EOG Resources Inc. has updated its plans for developing stacked natural gas pay zones in the massive Dorado natural gas play in the Austin Chalk and Eagle Ford Shale in South Texas.
“Our preliminary plan for the play was to focus initial development on the Austin Chalk formation and then follow that with the Eagle Ford,” said Executive Vice President Ken Boedeker, who handles exploration and production. He discussed the plans during the first quarter earnings call.
Management’s initial thinking was that it would “benefit from initial well cost reductions as well as water and gas gathering infrastructure installed for the Austin Chalk” and then apply those advantages to the Eagle Ford, he said.
“We now expect to co-develop it with the Austin Chalk, which will provide additional opportunities to lower costs through scale and simultaneous operations,” said Boedeker.
EOG in February struck a supply deal with Cheniere Energy Inc., which is considering an expansion of its Corpus Christi LNG facility. Dorado’s South Texas location would offer ready access to pipelines into Mexico, where gas demand is growing, Boedeker noted
In addition, Senior Vice President Lance Terveen, who handles marketing, said Dorado is close to the Agua Dulce hub near Corpus Christi.
Dorado would also have connectivity to the “dedicated Houston Ship Channel market and as you look forward on, over the next five years, you have the potential to see an additional potential of like 5 Bcf/dof new demand growth,” he said.
EOG drilled initial Dorado test wells in late 2018. The field was moved to active development last year, and it has since completed 11 net wells.
“This year we anticipate completing 30 net wells, nearly tripling activity,” Boedeker said. “Since last year, we have doubled our production rate out of Dorado” to 140 MMcf/d in 1Q2022.
EOG’s breakeven to develop the gas at Dorado is less than $1.25/Mcf, he noted.
“Our progress in Dorado is on pace to make this North America’s lowest cost of supply,” said CEO Ezra Yacob.
EOG plans to run two rigs in Dorado this year, with close to one hydraulic fracturing spread.
Capital spending for 1Q2022 was $1 billion, compared with $912 million for 1Q2021.
Production totaled 883,300 boe/d in 1Q2022, versus 778,900 boe/d in the year-ago period.
Average wellhead volumes were 1.46 Bcf/d for natural gas, compared with 1.34 Bcf/d year/year.
Natural gas liquids (NGL) production averaged 190,300 b/d in 1Q2022 from 124,300 in 1Q2021.
Crude oil and condensate output in 1Q2022 averaged 450,100 b/d, up year/year from 431,000 b/d.
The company fetched an average Henry Hub natural gas price of $4.91/Mcf in 1Q2022, versus $2.69 a year ago. The average West Texas Intermediate crude oil price for 1Q2022 was $94.38/bbl, compared with $57.80 year/year.
Net income was $390 million (67 cents/share) in 1Q2022, compared with year-ago profits of $677 million ($1.16). Revenue was $3.98 billion, up from $3.69 billion year/year.
For 2Q2022, EOG projected $1.1-1.3 billion in capital spending. The company’s full-year 2022 capital spending guidance is $4.3-4.7 billion.
Production guidance ranges are 864,300-927,000 boe/d for 2Q2022 and 858,300-933,700 boe/d for full-year 2022.
Guidance estimates for 2Q2022 for natural gas, crude oil and condensates, and natural gas liquids (NGL) are 1.4-1.53 Bcf/d, 453,000-464,000 b/d, and 178,000-208,000 b/d, respectively.
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