EOG Earnings Conference Call -- 2Q12

2Q12 Earnings, EOG, conference call, random data points:

• total crude and condensate production approached or exceeded high end of company's guidance
• total crude and condensate production up >50% yoy
• among large-cap independents, EOG had highest absolute organic crude oil growth rate DESPITE selling $3.2 billion in assets (during the last 3-year period)
• Eagle Ford: EOG's "800-pound gorilla"; with monster wells (see link)
• EOG feels their Eagle Ford acreage is the largest domestic net oil discovery in the past 40 years
• severe discount at Clear Brook, MN; almost all of EOG Bakken oil to St James, Louisiana, and Eagle Ford oil to Houston ("St James price")

Five points about the Eagle Ford: overall -- better than expected

• monster wells
• learning curve is dramatic
• drilling time down to 14 days (from 21 days in 2009)
• EOG is now connected to the Enterprise pipeline system
• self-sourced Wisconsin frac sand: saves $0.5 million/well

The Bakken:

• last year, advised that EOG more excited about the Bakken than previously, for 3 reasons
• 320-acre infill continues to be productive; the down-spacing suggests that EOG's 90,000 net acre core if the sweetest spot in the entire Bakken; 22 of the 30 best Bakken wells in the entire Bakken
• great results in EOG's Antelope Extension area, 25 miles southwest of their core area
• the third growth area is EOG's Stateline area (eastern Montana) -- additional 200 potential locations
• continuing waterflood pilot project (will be reviewed at August NDIC hearings)

Two EOG differentiators

• crude-by-rail: operational since mid-April, 2012; terminal construction cost already paid out; now that the Eagle Ford pipeline is operational, moved more rail cars to the Bakken; rail captures the $20 delta between Clear Brook, MN, and St James, Louisiana; 50,000 bopd gross at St James (now); will increase to 80,000 bopd gross by end of year as more tank cars become available
• Wisconsin sand frac project working as planned; saving $0.5 million/Eagle Ford well; will serve 700 wells this year ($350 million savings)

These are the "big 4" plays for EOG: Eagle Ford, Bakken, Permian Basin, Barnett combo

• EOG: near term, horizontal oil production in US (2 million bopd by 2015) will NOT affect 90 million bopd global production; only three consequential horizontal plays in North America: Eagle Ford, Bakken, and Permian (all others are either inconsequential or really NGL plays); -- see a stand-alone post on OXY and the Monterey Shale that was posted very recently -- it supports what EOG is saying about other plays;
• near term: oil supply-demand ratio remains tight
• long term: at least 10 years before North America horizontal supply affects that supply-demand ratio

Mark Papa will retire in mid-late 2013.