EOG Resources Inc. expects the Utica Shale in Appalachia “to be its next large-scale premium resource play” following the acquisition of 395,000 net acres and 135,000 mineral acres for a combined cost of less than $500 million, management said. 


The Houston-based exploration and production firm unveiled the acquisition alongside its third quarter earnings.

The acreage spans a 140-mile trend targeting oil and both wet and dry natural gas in the Utica, management said. 

“EOG is now operating seven significant resource basins with the addition of the Utica Combo in Ohio,” said CEO Ezra Yacob. “Our growing multi-basin portfolio of high-return plays positions EOG for long-term sustainable value creation.”

EOG’s vast Lower 48 footprint includes operations in the Permian, Williston, Powder River, Denver-Julesburg, and Anadarko basins, along with the Eagle Ford and Barnett shale formations, among other areas.

Yacob said EOG’s multi-basin approach “provides flexibility to allocate capital to the highest return projects across a diverse and improving inventory of future well locations. Operating in multiple basins also fosters innovation through diverse, high-performing teams creating new ideas at the field level that are then shared across our operations.”

The company said the Utica offers a “favorable drilling environment,” and that it plans to develop the play with three-mile laterals to support cost efficiencies. 

“Combined with strong liquids production rates, EOG expects the Utica Combo to be additive to the overall quality of its premium inventory,” the company said. “Development of this high rate-of-return play is underway with about 20 wells projected for 2023.”

During a call to discuss third-quarter earnings, Yacob said that, “Looking forward, we expect 2023 will remain dynamic with respect to the supply chain, oil and gas prices, and other global macro drivers. Our diverse low-cost asset base puts us in an excellent position to capitalize on opportunities no matter the environment.”

Global Pricing Exposure

Yacob was joined on the call by COO Billy Helms, who touted the firm’s international oil and natural gas marketing strategy.

EOG’s realized oil and natural gas prices “beat their target benchmarks in the third quarter,” said Helms. “Our marketing teams are doing an excellent job, executing our long-term strategy of diversifying across multiple transportation outlets and sales points. This strategy is also enabling the company to navigate the recent bottlenecks transporting natural gas out of the Permian.”

Helms said less than 5% of EOG’s domestic gas output is exposed to the Waha hub in West Texas, where prices briefly flipped negative in late October amid takeaway constraints. “In fact, we anticipate fourth quarter realized prices to remain strong for both natural gas and crude oil sales overall. Our crude oil and natural gas export capacity is serving us well in this regard.”

For the fourth quarter of 2022, EOG expects to sell over 250,000 b/d of oil at Brent-linked prices and 140 MMcf/d of natural gas linked to the Asian benchmark Japan-Korea Marker.

“Year-to-date through September, export-based pricing of crude oil and natural gas has added nearly $700 million of revenue uplift compared to the alternative domestic sales,” Helms said.

As for the macroeconomic picture, Helms said, “One of the major topics of the year continues to be the inflation story. The price pressure we are seeing on steel, fuel and labor continues to be persistent.”

He explained that, “Our employees are maintaining their focus on finding ways to mitigate inflation through innovation and efficiencies in their operations. Through their efforts, we now expect our average well cost to increase a modest 7% as compared to last year.”

EOG is forecasting full-year 2022 average production, which includes the United States and Trinidad and Tobago, of 903,300 to 915,100 boe/d, compared to 828,900 boe/d in 2021.

Management expects full-year 2022 capital expenditures (capex) to total $4.5 to $4.7 billion, up from $3.76 billion in 2021. 

For 2023, Helms said EOG is forecasting higher capex, driven by inflationary pressures and opportunities to advance development in areas such as the Dorado natural gas play in South Texas, the Powder River Basin and the Utica core. The forecast capex increase also is driven by the acceleration of new infrastructure projects such as a 36-inch diameter gas pipeline connecting Dorado with the Agua Dulce hub, as well as investments in carbon capture and storage (CCS).

EOG expects to begin injecting carbon dioxide at its first CCS project in early 2023, Helms said.

“EOG is well positioned to improve returns going forward from an existing asset base of low-cost-of-supply wells, augmented by a growing roster of new emerging plays,” Yacob said. “We remain committed to returning cash through a sustainable, growing regular dividend, which is supported by our low cost structure and an impeccable balance sheet – now in a net cash positive position.” 

Production, Capex Above Targets

Production in the third quarter averaged 919,200 boe/d, up from 844,400 boe/d in the same period of 2021. Output in 3Q2022 comprised 1.47 Bcf/d of natural gas, 465,100 b/d of oil and condensate, and 209,300 b/d of natural gas liquids.

The company’s U.S. natural gas production fetched a $1.17/Mcf premium to New York Mercantile Exchange Henry Hub pricing during the quarter, compared to a 49-cent premium in the year-ago period. The average realized price for the firm’s Trinidad production was $7.45/mcf, up from $3.39.

EOG’s capital expenditures totaled $1.17 billion for the quarter, up from $891 million in the year-ago period.

“Strong performance by our operating teams propelled third quarter production volumes and capital expenditures ahead of their targets, despite a challenging operating environment,” Yacob said. “We remain focused on applying new innovations and efficiencies to mitigate future inflationary cost pressures.” 

EOG reported net income of $2.85 billion ($4.86/share) for the third quarter, compared to $1.1 billion ($1.88) in 3Q2021. Total revenue swelled to $7.59 billion from $4.77 billion.