EOG Resources Inc. CEO Mark Papa is a lot more optimistic about natural gas prices than he was a few weeks ago. So optimistic in fact, that he said Tuesday the company is moving “full steam ahead” with its planned $3.4 billion capital budget.

“In our fourth quarter earnings call, we said that we were going to have a $3.4 billion capex [capital expenditure] budget this year, but we said that if gas prices were to disappoint, we might cut our capex budget, based on a $7.25 gas price” (see Daily GPI, Feb. 2), Papa told attendees at the A.G. Edwards Energy Conference in Boston.

“As I’ve had one-on-one meetings, a lot of people took that [comment] as a signal as ‘gee, whiz…we’ll pencil in less than 10% production growth this year,'” Papa said. However, he noted that “because of the February weather…we are quite bullish on gas prices. We expect prices are likely to average about $8/MMBtu or perhaps a little above $8. We are going full steam ahead with our capex budget.”

Papa also reiterated EOG’s goal to increase North American gas output this year by 18%, which he said will be driven by the company’s core holdings in the Barnett Shale.

“We are having a bang-up year so far,” Papa said of the Barnett. “We are on track to meet or surpass our very ambitious production goal for this year.”

However, the Houston-based producer is still keen on finding some assets to rival its Texas holdings. Papa reiterated that EOG is looking at some “stealth” plays, but avoided naming specific locations.

“We believe that the Fort Worth Barnett Shale play is not the Lone Ranger out there,” Papa said. Using horizontal drilling, with which EOG has gained its latest success, Papa said there are several areas company engineers are reviewing for possible exploration. “I’m not going to talk about it much…but we’ve got a lot of people working hard behind the scenes to find plays similar to the Barnett Shale…We are working very hard to develop other plays that have the characteristics of ‘resource’ plays, which means they are big, they involve horizontal drilling…first-mover advantage…

“We probably will be able to talk about them in less than a year. For now, we’re in a quiet zone.”

In related news, EOG grabbed the No. 20 spot in BusinessWeek‘s top 50 “Best Performers,” which is to be published in the upcoming March 26 issue.

“This year’s list is chock full of companies that are rewriting the rules in their industries,” the article states. “They are the agitators, the pioneers, and the game-changers that are leading the way into the 21st century.” The “Class of 2007 includes a number of energy companies that are basking in the sharp rise in oil prices over the past two years,” which includes No. 6 Sunoco, No. 36 Valero Energy and No. 49 XTO Energy.

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