EOG Resources has never made a secret of the fact that it considers its Eagle Ford acreage to be the crown jewel of the company’s land holdings, but its Bakken acreage has stolen a fair share of the spotlight in a very successful year for the company.
In November, EOG Executive Chairman Mark Papa said EOG has substantially upgraded its opinion of its Bakken acreage, now seeing the Bakken as a major growth area akin to the Eagle Ford in the company’s portfolio.
EOG is exploiting the synergy of working in both the Eagle Ford and the Bakken.
The company’s Eagle Ford completion technology is adapting well to the Bakken; it’s been a game changer, Papa said.
“The Bakken is a pretty big growth area for EOG, whereas a year ago we viewed it more as a kind of a stabilized production area,” Papa told CNBC’s Jim Cramer in a Nov. 8 broadcast. Productivity of new Bakken wells is up about 50 percent from year ago completions, he said.
“It’s a big upside for EOG,” he said.
(Editor’s note: Papa’s term as executive chairman of the EOG board ended Dec. 31.)
Benches beckon
Technology transfer from the Eagle Ford has made for better Bakken wells, but the Bakken petroleum system has a unique upside it doesn’t share with the Eagle Ford - the multiple benches of the Three Forks formation.
Drilling has confirmed that EOG can expect some good wells in the first two benches of the Three Forks. The company has much more testing planned, believing the third bench and even the fourth bench of the Three Forks has potential.
“We are encouraged by the Three Forks’ potential in the Antelope area,” EOG President and CEO William R. “Bill” Thomas said in a Nov. 7 earnings call adding that, “We completed an excellent well in the second bench early this year and plan to test the third bench during 2014.”
Thomas said EOG already has a number of good wells in the Three Forks first bench.
“It has been very successful,” he said.
More Bakken wells
With so many avenues to sweeten its returns, EOG aims to aggressively increase its Williston Basin drilling in 2014.
This year, EOG plans to drill 80 new wells on its Bakken acreage, versus 54 wells drilled in 2013.
Thomas said the company will test the third and fourth bench and it will design development patterns and spacing to develop the Three Forks and other areas in the Bakken which could have potential.
Operations will be primarily in the company’s 90,000-acre Bakken Core area, followed by its Antelope Extension area, EOG said, adding that based on successful drilling results from the first and second intervals of the Three Forks formation in the Antelope Extension, it intends to test additional benches during 2014.
“In the Bakken, we created a technical renaissance not only for EOG, but also for the industry. We changed our completion techniques and improved the well productivity,” Thomas told analysts in a Feb. 25 conference call.
“We continue to see plenty of opportunity on our Bakken Core acreage,” he said.
Superlatives
2013 was a big year for EOG; the company certainly moved the needle on its production volumes. By year end 2013, EOG saw its daily Bakken production climb to a gross 86,000 barrels of oil equivalent, up 38 percent from year-end 2012.
At year-end 2013, EOG’s total net proved reserves of 2.1 billion boe increased 17 percent over year-end 2012, while total net proved developed reserves increased 19 percent to 1.1 billion boe. U.S. net proved crude oil and condensate reserves increased 31 percent. And total proved liquids reserves increased 25 percent year-over-year, comprising 60 percent of total company proved reserves as of Dec. 31, 2013, EOG reported.
The production increase is not just a simple product of more wells; because of technology, the wells are better, Thomas said.
“EOG’s 2013 completions have 58 percent more production in the first 100 days as compared to those completed in 2012,” Thomas said, adding that EOG’s average IP this year is 1.9 times better than the peer average when compared to 20 different Bakken operators.
Downspacing expands return
Downspacing has produced a curious but pleasant effect on well production for EOG. Downspacing has proven to both accelerate and expand recovery. Understanding the interplay between wells that are adjacent to each other can produce powerful results.
Downspacing has made individual wells better, EOG found in its tests at Parshall field in Mountrail County, N.D.; 320-acre spacing has shown higher initial production rates from the newer infill wells. Not only that, downspacing has actually improved recovery from existing wells where infill drilling is done. The synergies have accelerated the return on 320-acre spacing as compared to the company’s previous spacing - a well every 640 acres.
The company plans to test 160-acre spacing on its core acreage and implement downspacing on its nearby Bakken Lite acreage sometime later in the year.
Golden sands
Frack sand is another asset EOG is deploying strategically to tame the Bakken, and the company is finding ways to use frack sand to dress up both sides of the ledger.
EOG is cutting procurement costs by mining its own sand. By the same token, copious and economical sand supplies have allowed the company to experiment liberally to find optimum levels of sand injection into its stimulation fractures.
“We have had a big advantage with our EOG sand. As a company, it has not only provided very low cost and helped us reduce our completion cost, it’s also really helped us technically to be able to experiment more - to use more sand - and that is a big part of the reason our wells are much better,” Thomas said. In baseball terms, he said, EOG is probably in the fifth or sixth inning on the completion technology process.
EOG has experimented with water injection in the Bakken - but so far it is the packing of more sand into Bakken wells that is working, Thomas said, adding that EOG has learned that there is a strong payoff that comes from connecting more rock and connecting that rock closer to the well bore.
“As we increase the amount of sand that we put in the Bakken, we feel like we are also doing a much better job of distributing that sand and the fluid frack along the lateral more evenly, so that helps to connect more rock and get more of the oil in contact with the well,” Thomas said.
The extra sand makes for a well that exhibits substantial initial production and a “little slower” decline rate, he said. Whether on a 30-day rate or a 100-day cumulative production rate, the wells are showing quite a bit of improvement.
Moving that oil forward in the production lot is good for cash flow, Thomas said.
True to the core
EOG’s E&P capital spending in 2014 is largely earmarked for the company’s two biggest liquids plays - the Bakken and the company’s flagship Eagle Ford in South Texas, where EOG maintains 632,000 acres. EOG plans to deploy 26 rigs to drill 520 net wells in the Eagle Ford this year.
In the Williston, EOG will continue in 2014 to focus the lion’s share of its drilling efforts on its Bakken Core area, said Billy Helms, EOG executive vice president of exploration and production.
“In 2014, we expect to again grow crude oil production,” he said. “We have existing oil and pipeline infrastructure within the core and, with the integration of EOG sand into our Bakken operations, we will continue our focus on reducing well cost even further, while enhancing the productivity and recovery factor of the field.”
In 2012 EOG predicted Bakken production would fall and it pulled rigs from the play. Today, however, EOG’s Bakken production charts display an upward trajectory.
The Bakken continues to show new facets that add to its value, and it sparkles brightly enough to shine alongside the Eagle Ford in the EOG crown.
