EOG 3Q13 Earnings Call Notes

posted in: Notes | 0

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“I am going to repeat that last sentence, because it bears repeating. No other large cap oil company has even remotely matched EOG’s oil growth rate either in 2013 or for the six-year average. We continue to have no interest in zero profit North American gas growth and we will continue the high margin oil focus.”

“we now expect to drill and complete 460 net wells in the Eagle Ford this year, which is an increase of 20 wells since last quarter.”

“EOG’s 2013 completions have 58% more production in the first 100 days as compared to those completed in 2012.”

“In the Delaware Wolfcamp play, we have previously said that we were waiting on infrastructure. We can now report that as of October 1, gathering infrastructure is in place and operational. We are now ready to complete two multi-well patterns to test various spacing and targets. We plan to use microseismic to determine frac geometry and monitor production in order to determine optimal development patterns for our Delaware Wolfcamp acreage.”

“To summarize, EOG has captured the best horizontal oil acreage in North America, and our high performance operational teams continue to execute superbly. Wells are getting better, unit costs are coming down and oil production continues to increase at peer leading growth rates. We have a very strong inventory of crude oil and liquids rich drilling prospects with high after-tax rates return.”

“Regarding oil, we believe that absolute 2013 total U.S. oil growth will be less than 2012 and this trend will continue in subsequent years. Through August, the EIA monthly data indicate 2013 oil production is on trend to increase 600,000 barrels per day on an annualized basis compared to 1 million barrels per day in 2012. We continue to be pragmatically bullish regarding oil prices, partially because we don’t expect any large international shale oil plays to impact global supply for at least five years.”

“I believe the gas prices will stay depressed until the 2018 timeframe. So EOG will not be in any hurry to generate a lot of gas deliverability. The current Marcellus location differential is likely just a harbinger of chronic Appalachian price dislocations that we will see over the next multiple years.”

“we again plan to drill zero North American dry gas wells in 2014 because we see no light at the end of the gas oil supply tunnel until 2018.”

Mark Papa: “This is my last earnings call and I want to thank everyone on both, buy and sell side for investing your time and patience in EOG story. I have enjoyed working with all you and have a sincere appreciation for all that you do. I am leaving the company in good hands with Bill Thomas and intend to keep my personal EOG stock holdings for a long time.”

“We have had a big advantage with our EOG sand. As a company, it has not only provided very low cost and help us reduce our completion cost, it’s also really helped us technically to be able to experiment more, to use more sand and that is a big part of the reason our wells are much better.”

“I would say, we are probably in the fifth or sixth inning, if you had put in baseball terms, on where we are on the completion technology process. We continue, quarter-by-quarter, to make advances and we are learning all the time.”

“Our view is that the industry has just been a little bit flippant with numbers. Reserves had been just floated about on essentially all plays. Billion barrels, 5 billion barrels, BOEs and it is just numbers that we think is just keep in the reserve estimating system a little bit but people just throwing number that offhand and EOG has not really joined that party. We, on the other hand, have been very cautious, very judicious in the numbers that we have given and we like to think we set our standards a little bit higher than most other companies have done when they issue reserve numbers and particularly with Eagle Ford.”

“We expect that our rig count is going to be similar to what we had this year. We had a peak this year of 56 rigs and we probably averaged somewhere around 50, but we expect just continued improvement with rig efficiencies. We have upgraded our entire rig fleet and we fortunately now have, what I would just classify, is just premium rigs.”

” I believe in 2018 is when we will have the first significant impact of the of gas exports in way of LNG from these converted former LNG import terminals. I think that’s when we will really have the first meaningful impact and I think that may have some impact on prices, so that is kind of the that way I see things.”

“The upper part of the Wolfcamp, we believe will tend to be a bit more oily than the lower part of the Wolfcamp. So we will be testing additional zones there.”

“It’s a process that it will take some time. It will take several years really to figure out the most optimum way to do it just like it has been in the Eagle Ford, but the recovery factors for the total Wolfcamp at this point are very low. Our goal would be to hopefully increase those recoveries as we go along, so, we have got a lot of work to do there but the good side of all this is that this Delaware Wolfcamp, had target rates of return of 60%, and so it is a very strong rate of return play for us already and hopefully we can improve as we go along.”

“In the Bakken, specifically yes we are seeing that the initial part of the production of the well are holding up and the decline rates are a bit flatter than the older wells. It’s because the fracs are bigger and more expensive and we are just connecting more rock to the new completions than we did with the original wells that we completed in there.”

“In the Eagle Ford, we have got multiple things going on there. We are downspacing as well as working on frac technology at the same time, so we are still in the process of learning of that and so I would say comparing the Eagle Ford decline rate is maybe a bit more difficult than the Bakken at this point.”