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