EOG Resources Inc. is “indifferent” to growing natural gas volumes in North America as long as prices hover around $4, and instead will continue to focus on oil and natural gas liquids (NGL) in the Eagle Ford Shale, the Houston-based company said Wednesday.

“Our business plan continues to be simple and consistent,” CEO Mark Papa said during a conference call with financial analysts. “We’ve completed the organic conversion to a liquids-based company by exploiting our world-class domestic onshore horizontal oil positions, while preserving all of our core North American natural gas resource play assets and maintaining a low net debt-to-cap ratio. This is manifested in very high year-over-year crude oil production growth rates…we continue to have zero interest in growing North American natural gas volumes in a $4 environment.

“We believe that debt-adjusted production growth per share is a useless metric to evaluate E&P [exploration and production] performance considering the value discrepancy between crude oil and natural gas, which is currently trading at 22 to one. What counts is profitable liquids growth, particularly crude oil.”

EOG’s North American natural gas production decreased 9% in 3Q2011 compared to the year-ago period.

“Our North American gas volumes this year have held up better than I expected relative to our expectations at the beginning of the year, which means that the decline is a little less steep than we thought,” Papa said. “But I’d also say that we really don’t care for 2012 where our gas volumes go because we think that at best case you’re just cycling money. Our interest in having gas volume growth next year or not is very, very low, unlike pretty much the whole rest of the industry…in terms of management focus on North American gas volumes at a $4 price range, we’re just indifferent to the volumes.

Led by output from the Eagle Ford and, to a lesser extent, the Fort Worth Barnett Shale combo, EOG reported a 64% increase in domestic crude oil and condensate production in 3Q2011 compared with 3Q2010.

The Eagle Ford “continues to be the hottest and highest rate of return play in the U.S., and EOG has the largest and best situated net position in the oil window,” Papa said. EOG reported net after royalty production of 53,000 boe/d in 3Q2011, 78% of which was crude oil and 11% NGL. “We expect to be the largest net Eagle Ford oil producer for at least the next decade,” Papa said.

EOG’s 2011 business plan involved $1.6 billion of asset sales. “To date, we’ve closed on $1.3 billion,” according to Papa, who said the timing of a small portion of those sales may carry over into 1Q2012. “Between our 2010 and 2011 dispositions, we will have sold about 6,600 net wells, which leaves us with a more concentrated portfolio,” he said.

As it did in 2011, EOG will devote the overwhelming majority of its 2012 capital expenditures (capex) to oil and liquids projects, “with a minimum amount allocated to dry gas drilling, primarily to old acreage,” Papa said. “In 2011 the capex spread was roughly 80% to liquids and 20% to dry gas; next year that spread will likely be 90-10%.”

EOG reported net income of $540.9 million ($2.01/share) in 3Q2011, compared with a net loss of $70.9 million (minus 28 cents/share) in 3Q2010. The 3Q2010 earnings included a $208.3 million write-down of Canadian natural gas assets.

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