% increase in its Eagle Ford estimated potential reserves from 2.2 net BnBoe to 3.2 net BnBoe. This is the company's third reserve increase in four years. EOG officials expect continued production growth in the Eagle Ford, with a current drilling inventory of 12 years.

In the report, company officials said the Eagle Ford Shale was a significant contributor to EOG's U.S. crude oil production growth (33% year-over-year) and associated natural gas liquids (NGLs) growth (22% year-over-year). Natural gas production from the play was also credited as contributing to the company's total production growth. See below for EOG's U.S. production volumes for the quarter:

  • Crude Oil and Condensate - 274,600 b/d
  • NGLs - 78,500 b/d
  • Natural Gas - 925 MMcfd

EOG Eagle Ford Second Quarter Operations Update

In Karnes County, the McCoy Unit #1H and #2H began production at 5,290 and 5,415 b/d with 475 and 415 b/d of NGLs and 2.7 and 2.4 MMcfd of natural gas, respectively. The Wolf Unit #6H, #7H, #8H and #9H, began sales at rates ranging from 3,160 to 3,600 b/d with 310 to 390 b/d of NGLs and 1.8 to 2.3 MMcfd of natural gas.

Northeast of Karnes in DeWitt County, the Justiss Unit #11H, #12H and #13H had initial production rates of 4,000, 3,900 and 4,130 b/d with 690, 650 and 750 b/d of NGLs and 4.0, 3.8 and 4.3 MMcfd of natural gas, respectively.

In Gonzales County, EOG recorded a number of wells with strong initial production including the Boothe Unit #11H and #16H, which had rates of 4,570 and 3,245 b/d with 580 and 500 b/d of NGLs and 3.4 and 2.9 MMcfd of natural gas, respectively. The Zimmerman Unit #14H began sales at 3,800 b/d with 350 b/d of NGLs and 2.0 MMcfd of natural gas.

Southwest of Gonzales in La Salle County, the Naylor Jones Unit 127 #1H, #2H and #3H had initial production rates ranging from 2,200 to 2,500 Bopd with 220 to 250 Bpd of NGLs and 1.3 to 1.5 MMcfd of natural gas. EOG has 100 percent, 100 percent and 75 percent working interest in these wells, respectively.

EOG is the largest oil producer and acreage holder in the Eagle Ford, with ~632,000 net acres across the play.

EOG Resources Boosts Eagle Ford Oil Production 62% Year Over Year

EOG Eagle Ford Acreage Map
EOG Eagle Ford Acreage Map

Eagle Ford Producer EOG Resources increased its crude oil production in the play by 62% in the first quarter of 2014 over the same reporting period last year. Portfolio-wide, company officials said total US crude oil and condensate production increased by 45%, with the Eagle Ford contributing the most to production volumes. As of March 31st, 2014, EOG's net Eagle Ford production was 207,000 boe/d.

In the first quarter, EOG entered its third and final phase of its joint venture agreement with ZaZa Energy in the Eaglebine. Plans were accelerated in the fourth quarter of 2013 to move into the second phase, which was a strong indication of the company's confidence from production in the area.

Read more: EOG Resources - ZaZa Energy Move into Third and Final Phase of Joint Venture Agreement

EOG Eagle Ford First Quarter Operations Update

EOG reported an average initial production (IP) rate for five Karnes County wells of 3,757 bbl/d crude oil. The Korth Unit #3H, #4H and #5H had IP rates of 3,140, 3,015 and 3,400 bbl/d, respectively. The Lynch Unit #1H and the Presley Unit #1H had initial oil rates of 4,260 and 4,970 bbl/d, respectively. EOG owns a 100% working interest in these five wells.

EOG also has a 100% working interest in three recently completed high volume oil wells in Gonzales County. The Neets Unit #1H and the Magoulas Unit #1H began production at 4,940 and 4,195 bbl/d, respectively. The Novosad Unit #12HR had an initial daily oil rate of 3,565 bbl/d.

EOG Resources has 632,000 net acres in the Eagle Ford, and in 2013, the company increased its Eagle Ford resource potential 45% to 3.2 billion boe from 2.2 billion boe. Company officials said EOG plans to add 400 million boe of net potential reserves and 735 net drilling locations to its drilling inventory in the Codell, Niobrara, Turner and Parkman plays in the Rockies in the coming years. That's a significant addition, but the Eagle Ford remains the top dog in EOG's portfolio.

 

EOG Resources - ZaZa Energy Move into Third and Final Phase of Joint Venture Agreement

ZaZa Energy Eaglebine Map
ZaZa Energy Eaglebine Map

EOG Resources joint venture with ZaZa Energy moves into its third and final phase in the Eaglebine. Plans were accelerated in the latter part of 2013 to move forward with the second phase of the joint venture.

Read more: EOG Accelerates Eaglebine JV with ZaZa by Electing into Phase II

In the third phase, ZaZa will receive $15 million and an additional two-well drilling commitment from EOG. As part of the agreement, EOG must begin drilling the first of two wells by July 1, 2014. In exchange, EOG will gain a 75% working interest in all of Zaza's remaining acreage.

Under the third phase, ZaZa Resources will also receive an additional $1.1 million in cash from EOG for the completion of the Range Resources-ZaZa joint venture agreement. Range Resources has an interest in portions of the acreage.

EOG Resources - Zaza Energy Phase III Joint Venture Highlights

  • Zaza Energy receives $4.7 million in cash from EOG Resources
  • Zaza Energy receives a carry of EOG's share of future joint venture costs of up to ~$9.2 million
  • Zaza Energy receives $1.1 million in cash from EOG for the completion of the Range Resources-ZaZa joint venture agreement
  • EOG Resources will begin drilling the first of two wells by July 1, 2014 as part of a two-well drilling commitment
  • EOG Resources is assigned a 75% working interest in all of ZaZa's remaining acreage

ZaZa Energy and EOG Resources reached terms on the joint venture agreement early in 2013. The company's eastern Eagle Ford acreage is in Grimes, Madison, Montgomery, Trinity, and Walker counties.

Read more at zazaenergy.com