Production of crude oil, condensate, natural gas liquids (NGL) and other liquids was up 30% in 2Q2013 at EOG Resources compared with 2Q2012, and the Houston-based company expects significant increases to come in the full year 2013.
In a conference call with analysts Wednesday, EOG executives said they expect crude oil and NGL production to increase more than previously forecast, while natural gas production is expected to decline 11.5% this year compared to 2012.
"As a result of our exceptional performance in the first half of the year, we've raised our full year oil growth estimate from 28% to 35%...we've increased our NGL growth estimate from 10% to 14%, and we've increased our total company overall growth target from 4% to 7.5%," said Executive Chairman Mark Papa. "The oil growth target increase is emanating primarily from the Eagle Ford, with contributions from the Bakken and Delaware Basins."
But natural gas remains the dark cloud in EOG's otherwise sunny forecast. "We still don't plan to drill any dry gas wells this year, and we continue to have zero interest in growing gas volumes in the current price environment," Papa said.
The company announced record production from an oil well in the Eagle Ford Shale in South Texas. At the end of the second quarter, EOG's Eagle Ford net production was approximately 173,000 boe/d.
"EOG's Eagle Ford acreage continues to prove that it's the premium horizontal oil position in North America," said CEO William Thomas. "During the second quarter, we consistently completed strong wells in both the eastern and western portions of our acreage, that drove our record production results. In addition, drilling and completion improvements continued to drive down well costs. As a result, we've lowered the average completed well costs in the Eagle Ford from $6 million to $5.5 million, and we've increased the number of wells we plan to drill this year from 425 to 440."
Improved drilling efficiencies and completion technology have enhanced well productivity in EOG's Bakken/Three Forks operations. EOG's North Dakota drilling program was focused on the Bakken formation in 2Q2013, with results from 160-acre spacing between wells in the Bakken core remaining encouraging, the company said. And EOG said it remains active in the Delaware Basin Leonard and Wolfcamp, although the plays are constrained by a lack of natural gas processing infrastructure.
"We expect EOG's three high rate-of-return oil plays, the Eagle Ford, Bakken/Three Forks and Delaware Basin, to provide us with years of drilling inventory, as well as significant growth opportunities," Papa said. "These plays just get bigger and better."
EOG reported 2Q2013 net income of $659.7 million ($2.42/share), up significantly from $395.8 million ($1.47) in 2Q2012. Earnings and production exceeded analyst's expectations.
"This machine continues to fire on all cylinders," Tudor, Pickering and Holt & Co. analysts said in a note. By early afternoon, EOG shares were trading above $156, a more than 2% increase from the previous day's close.
It was EOG's first earnings report since Papa stepped down as CEO July 1. Papa, who was replaced by Thomas, now holds the title of executive chairman. If Wednesday's conference call is any indication, Papa plans to remain in the spotlight until his retirement on Dec. 31, when Thomas will assume the executive chairman title as well. Papa took time during the call to congratulate his successor on his new role in the company.
"He has been with the company for over 34 years and knows the assets inside and out," Papa said. "This makes him well qualified to deliver on our five-year plan and guide the company for many years beyond that."