By August 4, 2016 Read More →

EOG reports Q2 loss but says to ramp up well fracking this year

EOG photo by Billy Smith II

EOG Resources says it has raised the number of fracking wells to 350 from 270. photo by Billy Smith II

EOG posts net loss of $292.6M

By Terry Wade

HOUSTON, Aug 4 (Reuters) – Shale oil bellwether EOG Resources Inc on Thursday boosted this year’s fracking plans by 30 percent, saying it expected big returns on new wells even as oil dipped back to $40 a barrel.

The plans are the boldest yet among U.S. shale oil companies, many of which have raised their production forecasts in recent days after posting second-quarter results.

The upward revisions highlight how the fittest shale companies, mainly those with the oiliest land, are surviving at a time when dozens of others are filing for creditor protection in the biggest wave of bankruptcies since the telecom meltdown in the early 2000s.

Houston-based EOG raised the number of wells it plans to bring online this year to 350 from 270, and lifted by 50 to 250 the number of wells it would drill, while keeping its budget stable around $2.5 billion.

Since the start of the worst price crash in a generation in mid-2014, when oil was still above $100 a barrel, many shale producers have cut costs and lifted well productivity by 50 percent or more. Wall Street has also demanded they focus more on capital efficiency rather than just raising output.

“The benefits of EOG’s premium drilling strategy are beginning to show in our operating performance,” CEO Bill Thomas said in a statement. “We are committed to focusing capital on our premium assets.”

EOG, best known for its South Texas operations, said that greater efficiencies have allowed it to do more for less and earn an after-tax rate of return of more than 30 percent on what it called premium wells, assuming oil prices stay at multi-year lows.

It increased its backlog of premium drilling locations to 4,300 from 3,200.

The length of horizontal wells have grown to 10,000 feet or more, and producers are using ever increasing amounts of sand in their high-pressure frack jobs to coax oil from cracks in rocks.

Second-quarter crude and condensate production fell 4 percent to 267,700 barrels per day from 277,500 in the year-ago period, as drilling activity slowed and output from existing shale wells declined.

That decline is a sign of the industry’s growing focus on capital discipline, unlike in years past when executives raced to lift production at all costs.

Still, EOG said production could grow significantly with balanced cash flow from 2017 through 2020. Output could rise 10 percent a year through 2020 with $50 oil and 20 percent a year with $60 oil, it said.

The company swung to a second quarter net loss of $292.6 million, or 53 cents per share from a profit of $5.3 million, or 1 cent per share a year ago, as tumbling oil prices overshadowed cost cuts and productivity gains.

(Reporting by Terry Wade; Editing by Richard Chang, Bernard Orr)

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