EOG Resources, Noble Energy boost 2004 production targets

Results from U.S., Canada drilling surpass expectations, says EOG’s Mark Papa

Ray Tyson

Petroleum News Houston Correspondent

Major independents EOG Resources and Noble Energy, lifted by strong field performance and timing of new projects, have raised their production targets for full-year 2004.

EOG said it raised its previously announced 2004 total company production growth guidance from 6.5 percent to 8 percent. With the increase, EOG also increased its three-year total growth target to 27 percent — 8 percent in 2004, 10 percent in 2005 and 7 percent in 2006.

“Results from our U.S. and Canada singles and doubles drilling programs have surpassed original expectations,” said Mark Papa, EOG’s chief executive officer.

He said EOG has had particular success with its horizontal drilling program in the East Texas Barnett Shale, one of the hottest natural gas plays in the United States.

“This play is expected to have a very significant impact on EOG’s U.S. natural gas production growth, reserve additions and reinvestment rate of return,” Papa said.

In the Barnett Shale, an unconventional gas play, EOG has acquired about 175,000 acres at essentially 100 percent working interest over the last three years. To date, the company has drilled nine horizontal wells, “focusing on optimizing drilling and completion methodologies,” the company said.

Since completing its initial horizontal well in the Barnett Shale, EOG said it has decreased drilling time from 30 to 10 days and reduced total well costs by over 50 percent. The Evans Unit No. 1H and the River Hills No. 2H wells recently came on-line and are producing around 2.6 and 3.2 million cubic feet per day, the company noted. With 400 to 800 potential net well locations, EOG said it anticipates increasing drilling activity in the play beginning mid-2004.

EGO said results from its South Texas drilling program in the Roleta, Frio and Wilcox Plays also continue to be strong. Overseas, the company’s Trinidad and U.K. North Sea programs continue on track, the company added.

EOG’s overall production during the 2004 first quarter rose 2 percent to 975 million cubic feet of gas per day from 954 million cubic feet per day in the 2003 first quarter. In Canada, daily production rose to 203 million cubic feet from 158 million cubic feet, while daily production in the U.S. fell to 618 million cubic feet from 642 million cubic feet. Trinidad was flat at 154 million cubic feet per day.

Two international projects bump up Noble’s output

Noble’s overall production from continuing operations for the first quarter 2004 increased more than 17 percent to 106,615 barrels of oil equivalent per day from 90,823 barrels of equivalent per day in the 2003 first quarter. U.S. domestic operations posted a production increase of 14 percent, while international volumes increased 24 percent compared to the first quarter 2003.

“With renewed focus on our domestic operations and the continuing ramp up of our international projects, I expect the company to continue to deliver improved performance throughout the year,” said Charles Davidson, Noble’s chief executive officer.

Two of Noble’s major international projects, the Phase 2A condensate expansion in Equatorial Guinea and natural gas sales in Israel, began contributing to company production and earnings.

“Our (U.S.) domestic operations demonstrated strong production growth, primarily as a result of our deepwater success,” Davidson said.

By year-end in Israel, he added, Noble is expected to add another 30 to 50 million cubic feet per day of natural gas production net to the company, to go along with production that exceeded 40 million cubic feet per day net to Noble at the end of the 2004 first quarter.

Phase 2A condensate expansion in Equatorial Guinea, which began last November, is expected to add nearly 10,000 barrels of oil equivalent per day to Noble Energy by the end of the 2004 second quarter, Davidson said.

On the earnings front, Noble reported 2004 first-quarter net income of $85.5 million or $1.48 per share, a 145 percent increase compared to $34.9 million or 61 cents per share in the year-ago quarter.

EOG reported a profit in the 2004 first quarter of $98.1 million or 83 cents per share, down from 2003 first quarter net income of $126.7 million or $1.09 per share. The results for first quarter 2004 reflect a previously disclosed $44.5 million pre-tax loss on the mark-to-market of commodity price transactions.