EOG Resources Inc., whose focus is spread across the Midcontinent, Rockies, Permian Basin and the Eagle Ford Shale, reported a surge in profits and revenues during the first quarter, while making progress on its plans to boost oil production by 16-20%, increase free cash flow by more than $1.5 billion, and reduce well costs and operating expenses.
The Houston-based independent last week reported first quarter net income of $638.6 million ($1.10/share), compared with net income of $28.5 million (5 cents) in the year-ago quarter. Revenues totaled $3.68 billion in 1Q2018 versus $2.61 billion a year ago.
During an earnings call to discuss the latest results, COO Billy Helms said the company plans to keep an average rig count of 39 through the year, and would stay within its full-year capital expenditure budget of $5.4-5.8 billion.
"We remain committed to stay within our capital guidance," Helms said. "We're very much on track with our plan as we laid it out. Our rate of capital spend is directly in-line with what we laid out at the start of the year, and we've already talked about the benefits of moving to these larger packages of wells. As a result, the front-end of the year is more loaded towards capital spend with the production more weighted towards the back half of the year."
EOG reported total production of 59.4 million boe (659,900 boe/d) in 1Q2018, a 15.6% increase from the 51.4 million boe (570,700 boe/d) produced in the year-ago quarter. The company estimates that total production will range from 670,300-706,200 boe/d in 2Q2018, and from 685,800-728,500 boe/d for the full-year 2018.
During the first quarter, EOG brought 72 gross (65 net) wells online in the Eagle Ford, with a gross average 30-day initial production (IP) rate of 1,620 boe/d. The company also brought 12 gross (nine net) wells in the Denver-Julesburg (DJ) Basin's Codell formation online, with a 30-day gross IP rate of 1,055 boe/d, plus 10 gross (eight net) wells in the Austin Chalk (2,750 boe/d) and nine gross (eight net) wells in the Powder River Basin's (PRB) Turner formation (1,210 boe/d).
In the Delaware sub-basin, EOG brought 58 gross (53 net) wells targeting the Wolfcamp formation online during the quarter, with a 30-day gross IP rate of 1,925 boe/d. Nine gross (eight net) wells targeting the Bone Spring formation were also brought online (1,645 boe/d), as were three gross (three net) wells targeting the Leonard Shale (2,430 boe/d).
EOG plans to run an average of 19 rigs in the Delaware in 2018, nine in the Eagle Ford, four in the Rockies, two in the Woodford oil window and one in the Bakken.
In 2018, the company plans to complete about 230 net wells across multiple target zones in the Delaware, plus 10 net wells in the Northwest Shelf. Of the 230 Delaware wells, 205 are planned targeting the Wolfcamp, while five each are planned for the First and Second Bone Spring formations and 15 are planned to target the Leonard Shale.
Elsewhere, EOG plans to complete about 260 net wells in the Eagle Ford in 2018, 45 wells in the PRB, 35 wells in the DJ Basin, 25 wells in the Woodford oil window and 20 wells in the Bakken.
Although EOG had described 2017 as a "watershed year," in part due to its successful integration of Yates Petroleum Corp. and its affiliates, CEO William Thomas said the company had "no interest” in corporate mergers and acquisitions “in any commodity price environment." EOG acquired Yates in a $2.5 billion-plus deal in late 2016, doubling its position in the Delaware and the PRB.
"In general, I think this year we have a very robust exploration effort ongoing," Thomas said during Friday's earnings call. "We've acquired a significant amount of low cost acreage in multiple plays, and we're testing numerous new plays with exploration or step-up drilling this year.
"Our organic machine is really in high gear. We have a lot of confidence in it, and we believe we can acquire significant -- hopefully, even better -- drilling potential than we currently have through that process at very low cost."