Tuesday, August 31, 2010

EOG Update

Below are some thoughts from a recent EOG Resources earnings release and presentation.  I've gotten a bit behind from a news perspective, so in the spirit of catching up, please excuse any on old news.

First, the company reported the below completions that I have not yet posted:
  • Sustainable Forest 5 #6-ALT, EOG Resources:  19.3 MMcf/day IP; Ten Mile Bayou Field, DeSoto Parish, LA, S5/T11/R12; res. A, serial #240632 (self-reported by EOG)
  • Walters Gas Unit #1H, Cabot Oil & Gas:  21. MMcf/day IP; Carthage Field (Haynesville Shale), San Augustine Co., TX (self-reported by EOG)

The company is also particularly proud of two other completions in Nacogdoches Co., the Murray #1H  and Crane #1H.  I already reported the official results of the Murray #1 H and Crane  #1 H completions, but EOG self-reported first 30 day flow rates for these wells at 25 MMcf/day and 27 MMcf/day, respectively.  EOG briefly discussed its practice of limiting flow rates to maintain reservoir pressure, but it did not elaborate with any specifics.  It noted that the Murray and Crane wells also were limited by pipeline constraints.  I see that the Murray #2H and Crane #2H have already been permitted, so the company is definitely interested in trying to repeat these successes.

The Mid-Bossier shale is another attractive target for EOG.  The company noted results from its Red River 5 #3 well in DeSoto Parish, LA (serial #240930), which it reported at 15.2 MMcf/day at 6,750 psi.

Additionally, EOG noted that it is selling a package of about 180,000 net acres in the Haynesville, Marcellus and Eagle Ford Shales.  Of that total acreage, only 15,000 acres are in the Haynesville, and I assume is is lower priority acreage from a productivity perspective.  EOG had originally discussed a joint venture but thought an outright sale would be simpler.  That, and it would be nice to get some more money in the bank to support current drilling efforts, especially in light of the fact that the company bumped up its capital spending budget by $500 million to drill for more oil.  It will be interesting to see what EOG gets for the land and who will buy it.  I presume the Haynesville acreage has leases that expire in the next +/- 18 months, so a prospective buyer is not likely to be a company with it's own ticking lease time bomb.

For more than a year now, EOG has been focused on increasing the company's liquids production (oil and NG liquids) to around 50% of production.  It was an early adapter of the concept that other independents now avidly follow.  The company reached this goal in Q2.  While EOG's focus has shifted towards liquids, it is still aware of its strong position in Haynesville and Mid-Bossier Shales and is looking for gas production to replace gas assets that the company is selling in Canada.  That bodes well for the company's continued interest in the region.

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