Wednesday, September 11, 2013

EOG CEO Presentation At Barclays

Notes from EOG's CEO presentation at Barclays CEO Energy-Power Conference.

EOG Resources CEO: William Thomas

Note: there is much more at the transcript than what I have here
Note: every bullet in this post is huge; not one trivial comment

2014 - 2017: four years of very high margin oil production growth profile

Cash flow:
  • healthy dividend increases
  • reduce debt
  • accelerate their best plays: Eagle Ford, the Bakken/Three Forks, the Permian
Generating in excess of 100% direct rates of return on those three plays

What's new for the company?
  • increased crude oil projections from 28% to 35%
  • increased NGL from 10% to 14%
  • increased total company growth from 4% to 7.5%
Without increasing CapEx
  • wells keep getting better
  • completion technology is driving well performance; and it is astounding
  • reduced the cost of wells; well costs keep going down
"Internally we have been surprised how these horizontal plays continue to respond to improvements in completions" -- more later in this discussion.

Downspacing in the Bakken: very good success
  • allowed EOG to add additional locations to its inventory
  • inventory has grown from 7 years to 12 years
  • drilling in the core and the Antelope: excess of 100% rates of return
Average wells continue to increase: up to 940,000 EUR -- in the core, and the Antelope

In the Bakken and Eagle Ford: 26 billion bbls of oil net to EOG in place in the rock
  • every time we increased that 1%, that was 260 million additional bbls net to EOG
Cost side:
  • EOG considers themselves the lowest cost drilling in the three shale plays
  • they own their own sand
  • cost guidance continues to go down
CBR:
  • EOG was the first move on CBR
  • started over five years ago in the Bakken
  • loading facilities in the Bakken, the Permian, the Eagle Ford, and the Barnett
  • EOG owns loading and unloading facilities
  • "all" of our crude has been shifted from Cushing to St James
  • EOG gets the best price in St James
  • establishing markets on the both coasts (east and west)
US horizontal crude oil growth:
  • not concerned about over production as happened with natural gas
  • 80% of current horizontal oil production in the US comes from two plays
  • Eagle Ford: 821,000 bopd
  • Bakken: 750,000 bopd [In fact, according to the NDIC, June, 2013, production exceeded 821,000 barrels -- the most recent data available; I wonder if the CEO didn't get these two numbers turned around? 821,000 from the Bakken and 750,000 bbls from the Eagle Ford.]
"... really no other plays that are going to be found like these two plays."

In third place, and a very distant third place: the Permian.
  • a lot of oil
  • cost to drill much less than the Bakken and Eagle Ford
Quality of wells:
  • it takes 2.6 Permian wells to equal 1.0 Eagle Ford well
  • it is going to take a lot more capital to develop the Permian
Competitors:
  • production: EOG's production curve steeper than the peer group
  • in the Eagle Ford, a big lead, and getting bigger
  • growing production much more rapidly than peers
Inventory:
  • 12 years in the Bakken
  • multi-decades in the Permian (just getting started)
  • 15 years across all plays
Back to the Bakken:
  • good results from downspacing at 160 acres in the core and Antelope
  • IPs: anywhere from 2,000 to 2,500 bopd
  • rates of return in excess of 100%; black oil, 78% and 92%
  • average EUR: continue to increase
  • of the top 10 wells by peak oil rates in the Bakken, 7 were EOG wells
  • EOG surmises that maybe 10 out of 10 wells with best oil rates will be EOG wells with the next completion technique

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