Throughout its operational footprint, EOG Resources Inc. is high-grading locations to select properties for development that are considered “double-premiums” that boost returns and cash flow, says CEO William R. “Bill” Thomas.
Premium properties in the Delaware Basin and Eagle Ford are being targeted, but the company also is increasing activity at Powder River Basin as the Wyoming play enters a new phase of development.
EOG expects to spend $3.7 billion-$4.1 billion this year to maintain oil production at 440,000 boe/d and complete approximately 500 net wells as it continues to increase shareholder value and returns with a focus on wells that generate a 60% rate of return at $40 oil, Thomas explains.
Download EOG Wells Drilled Since 2021
“We are leasing and testing on some of the new plays that we have been developing over the past few years, and those are very high-impact plays; double-premium kind of plays,” he told investors at an Evercore conference in March. “We are set to generate an enormous amount of free cash flow–$2.4 billion at $50/bbl (WTI)–obviously, a lot more at $60/bbl. We have already increased the regular dividend by 10%.”
In the Delaware Basin, EOG plans to average 14 rigs and four frac crews in 2021, with plans to bring 275 wells on line by year’s end on its 404,000-net acre position in West Texas and southeastern New Mexico, according to company information. A well cost reduction of 5% is targeted in the Delaware, where the company boosted production by 10% last year. Altogether, EOG has 6,300 net undrilled locations in the Delaware.
In the Eagle Ford, EOG is keeping three rigs and two frac crews busy, with plans for 145 completions this year. It has 1,900 premium undrilled locations in the play.
Thomas notes that a lot of the company’s growth over the past decade came from the Eagle Ford, which although a more mature play now, still has substantial inventory, including multiple double-premium properties.
After continuing to delineate plays and install infrastructure along development corridors to reduce costs, EOG is running two rigs and one frac crew in keeping with plans to complete 45 net Powder River wells tapping into the Parkman, Niobrara, Turner and Mowry formations.
If the company meets its well cost reduction target of 9% this year in the Powder River, the costs will have been cut by 25% since the beginning of 2019. New completion designs have increased average cumulative production from a Niobrara well by 45% and 70% from a Mowry well. EOG has been increasing activity, including building out infrastructure on federal lands, Thomas says.
Given recent statements from the Biden administration, the company’s current existing federal leases and corresponding federal drilling inventory can be fully developed, he says. “EOG is well prepared to manage through any regulatory changes that can impact the pace of development on federal acreage,” Thomas relates. “The combination of our large number of federal permits in hand, our flexibility to pivot within our deep inventory of double-premium locations and our ability to add new inventory through organic exploration gives us the confidence that the future performance of the company will not be affected.”
Energy News
Oil & Gas Permits
