Houston-based EOG Resources Inc. plans to grow overall company crude oil volumes by 18% this year while keeping spending and dividends within cash flow at a $50/bbl average oil price, the company said.
Capital spending this year is expected to range from $3.7 to $4.1 billion, including production facilities and gathering, processing and other expenditures, and excluding acquisitions. The company expects to complete about 480 net wells, compared to 445 net wells in 2016.
EOG said it anticipates flat to lower completed well costs in 2017 versus 2016 levels as continued efficiencies and service contract expirations are expected to offset potential cost increases.
"EOG's goal during the last two years was to exit the industry downturn in better shape than when we entered it," said CEO Bill Thomas. “We made major technology advances in our proprietary well targeting, completion designs, drilling practices and production operations. EOG is now set to resume strong oil growth within cash flow."
Capital will be allocated primarily to EOG's highest rate-of-return oil assets in the Eagle Ford, Delaware Basin, Rockies and the Bakken Shale, the company said. After reducing the drilled but uncompleted well inventory to a normal operating level in 2016, EOG will increase its focus on its 6,000 remaining premium drilling locations, the company said.
“EOG is capable of delivering very strong rates of return in the current commodity price environment through premium drilling combined with the company's expectations that well costs will remain flat or lower in 2017,” it said. Premium inventory, according to the company, includes wells with a direct after-tax rate of return of at least 30% assuming $40 flat crude oil prices.
“As a result of drilling low-cost premium wells, the company grew oil production within cash flow during the second half of 2016,” Thomas said during a conference call Tuesday. “We announced the world's first technically successful enhanced oil recovery in shale that delivers strong project economics.
“EOG completed the largest transaction in the company's history with the Yates Petroleum acquisition. Finally, we accomplished all this while maintaining our healthy balance sheet and posting the safety record in company's history. To sum up 2016, record-setting capital efficiency gains and a significantly larger and improved drilling inventory have reset the company to achieve outstanding results in the years to come.”
Capital efficiency improvements in 2016 offset the impact of a significant reduction in capital expenditures resulting from low oil prices, the company said. Last year, total company crude oil and condensate volumes declined less than 1% to 282,500 boe/d while exploration and development expenditures (excluding acquisitions) decreased 42% compared to 2015. Increased development activity and significant well productivity improvements drove volume increases in the Delaware Basin, with additional growth from the Powder River and Denver-Julesburg Basins. These contributions were offset by volume declines in the Bakken and Eagle Ford resulting from lower activity levels.
Natural gas liquids volumes grew 6% while natural gas volumes decreased 7%, primarily due to natural decline and the sale of the company's Barnett and Haynesville shale dry gas assets.
EOG Resources Inc. reported a fourth quarter net loss of $142.4 million (minus 25 cents/share) compared to a fourth quarter 2015 net loss of $284.3 million (minus 52 cents/share). For the full year EOG reported a net loss of $1.1 billion (minus $1.98/share) compared to a net loss of $4.5 billion (minus $8.29/share) for the full year 2015.
The adjusted net loss for the fourth quarter was $6.7 million (minus 1 cent/share) compared to an adjusted net loss of $149.5 million (minus 27 cents/share) for the same prior year period. Adjusted net loss for the full year was $892.6 million (minus $1.61/share) compared to adjusted net income of $33.9 million (6 cents/share) for the full year 2015.