EOG Resources’ 1Q16 operational performance
For 1Q16, EOG Resources (EOG) reported a total production of 549.9 MBoe (thousand barrels of oil equivalent) per day, which is at the higher end of its 1Q16 production guidance range of 519 MBoe–551 MBoe per day.
EOG Resources’ 1Q16 production is ~7% lower than its 1Q15 production of 589.5 MBoe per day. Sequentially, EOG’s 1Q16 production is ~3% lower than it was in 4Q15.
S&P 500 (SPY) upstream companies Pioneer Natural Resources (PXD) and Southwestern Energy (SWN) reported ~15% and ~2% year-over-year increases in their 1Q16 production volumes, respectively, whereas non-S&P 500 company Consol Energy (CNX) reported a ~36% year-over-year increase in its 1Q16 production. The Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3x Shares ETF (GUSH) is a leveraged fund that invests in oil and gas exploration and production companies, whereas the Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil- and gas-related equities from the S&P 500.
EOG Resources’ capital efficiency improvement plan
In 1Q16, EOG Resources implemented its previously announced strategy to focus capital in areas that generate premium rates of return. This move significantly improved the average well performance and contributed to EOG’s strong production in 1Q16. This strategy also helped EOG to exceed its crude oil 1Q16 production guidance.
EOG Resources’ production guidance
For 2Q16, EOG Resources expects a total production in the range of 512.7 MBoe–547.7 MBoe per day, a midpoint sequential decrease of ~4% from 1Q16’s production. This is due to the lower capital expenditure planned in 2Q16. For 2016, EOG Resources slightly updated its previously stated production guidance range of 508.3 MBoe–549.2 MBoe per day to 512.3 MBoe–550.4 MBoe per day. The midpoint of EOG’s 2016 production guidance is ~7% lower than its 2015 production of 572.2 Mboe per day.
Whereas Pioneer Natural Resources is expecting a ~12% growth for its 2016 production, many other upstream companies, such as Energen (EGN), Southwestern Energy (SWN), Chesapeake Energy (CHK), and Marathon Oil (MRO), are expecting lower production volumes for 2016.
EOG Resources’ cost-reduction focus
For 1Q16, EOG Resources reported a ~29% year-over-year decrease in LOE (lease operating expenses), a ~12% year-over-year decrease in transportation costs, and a ~7% year-over-year decrease in G&A (general and administrative) expenses. For 2Q16, EOG expects LOE in the range of $5.00–$5.50 per barrel of oil equivalent.