EOG Resources is reaping such high volumes of liquids from key US resource plays that it has raised its 2013 year-over-year production growth target for oil and condensate to 35% from 28%, its executive chairman said Wednesday.
At the same time, the company is projecting its natural gas liquids production will rise 14% this year above last year's level, up from an earlier-targeted 10%, Mark Papa said in a quarterly earnings conference call.
Moreover, the producer is seeing rates of return of 100% or more in its top three plays -- the Eagle Ford Shale in South Texas, the Bakken Shale in North Dakota and the Leonard Shale in West Texas' Delaware Basin, he said.
"Our oil growth increase is emanating primarily from the Eagle Ford, with contributions from the Bakken Shale and the Delaware Basin," said Papa, who assumed his new role last month.
Papa had been CEO of the company since it was spun off from Enron in 1999. EOG stood for Enron Oil & Gas and had been the upstream arm of the defunct energy trading giant, which collapsed after it revealed accounting irregularities in 2001.
EOG's Q2 crude oil and condensate production totaled 214,400 b/d, up 35% from 158,700 b/d in the year-ago period, while NGL output was 64,700 b/d, an increase of 16.5% from 55,500 b/d a year ago.
Total company liquids production, for oil, condensate and NGLs increased 30% in Q2 over the comparable 2012 quarter.
Meanwhile, gas output should decline 11.5% this year from an average 1.516 Bcf/d in 2012, said Papa. In Q2, EOG produced 1.361 Bcf/d of gas, down nearly 15% from 1.598 Bcf/d in the same last year.
EOG's total daily production in Q2 was 505,900 barrels of oil equivalent, 5% above 480,500 boe/d in Q2 2012. EOG forecasts 7.5% total production growth in 2013, up from 466,400 boe/d in 2012. EOG SEES HIGH INITIAL PRODUCTION RATES FROM LEONARD SHALE
Bill Thomas, who took over as president and CEO last month, noted the high initial production rates of EOG wells in the Leonard Shale of the Delaware Basin and said investment there will likely increase.
For example, in Lea County, New Mexico, three key EOG wells -- Diamond 31 Fed Com #2H, #3H and #4H -- came online at oil rates of 1,780 b/d, 1,905 b/d and 1,530 b/d, all very high rates. NGL rates were 215 b/d, 165 b/d and 150 b/d respectively. The wells also had respective natural gas outputs of 1,200 Mcf/d, 910 Mcf/d and 835 Mcf/d.
In addition, better drilling and completion results in the Eagle Ford Shale, which Papa once called the "800 pound gorilla" of US resource plays, are driving down EOG's well costs this year to an estimated $5.5 million from an earlier $6 million apiece.
Thomas said well results in the company's western Eagle Ford position in particular are exceeding expectations, while those in its eastern acreage continue to set a high bar.
La Salle County, Texas, EOG wells in the Eagle Ford western area included the Keller #1H and #2H which debuted at very high rates of 1,855 b/d and 2,050 b/d of oil, with 75 b/d and 50 b/d of NGLs respectively. The wells also had respective gas rates of 430 Mcf/d and 300 Mcf/d.
In Gonzales County, in the northeastern edge of its Eagle Ford leasehold, EOG saw the Burrow Unit #3H, #4H and #5H wells completed at initial output rates of 2,990 b/d, 3,030 b/d and a stunning 7,515 b/d of oil respectively, with 385 b/d, 370 b/d and 860 b/d of NGLs. The wells also produced 2,200 Mcf/d, 2,100 Mcf/d and 5,100 Mcf/d of gas, respectively.
In fact, even after 30 days, the Burrow #5H, EOG's best Eagle Ford well to date, boasted a still-impressive average production of 4,265 b/d of oil.
Burrows #5H "did have a longer lateral, about 7500 feet," said Thomas. "The the other two [Burrows' laterals] are quite a bit shorter" Longer laterals -- the horizontal leg of a well -- account for the stronger production rate, he said.
EOG late Tuesday reported Q2 net income of $659.7 million, up from $395.8 million in the same period of 2012. Stripping out one-time items that included net gains on asset dispositions, impairments, and a gain on mark-to-market of financial commodity contracts, adjusted net income for Q2 2013 was $573.8 million, compared with $312.4 million last year.