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EOG Moves Four Oily Rockies Plays to Active Drilling Mode

Onshore specialist EOG Resources Inc. has moved four horizontal plays into drilling mode from exploration in the Denver-Julesburg (DJ) and Powder River basins (PRB), joining a pot of development efforts ongoing in the Eagle Ford and Bakken shales and the Permian Basin.

The Houston-based independent said it has identified 735 drilling locations in the DJ's Codell and Niobrara formations, and PRB's Parkman and Turner plays, which together hold an estimated 400 million boe and a decade's worth of inventory. Seventy-three net wells are scheduled to be drilled in the DJ and PRB alone this year.

"As we've stated in the past, EOG's Eagle Ford and Bakken assets have set the bar high for any new play we might consider adding to our top-tier drilling portfolio," said CEO Bill Thomas. "The Codell, Niobrara, Turner and Parkman each meet our stringent funding hurdles...The sweet spots in these four plays are expected to make meaningful contributions to EOG's crude oil production profile for years to come."

Four wells to date this year have targeted the DJ's Codell formation in Laramie County, WY, where the company has 72,000 net acres. "Based on the evaluation of the geologic characteristics of the formation, data from 130 vertical wells drilled by other industry operators and eight producing EOG long-lateral horizontal wells, estimated potential reserves are approximately 125 million boe, net, of which 78% is crude oil," the operator said. Another rig is to be added to the one working; 26 net wells are planned in 2014.

In the Niobrara formation, EOG completed three horizontals in 2013 that averaged 700 b/d initially. Acreage there is "quite consistent in this part of the DJ Basin," with estimated reserve potential on the Niobrara in Laramie County and Weld County, CO, at 85 million boe net, 71% weighted to oil. Thirteen net wells are planned this year on a one-rig program; 235 net drilling locations have been identified.

EOG has been active in the Parkman and Turner plays for several years, but after transferring updated completion techniques to the area, it now plans to drill 28 wells net in 2014. Estimated potential reserves on its 30,000 net acres in Parkman are 75 million boe net, 69% weighted to oil. Six net wells already have been drilled in the play.

In the Turner formation, EOG is active in Campbell and Converse counties, where it has accumulated 63,000 net acres. Recent wells are producing 34% crude versus 26% "several years ago" on the technology transfer to the play. Six net wells are scheduled this year; estimated potential reserves are 115 million boe net.

EOG's 564,000 net acres in the Eagle Ford in South Texas, where it has been drilling for five years, continued to deliver strong results in the latest period and the play was "once again was the single largest contributor" to U.S. crude oil growth. The Eagle Ford position should be held by production by mid-year, the operator said. The company is working in Karnes County, where three wells in the Korth unit delivered initial production (IP) rates of up to 3,400 b/d, with up to 425 b/d of liquids and 2.4 MMcf/d. In the Lynch unit, one well produced 4,970 b/d. Three recently completed oil wells in Gonzales County also reportedly had solid IPs of up to 4,940 b/d, with as much as 440 b/d of liquids and 2.5 MMcf/d.

In the Bakken of North Dakota, EOG plans to begin using seven rigs by mid-year, one more than today. Primary activity this year is on the core acreage, where it is testing 700-foot well spacing. Wells in Mountrail County have had IP rates as high as 2,220 b/d with liquids of up to 215 b/d and 330-730 Mcf/d of gas.

The Permian's Delaware sub basin, also is benefiting from advanced completion techniques, with productivity rising in the Leonard Shale. In Lea County, NM, EOG has completed several wells with a high IP rate of 1,395 b/d of crude, 215 b/d of liquids, and up to 1.2 MMcf/d of gas. Using two rigs, EOG is developing the Leonard A zone and testing other areas.

EOG also has completed five wells in the Wolfcamp Shale in Reeves County, TX. The State Harrison Ranch 56 wells have produced initial rates of  325-700 b/d, with 195-490 b/d of liquids and 1.2-3.1 MMcf/d of gas.

"Although the Delaware Basin Wolfcamp wells typically begin production at lower initial oil rates relative to the Leonard, they maintain steady, flat production, delivering excellent after-tax rates of return," the company said.

EOG's total crude oil/condensate production increased by 42% in the first quarter year/year, with U.S. crude up 45%. Total oil, gas and liquids production climbed 18% from 1Q2013, with crude/condensate and liquids up 18% overall. On the gains, EOG increased its full-year crude/condensate production target by 2% to 29% and raised the total production growth target to 12% from 11.5%.

EOG earned $660.9 million ($1.21/share) in the first quarter, versus $494.7 million (91 cents) in the year-ago quarter.

Analysts with Tudor, Pickering, Holt & Co. called it another “blowout quarter” after EOG “handily beat” production forecasts. By the analysts’ estimates, North American oil production was up 2% while natural gas rose 4%.

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