Many U.S. independents continue to spend time and resources to unlock North American natural gas production, but EOG Resources Inc. CEO Mark Papa, who leads one of the biggest independents in the United States, said he has no clue why.

“EOG is about the only company that’s not growing its North American gas volumes this year, which is just astounding to me that every one of our peer companies is still growing natural gas [production] in North America in a glutted market,” Papa told investors at the Howard Weil Energy Conference in New Orleans.

EOG long has been one of the biggest onshore gas producers in North America. However, two years ago the management team began to transition the Houston-based company toward more profitable natural gas liquids and oil growth onshore. The company’s gas production in 2010 fell about 2% from the year before. This year gas output should be down another 5%. That’s just fine with the company’s chief.

“We’re not throwing incremental gas into an already flooded market,” Papa told the industry audience.

The independent has no plans, however, to sell off a lot of its substantial gas-weighted leasehold either. Instead, EOG plans to wait it out until gas pricing improves.

EOG has a “massive inventory of captured gas assets in low finding costs plays,” said Papa.

“We expect natural gas demand to rebound over the long term,” he said. Among other things the company is optimistic about increased demand for gas generation because of federal coal regulations. In addition, Papa sees a “movement” toward natural gas vehicles around 2015.

Assets to be sold will be noncore — but not on the table are the 210,000 net acres of “quality” leasehold in the Marcellus Shale.

“We are going to hold onto it,” said Papa.

The news helped to clarify why EOG abruptly terminated a $405 million transaction with Newfield Exploration Co. in late December (see Shale Daily, Dec. 27, 2010). EOG had made a deal hardly a month earlier to sell Newfield 50,000 net acres in the Pennsylvania portion of the shale play (see Daily GPI, Nov. 17, 2010).

EOG still remains on track to sell about $1 billion of its natural gas midstream properties this year, Papa told the audience. Last year EOG sold close to $673 million of its noncore properties. Unlike many of its peers, EOG has no plans to keep some of its properties by taking on joint venture (JV) partners.

“We plan to maintain sole ownership in the resource plays. We don’t intend to dilute them with JVs,” he said. For the gas-weighted assets, “we intend to focus limited technical staff on 100%-owned projects.”

As for the oily onshore leaseholds, which include the prospective Eagle Ford Shale, the reasons for not bringing aboard a partner are “obvious,” Papa said. As the “biggest producer” in the play and a leasehold of more than 520,000 net acres, EOG’s direct rate of return is expected to be 65-110%. In February Papa told analysts that EOG expected almost 70% of its 2011 and 73% of its 2012 North American wellhead revenues to come from liquids (see Daily GPI, Feb. 22).

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