EOG Earnings -- 3Q13; Transcript Highlights; Bakken Is Now Providing Rates of Return In Excess of 100%

The transcript at SeekingAlpha:

• oil, NGL, and gas production exceeded guidance 
• unit cot beat the lower guidance provided last quarter
• will (again) raise full 2013 production growth guidance from 35% to 39%
• three plays: Eagle Ford, Bakken, Leonard
• "no other large cap oil company has even remotely matched EOG's oil growth rate either in 2013 or for the six-year average"

Eagle Ford:

• Eagle Ford: 100% direct (after-tax) rate of return from both the western and the eastern portions

Bakken/Three Forks:

• will continue the downspacing program (e.g. Van Hook 126-2523H and 130-2526H)
• encouraged by completions in the Antelope Extension area
• achieving direct (after-tax) rates of return in excess of 100% in both the Core and Antelope areas
• reminder: in the quarter call, EOG increased drilling inventory in the Bakken/Three Forks from 7 to 12 years; EOG will increase drilling activity in the Bakken/Three Forks in 2014

Leonard: also achieving direct (after-tax) rates of return in excess of 100%

The macro oil environment:

• US rate of crude oil production will slow in 2013 (compared to 2012)
• bullish on oil prices; EOG doesn't see any large international shale oil plays to impact global supply for east five years
• hedging at $95 to $97
• believes that natural gas prices will stay depressed until 2018 timeframe
• the current Marcellus location differential is likely just a harbinger of chronic Appalachian price dislocations that will be seen over the next multiple years

2014

• EOG likely to ramp up activity in Eagle Ford and Bakken/TF above 2013 levels
• in the Permian Basin, overall capex will be flat, but allocation will shift to the Delaware Basin

Q & A

• like another operator, EOG is still trying to re-calculate accurate EURs as completions techniques improve; won't provide revised EURs until longer production time
• "The Bakken, with the dramatic improvements we have had in it, is now equal to the Eagle Ford in returns in excess of 100%, so it will get more money each year."
• Eagle Ford drilling downtick: now, down to 9 days; previously "less than 12 days"; and, drill times in the Eagle Ford are getting faster; "EOG has had many wells that are quite a bit faster than that"
• up to about 56 rigs (across all plays); upgraded entire rig fleet; "just premium rigs"
• second bench of the Three Forks just as successful as the first bench; "particularly in the Antelope area, we do believe that we have potential in the third benchand possibly in the fourth bench in the Antelope;
• "as we said, we are getting extremely strong rates of return in the Bakken"
• "we have 12 years of inventory in the Bakken/Three Forks. So as next year and the years go along, we believe that we will be drilling more wells each year in the Bakken and that's really the whole Bakken/Three Forks....setting production records even with modest programs ... so we have got some good expectations as we go forward."
• why 2018 before we see LNG prices improve? 2018: the first significant impact of the gas exports in way of LNG from these converted former LNG import terminals; ... first meaningful impact..."
•  a reminder that EOG does have a water injection pilot in the Bakken  

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From Yahoo!In-Play:

EOG Resources beats by $0.27, misses on revs: Reports earnings of $2.32 per share, excluding non-recurring items, $0.27 better than the Capital IQ Consensus Estimate of $2.05; revenues rose 19.8% year/year to $3.54 bln vs the $3.86 bln consensus.

• EOG increased its U.S. crude oil and condensate production by 41 percent and total company crude oil and condensate production by 39 percent in the third quarter of 2013 over the same prior year period. Total company liquids production -- crude oil, condensate and natural gas liquids (NGLs) - rose 33 percent.
• EOG is increasing its full year crude oil and condensate production growth target for the second time in 2013 to 39 percent from 35 percent, following three quarters of extraordinary results. Total natural gas liquids production is expected to increase 17 percent, compared to the previous 14 percent target, and total natural gas production is projected to decline 11 percent, consistent with EOG's longstanding strategy in North America. Overall, EOG is targeting 9 percent total company production growth in 2013, versus its previous goal of 7.5 percent. In addition, EOG is again lowering certain unit cost estimates, based on results to date.

From Bloomberg:

EOG Resources, Inc., the second-largest U.S. independent oil and natural gas producer by market value, said third-quarter profit rose after crude prices and output increased.

Net income climbed to $462.5 million, or $1.69 a share, from $355.5 million, or $1.31, a year earlier, the Houston-based company said in a statement on PR Newswire today.

Excluding one-time items such as a loss from energy contracts, per-share profit was $2.32 cents, exceeding the $2.06 average of 37 analysts’ estimates compiled by Bloomberg.

EOG has been remaking itself to focus on oil production, with an estimated 88 percent of its North American revenue forecast to come from crude and natural gas liquids this year, according to an Oct. 2 presentation. The explorer is looking for growth from the Eagle Ford Shale and Permian Basin in Texas and the Bakken Shale of North Dakota. The company’s shares have risen 46 percent this year.

“Their asset base is so extensive and so high quality and the management team has such a long track record of creating value and not making mistakes,” James Sullivan, an analyst with Alembic Global Advisors in New York, said in a phone interview before the earnings release. Sullivan’s rating on EOG is equivalent to a buy and he doesn’t own shares in the company.

More at the link.

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The press release:

• delivers 39 percent year-over-year total company crude oil production growth
• raises 2013 full-year crude oil production goal to 39 percent from 35 percent
• increases 2013 total company production growth target to 9 percent from 7.5 percent
• reports record western Eagle Ford oil well
• continues to achieve stellar economic results from the Eagle Ford, Bakken/Three Forks and Leonard plays
• announces Mark G. Papa will continue as director following year-end retirement

This was the record well in the western Eagle Ford EOG referenced:

During the third quarter, EOG reported its top well to date from its western Eagle Ford acreage. The Kaiser Junior Unit #1H began initial production at 2,815 barrels of oil per day (Bopd) with 160 barrels per day (Bpd) of NGLs and 940 thousand cubic feet per day (Mcfd) of natural gas in Atascosa County.