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EOG Resources’ Big Plans for 2015 Production and Costs

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Production and price estimates

According to the information EOG Resources (EOG) released on August 6, 2015, crude oil and condensate production will be in the range of 284 MBbld (thousand barrels per day) to 291.6 MBbld in 2015. Natural gas production should be between 1,228 MMcfd (million cubic feet per day) and 1,265 MMcfd in 2015.

The company also estimates that its realized crude oil and natural gas costs should remain below WTI (West Texas Intermediate) and Henry Hub prices in 2015.

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EOG’s 2015 capex and cost reduction plans

In the conference call for 2Q15’s financial results, EOG also discussed its plans for the remainder of 2015, which should feature the following strategies:

  • to keep oil production unchanged while increasing its uncompleted well inventory from 285 to 320 by 2015’s end
  • to target $6.00 to $6.40 per barrel of lease and well costs while targeting transportation costs of $4.30 per barrel to $4.50 per barrel in 2015
    • In comparison, lease and well costs were $6.53 per barrel in 2014 while transportation costs were $4.48 per barrel. In the Bakken Shale play in North Dakota, EOG anticipates that its 2015 well cost will be 20% below the 2014 levels with a target of $7.1 million.
  • to strengthen its balance sheet by keeping net debt low and liquidity strong

In its latest update with the 2Q15 results, EOG reduced its capex plans further by $200 million. Its full-year capital expenditure guidance now stands at $4.7 billion to $4.9 billion. In 2014, its total capex was $8.4 billion.

Continental Resources (CLR), another energy upstream company, saw a 2Q15 capex decrease of 32.5% over 2Q14 while Suncor Energy (SU) has revised down its 2Q15 capex by 58% compared to a year ago. EOG represents 1.6% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and 0.2% of the SPDR S&P 500 ETF (SPY).

Bakken reserves increase

In 2015, EOG plans to increase its net reserve potential in the Bakken and Three Forks shale plays by 600 MMBoe (million barrels of oil equivalent) to 1.0 billion Boe. Reserve potential refers to large-acreage plays, which are expected to contribute to EOG’s crude oil– and liquids-rich natural gas production. In the Bakken, EOG’s management believes the non-core acreage, consisting of Bakken Lite, State Line, and Elm Coulee, will remain economic to produce, even with low crude oil prices.

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