Random Data Point From EOG's 1Q14 Earnings Conference Call

From EOG's 1Q14 Earnings Conference Call 

In the Eagle Ford:

In modeling production from the Eagle Ford we are on a growth track for the next 10 years; and, I want to repeat: in modeling production from the Eagle Ford, we are on a growth track for the next 10 years before we even begin to see production level out.

So, what about the Bakken? What is EOG's modeling for the Bakken?

In the question and answer period:

Analyst: I liked your comments on your 10 years of growth in the Eagle Ford. Given that you model back, can you about how many years of growth do you see in the Bakken?

Bill Thomas: We have not done that extensive model in the Bakken yet, because we’re really in the initial stages of downspacing, and I want to ask Billy Helms to make some comments on that.

Billy Helms: For our Bakken as we illustrated, we’re still very satisfied, very pleased with our 1,300 foot spacing test. But we realized that our NPV, net present value, was not maximized. So, we’re going to be doing lots of additional testing, we did talk about 700 foot spacing pattern and we’ll be testing some various spacing patterns as we try to define how to maximize net present value. 

This is a similar approach as we've done in most of our shale plays across the company. and until we really find out what that formula looks like, we're really kind of hesitant to state what the upside not be there, but certainly we will provide some more effort on that as we go forward the year, and we're very confident that we're going to have success there.

 I think, if I recall correctly, a reader told me that EOG took lessons learned in the Eagle Ford back to the Bakken, and are already seeing better results with new completion techniques. This short interchange tends to confirm that.

***********************************

Downspacing: Relationship Effects Of Neighboring Wells

In that same conference call, this exchange:

David Heikkinen - Heikkinen Energy Advisors: On the maximizing NPV, one of the things we've talked a lot about is your IRR doesn't change much, but your EUR may decline per well as NPV goes up. Is that a fair characterization of how your downspacing could actually roll forward?

Bill Thomas: Yes, that's correct. Naturally, as you push wells closer together, you're going to end up having some sharing between wells. That's just inevitable. Our rate of return is still very, very high as you stated, but what we end up doing is adding a lot more recoverable reserves, and there is a lot more net present value to each spacing unit that we drill. So, that's kind of our overall process. And we're still early on in the space, certainly in the Bakken as we try to define that.

I interpret that to mean this: EOG suggests that downspacing (putting wells closer together) in a spacing unit, will increase the amount of oil produced in that spacing unit (and thus increase the net present value to each spacing unit. However, it appears to me he is suggesting that the EUR will decrease in wells that are close together and "sharing."

That's an important interchange, critical to understanding the Bakken. Compare that interchange with what Motley Fool and CLR suggest at this link.