In the first quarter of 2013, EOG successfully tested its first well in the second bench of the Three Forks formation, saw its overall North Dakota oil production results beat the industry average because of 160-acre downspacing, and had its new wells outperform previous wells in the Bakken petroleum system due to new hydraulic fracturing techniques.
These were among the accomplishments announced by the Houston-based independent during a May 7 earnings conference call. Led by its Eagle Ford and Bakken operations, EOG also saw its overall production exceed guidance, including a total crude oil output increase of 33 percent.
The company also continued to trim costs, beating its own guidance, and realized a $12.23 per barrel premium over West Texas Intermediate for its U.S. crude oil volumes via its “crude-by-rail” terminal system to St. James, La.
EOG’s total U.S. crude oil and condensate production in the first quarter of 2013 was 178,300 barrels per day, up 36 percent from the 131,000 bopd the company averaged in the first quarter of 2012. Globally, EOG averaged 187,300 bopd in the first quarter, up 33 percent over the 140,800 it averaged in the same quarter of 2012.
“We hit on all cylinders in the first quarter,” said outgoing Chairman and Chief Executive Officer Mark Papa in a May 7 conference call. “Our oil, NGL, and North American gas volumes considerably exceeded our guidance, and for the same quarter in a row our unit cost beat guidance, and domestic oil prices were at a significant premium to WTI. Therefore, we beat on volumes, costs, and net backs.”
In the U.S., EOG focuses on three major plays: the Bakken petroleum system in the Williston Basin, the Eagle Ford in south Texas, and the Midland and Delaware plays in the Permian Basin of west Texas and New Mexico. EOG does not break down its U.S. production by play, but according to North Dakota Industrial Commission records, in February 2013, EOG was the fifth largest crude oil producer in North Dakota producing an average of 43,338 bopd. The numbers come only from EOG-operated wells and do not break out oil owned by other companies, partners in the wells, nor do they include wells in which EOG is a minority partner and therefore not the operator.
Second and third Three Forks benches
In its Antelope Extension acreage in northeast McKenzie County, EOG brought its Riverview 03-3103H well on production in the first quarter. In the first 24 hours that well yielded 3,150 barrels of oil from the second bench of the Three Forks formation in the Bakken petroleum system. The company’s West Clark 101-2425H well, which targeted the first bench of the Three Forks, had a 24-hour initial production of 2,205 barrels.
“The Three Forks and (middle) Bakken results on our Antelope Extension acreage continue to look strong, and we are particularly excited about the potential of the Three Forks second bench,” EOG President Bill Thomas said in the May 7 conference call. “Early looks indicate that this target may have better potential than the first bench and the Bakken phase in this area. We plan to test the third bench of the Three Forks in this same area next year.”
Drilling will likely increase in 2014
EOG also saw positive results from its ongoing 160-acre downspacing. In the Parshall field in southern Mountrail County, N.D., EOG’s Van Hook 20-0107H and 127-0107H wells had 24-hour oil IP rates of 2,375 barrels and 2,170 barrels, respectively. In that same area, the company’s Wayzetta 136-2127H well had a 24-hour IP rate of 1,910 barrels, and its Fertile 53-3024H well had a 24-hour IP of 1,725 barrels. All four are 160-acre infill wells.
The 160-acre downspacing continues to outperform EOG’s expectations, according to Thomas, and he said the “vast majority” of the company’s planned 53 North Dakota well completions in 2013 will be on 160-acre spacing units, which could well lead to an increase in the company’s drilling activity in 2014.
“As we continue to gain confidence in downspacing results over the course of 2013, we will likely increase the level of drilling activity in 2014,” Thomas said.
Papa added that EOG’s overall North Dakota results are better than the industry average “because we are drilling 160-acre downspace wells in the best acreage in the entire play.”
New fracking techniques
In addition to downspacing, EOG continues developing and implementing new hydraulic fracturing techniques, including using its sand from its own mine. Thomas said the company is very positive about its new frack techniques.
“We’re contacting more rock, and we’re really enhancing the recovery factor of the Bakken on our core acres. So it’s going well right now.”
The combination of the new fracking and downspacing continue to improve EOG’s productivity in the Williston Basin.
“In summary,” Thomas said, “we are encouraged by our solid downspacing results in the Parshall core area and excellent results from multiple Three Forks pays in the Antelope Extension area. As reported on our February call, we are applying new frack techniques in the Parshall core and Antelope area, and the new wells are outperforming the original wells that we drilled several years ago. The results continue to set us up for many years of excellent drilling in the play. With our new techniques, we believe EOG will continue to lead the industry in Bakken and Three Forks drilling results.”
What’s ahead in 2014?
Thomas said EOG’s positive results paint a bright future for the company in the Williston Basin.
“The results continue to set us up for many years of excellent drilling in the play. With our new techniques, we believe EOG will continue to lead the industry in Bakken and Three Forks drilling results.”
Papa added that if crude oil prices remain strong, i.e., in the range of $94 to $95 per barrel, EOG will likely increase its drilling activity in its Bakken, Eagle Ford and Permian plays in 2014.
Papa, however, won’t be at the helm in 2014. He is stepping down as chief executive officer as of July 1 and Thomas will take over as CEO. Papa will remain as executive chairman through the end of the year, retiring on Dec. 31. Thomas will then take over as chairman as well.
