In recent quarters the goal of EOG Resources has been to lower operational costs and achieve a strong return on capital investment in an effort to reset the company to succeed in a low commodity price environment, and a series of achievements this year demonstrate "significant progress" toward those goals, according to CEO Bill Thomas.
Per unit lease operating costs decreased by 27% and per unit cash operating costs were down 15% in the first six months of 2016 compared with 1H2015, Thomas said during a conference call with analysts Friday.
"And with outstanding capital efficiency gains, we exceeded the high-end of our second quarter U.S. oil production target, and we are increasing our full year U.S. oil forecast by 2% without increasing capex [capital expenditure] guidance." U.S. crude volumes were 265,400 b/d in 2Q2016.
EOG also increased its premium inventory by 34% (to 4,300 from 3,200) and its premium reserve potential by 75%, and closed on $425 million of non-core property sales this year. EOG defines a premium well by an after-tax direct rate of return of at least 30% at $40 oil.
"Due to the sustainable gains in well productivity and costs, we can grow oil production at a 10% compound annual growth rate at $50 oil," Thomas said. "At $60 oil, our compound annual growth rate jumps to 20%."
Houston-based EOG increased its targeted number of well completions for 2016 to 350 net wells from the previously announced 270 net wells, and it expects to drill 250 net wells, 50 more than its original 2016 plans.
Still, EOG reported a 2Q2016 net loss of $292.6 million (minus 53 cents/share), compared with 2Q2015 earnings of $5.3 million (1 cent).
The South Texas Eagle Ford continues to lead EOG in activity and production. The company increased its Eagle Ford premium activity by 390 net drilling locations in 2Q2016, to almost 2,000 total. EOG completed 60 wells in the Eagle Ford in 2Q2016 with an average treated lateral length of 4,800 feet per well and an average 30-day initial production (IP) rate per well of 1,705 boe/d, 175 b/d of natural gas liquids (NGL) and 1.1 MMcf/d of natural gas.
Also in 2Q2016, EOG expanded its premium inventory in all three of its major Delaware Basin formations. In the Wolfcamp, EOG completed 16 wells with an average treated lateral length of 6,500 feet per well, and an average 30-day IP rate per well was 2,410 boe/d, 340 b/d of NGL and 2.8 MMcf/d of natural gas. In the Second Bone Spring, EOG completed nine wells with an average treated lateral length of 4,500 feet per well and an average 30-day IP rate per well of 1,500 boe/d, 155 b/d of NGL and 1.4 MMcf/d of gas.
Stay up to date on 2Q16 earnings and projections for the remainder of the year with NGI's Earnings Call and Coverage sheet.