EOG Resources Inc.'s crude oil and condensate production increased 16% in 1Q2015 compared to 1Q2014, but the company won't be exerting much effort to further boost production until oil prices find their way higher, CEO Bill Thomas said.
"We're not interested in growing oil at the bottom of the commodity price cycle," Thomas said during a conference call with analysts Tuesday. "While oil production did come down sequentially in the first quarter, it was slightly over the high end of our guidance. The driver of our performance was primarily improved well results...The best rocks respond best, and big fields keep getting bigger…
“If the current forward oil curve continues to improve, our plan is to increase well completions in the third quarter. Therefore, we expect our oil production to return to growth in the fourth quarter, building momentum as we head into 2016. We're right on track with this plan."
EOG reported 298,600 b/d of domestic crude oil and condensate production in 1Q2015, compared with 258,100 b/d in 1Q2014. Also up compared with 1Q2014 was natural gas liquids production (77,400 b/d, compared with 70,800 b/d) and natural gas production (905 MMcf/d, compared with 894 MMcf/d).
Earlier this year, Thomas said EOG was sitting on a 15-year inventory of potential drilling sites in the Eagle Ford, Bakken and the Permian Basin’s Delaware subbasin plays and planned to acquire more prime drilling locations (see Shale Daily, Feb. 27). The company substantially deferred completion work -- at least in the first half of the year -- and slashed its 2015 capital budget by 40%. EOG's top priorities were to be "capturing very high-quality assets," and preparing for an upswing in crude oil prices, he said (see Shale Daily, Feb. 23; Feb. 20).
"We laid out a plan two months ago on our year-end call, and I'm pleased that our first quarter results are right on track," Thomas said. "We're quickly transforming the company to be successful in this low-price environment."
In the Eagle Ford Shale, EOG plans to reduce drilling rigs from 23 at the end of 2014 to an average of 15 this year, and expects to complete about 345 net wells, which would be a 35% reduction from last year. The company claims an industry-leading 561,000 net acre position in the Eagle Ford oil window.
In the Delaware Basin, EOG expanded its activity level in the first quarter and continued to make advancements in well productivity and cost reduction. Activity in the basin was focused in the second interval of the Bone Spring Sand play.
EOG achieved "very encouraging" results with 500-foot spacing on its Parshall Core acreage in North Dakota's Bakken Shale. Average well costs there were down 14% in 1Q2015 compared with 2014 levels.
But low commodity prices had a significant impact on the company's first quarter financial results. EOG reported a 1Q2015 net loss of $169.7 million (minus 31 cents/share), compared with 1Q2014 net income of $660.9 million ($1.21).
"We continue to believe that current oil prices will discourage oil exploration and development worldwide and will encourage demand growth," Thomas said. "This will correct the current oversupply situation and the market will continue to rebalance. We believe there is more upside to the forward curve than downside."