US independent EOG Resources has adhered to its 2015 plan to focus on its key areas: the Delaware Basin, Eagle Ford, and Bakken. “We are executing on our 2015 plan to reset the company to be successful in a low commodity price environment,” EOG CEO Bill Thomas said in Friday morning’s conference call. “EOG will enter 2016” with flexibility, he added.
The following post provides a snapshot into what EOG, which has been dubbed the “Apple of Oil”, has done, is doing, and plans to do, in its two key Texas areas.
EOG’s areas of operation
Diving Into The Delaware Basin
Billy Helms, EOG’s Executive VP of E&P, highlighted as a major accomplishment during 3Q the updating of its Delaware Basin net resource potential by 1.0 billion Boe to 2.35 billion Boe (+70%).
In the Delaware Basin Wolfcamp, EOG added 950 net drilling locations and increased its net resource potential estimate over 60% to 1.3 BnBoe. Helms said advancements in targeting and completion technology are enabling tighter well spacing and increased production per well. In the Second Bone Spring Sand oil play, EOG says it provided an initial net resource potential estimate of 500 MMBoe and added 1,250 net drilling locations “in this high quality crude oil play.”
EOG added 26,000 net acres to its Delaware Basin position in 3Q via acquisitions in Loving County, Texas, and Lea County, N.M., for a total of $368 million. Most of the acquired acreage is adjacent to EOG’s existing operating areas in the high rate of return Delaware Basin oil window. Combined, Helms said, these acquisitions added net production of 750 boepd per day with an associated 2.5 MMBoe of proved producing reserves.
These acquisitions and the updated resource potential bring EOG’s total Delaware Basin net position to 2.35 billion Boe and 4,900 locations. The company says this will provide “decades of high return drilling potential.”
“Outstanding technical and operational advances enabled us to increase potential resource estimates for our Delaware Basin position by over 70 percent,” CEO Bill Thomas commented.
EOG’s Largest High Return Play
The Eagle Ford remains EOG’s largest high return play. This year, the company expanded the use of high density completions to 95% of the Eagle Ford wells planned for the year. Enabled by high density completions and proprietary targeting technology, the company is now testing tighter well spacing in the lower Eagle Ford with stacked-staggered “W” patterns.
Furthermore, an efficient drilling program increased the amount of acreage held by production to 91% of EOG’s 561,000 net acres in the Eagle Ford oil window.
The oil slump also has brought EOG some benefits. It cut lease and well expenses by 17 percent as it wrung out costs and got better deals from equipment suppliers, the company said. And its costs to move its oil fell 11 percent as general and administrative costs declined 6 percent.
Its oil production also slipped, falling 5 percent compared to the same period last year. But that’s a small figure compared to the 36 percent it cut from spending on drilling projects. It didn’t lower its annual spending guidance.
Preliminary 2016 Outlook
On Friday morning’s call, CEO Bill Thomas reiterated the EIA’s estimate that the US will exit 2015 with 500-600,000 bpd lower than the peak production recorded in April.
He said, “We agree with the consensus view…that supply and demand is in the process of slowly rebalancing…EOG will enter 2016 with a large, high quality inventory of drilled but uncompleted wells…but with few capital commitments…which gives us flexibility.”
EOG recorded a $4.1 billion loss in 3Q, about $7.47 a share. This was down from a profit of $1.12 billion profit, or $2.01 a share, in 2Q15. Revenue in the quarter dropped from $5.1 billion to $2.2 billion.
EOG’s total crude oil and condensate production surpassed prior guidance in 3Q due to improved well productivity. Total company production fell 5% versus 3Q14 (excluding production related to EOG’s Canadian operations, which were sold in 4Q14.) Total Capex decreased 36% compared to the same period last year.
“EOG Resources Capital Discipline”; The data here is based on FY estimates as of November 5, 2015, excluding acquisitions
The company said Friday that significant reductions in operating expenses were more than offset by lower oil price realizations. This resulted in decreases in adjusted non-GAAP net income, discretionary cash flow and adjusted EBITDAX during the quarter versus 3Q14.