EOG Resources Inc., the largest oil producer and acreage holder in the Eagle Ford Shale, continued to make impressive gains in completion techniques and used them to beat its production guidance for the third quarter.
In a surprise move, the Houston-based company also added three parcels in the Delaware Basin to more than double the number of potential drilling locations it has there.
EOG reported a loss of $4.08 billion (minus $7.47/share) for 3Q2015, which included $6.3 billion in impairments. By comparison, the company reported net income of $1.1 billion ($2.01/share) during the previous third quarter.
Total production -- including domestic and international drilling -- was 569,600 boe/d in 3Q2015. Although that represented a 7.2% decline from 3Q2014 (614,100 boe/d), it beat the company's production guidance for the quarter.
Reducing completion costs and the average number of days from spud to total depth (TD) was a recurring theme. During Friday's presentation, EOG reported that it had reduced completion costs in the Second Bone Spring formation by 15.4%, from $7.8 million/well in 2014 to a current price of $6.6 million/well. It also reduced average spud to TD by 20.8%, from 14.4 days in 2014 to 11.4 days in 3Q2015.
EOG also reduced completion costs by 9.8 % in the Eagle Ford (from $6.1 million/well in 2014 to $5.5 million/well currently) and average spud-to-TD times by 13.5% (from 8.9 days in 2014 to 7.7 days currently). In the Bakken, completion costs fell 20.4% (from $8.8 million/well in 2014 to $7.0 million/well currently), while average spud-to-TD times fell 38.7% (from 12.4 days in 2014 to 7.6 days in 3Q2015).
"We are having a record year of well productivity improvements and cost reductions," CEO Bill Thomas said during Friday's earnings call. "Ongoing completions and the new work we're doing on targeting, mean EOG continues to drill the strongest horizontal wells in the industry. Making a solid return in horizontal oil at $50 is an excellent achievement."
Domestic production volumes were down across the board between 3Q2014 and 3Q2015. Total production fell 6% (from 536,100 to 504,200 boe/d), while natural gas declined 5.5% (from 941 to 889 MMcf/d), crude oil and condensate went down 5% (from 293,200 to 278,300 b/d) and natural gas liquids slid 9.4% (from 85,800 to 77,700 b/d).
EOG was very active in the Delaware Basin during the third quarter. It reported an increase of 1.0 billion boe in its net resource potential -- 500 million boe in both the Wolfcamp and Second Bone Spring formations -- to a new total of 2.35 billion boe. Through tighter well spacing and enhanced targeting and completion techniques, EOG said it added 2,200 net drilling locations -- 950 in the Wolfcamp, and 1,250 in the Second Bone Spring -- for a new total of 4,900 net drilling locations.
The company also added, through three separate transactions, 26,000 net acres to its position in the Delaware Basin for a combined $368 million. EOG said most of the acquired acreage -- all located in Loving County, TX, and Lea County, NM -- is adjacent to its existing acreage in the basin's oil window, and has 750 boe/d of existing net production.
"The acquisitions we have done are largely staying within our focus of growing organically," said Billy Helms, EOG executive vice president for exploration and development. "We're still able to get out ahead of the competition and acquire positions in new plays fairly cheaply.
"The Delaware Basin is a very mature basin. We're being highly selective in what we acquire. We passed up several opportunities and focused on these three tactical acquisitions, which we are very encouraged with."
In two other areas where EOG operates, the Eagle Ford and Bakken shales, the company said it spent the third quarter continuing to test its drilling and completion techniques.
The company said it has had an average of 15 operated rigs deployed in the Eagle Ford in 2015. It also reported having eight rigs deployed in the Delaware Basin and two in the Bakken in 2015.
EOG issued domestic production guidance of 486,000-504,700 boe/d for 4Q2015, and 503,800-508,500 boe/d for the full year 2015. The company also said total capex will range from $4.7 billion to $4.9 billion for the full year 2015, about a 42% reduction from the $8.3 billion EOG spent on capex in 2014. Officials said they would release production and capex guidance for 2016 in February.
EOG has 624,000 net acres in the Eagle Ford, including 561,000 net acres in the play's oil window.