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EOG Resources’ 3Q16 Production Guidance and Management Strategies

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EOG Resources’ 3Q16 production guidance

EOG Resources (EOG) expects total production in the range of 524.2–549.7 Mboepd (thousand barrels of oil equivalent per day) in 3Q16.

The midpoint of the company’s 3Q16 production guidance is ~537 Mboepd, ~6% lower than its production of 569.6 Mboepd in 3Q15.

Sequentially, EOG Resources’ production guidance is ~1% higher compared to 2Q16. For 3Q16, EOG expects crude oil (USO) production in the range of 268.4–280.8 Mbpd (thousand barrels per day), natural gas liquids production in the range of 75–79 Mbpd, and natural gas (UNG) production in the range of 1,085–1,139 MMcfpd (million cubic feet per day).

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EOG Resources’ operational guidance for 2016

During its 2Q16 earnings in July 2016, EOG Resources announced its plan to increase its targeted number of well completions in 2016 from 270 to 350 net wells. 

Many of these additional well completions are scheduled for late 2016. In addition, due to increased drilling productivity, EOG Resources expects to drill 250 net wells, 50 more than it had included in its original 2016 plan. EOG Resources attributed this increased activity to cost reductions and efficiency improvements.

Due to its increased activity levels, EOG Resources has increased its 2016 production guidance. For 2016, EOG Resources now expects its full-year production to be in the range of 533.5–551.5 Mboepd, a midpoint rise of ~11 Mboepd (or ~2%) from its previous guidance of ~531 Mboepd.

EOG Resources’ 2016 capital expenditure guidance

EOG Resources plans to accomplish the above-mentioned increase in activity while maintaining its 2016 capital expenditure guidance of $2.4 billion–$2.6 billion, a midpoint fall of ~47% compared to its capital expenditure in 2015.

From its expected 2016 capital expenditure, EOG plans to spend $1.9 billion–$2.0 billion on exploration and development activities.

Other upstream players

Pioneer Natural Resources is expecting a ~13% rise in its 2016 production, but many other upstream companies such as Energen (EGN), Southwestern Energy (SWN), Chesapeake Energy (CHK), and Marathon Oil (MRO) are expecting lower production volumes in 2016.

The Direxion Daily S&P Oil & Gas Exploration & Production Bear 3x Shares ETF (DRIP) is a leveraged inverse ETF that invests in oil and gas exploration and production companies.

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