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.
The company’s Eagle Ford completion technology is adapting well to the Bakken; it’s been a game changer, he said.
In the past the company has focused on the Eagle Ford over the Bakken, making no secret of the fact that EOG considered the Eagle Ford acreage to be its best acreage. Now the Bakken seems to be getting a fair share of the spotlight.
“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.
EOG President and CEO William R. “Bill” Thomas reflected the upgraded status of the Bakken acreage in the company’s Nov. 7 third quarter earnings call.
“EOG is consistently making the best oil wells in the best two oil plays in North America, the Eagle Ford and Bakken/Three Forks,” Thomas said. “EOG’s exceptional Eagle Ford results were replicated in the North Dakota Bakken/Three Forks through improvements in initial production rates and efficient execution of its drilling program.”
EOG said it remains focused on the highly economic Bakken core and Antelope extension areas. Based on continuous gains in results from both the Bakken and Three Forks formations, plans are to increase the level of drilling activity in 2014.
“Every quarter, EOG’s technical understanding of the Eagle Ford and Bakken/Three Forks expands, as we further modify completion techniques that boost overall well productivity and economics,” Thomas said.
Bakken strength is showing up in the company’s production results.
“Because of continued strong Eagle Ford and Bakken performance, we are again raising our full year 2013 production growth estimate for oil from 35 percent to 39 percent, natural gas liquids from 14 percent to 17 percent, and the total company growth estimate from 7.5 percent to 9 percent,” Papa said in earnings call remarks.
“No other large cap oil company has even remotely matched EOG’s oil growth rate either in 2013 or for the six-year average,” Papa said.
Sand advantage
EOG mines its own sand, which has 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.
The jury is still out on EOG’s water injection pilot currently under way in the Bakken — but Thomas said the verdict is in on the packing of more sand into Bakken wells. He says 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.
Spacing it down
In the Williston Basin, EOG’s recent downspaced wells in the core included the Van Hook 126-2523H with an initial production rate of 2,235 barrels of oil per day — plus 1.1 million cubic feet of gas per day, and the Van Hook 130-2526H with an IP of 1,910 bopd and 900 thousand cubic feet per day of rich gas, Thomas said.
The Wayzetta 137-2226H and 150-1509H wells logged initial production of 2,500 bopd and 2,320 bopd, as well as 1.2 mmcf and 1 mmcf per day, respectively of natural gas, he said. The Fertile 50-0509H, in which EOG has 100 percent working interest, began producing crude at 2,315 bopd with 1 mmcf per day of rich natural gas.
In the Antelope Extension area EOG completed a trio of Three Forks wells in the first bench, Thomas said. The Bear Den 100-2017H, 101-2019H and 23-2019H began flowing at 2,100 bopd, 1,235 bopd, and 1,665 bopd respectively — plus 2 mmcf per day, 1.2 mmcf per day, and 1.6 mmcf per day of natural gas, respectively.
“We are encouraged by the Three Forks’ potential in the Antelope area,” Thomas said. “We completed an excellent well in the second bench early this year and plan to test the third bench during 2014.
“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.
“We have had a number of good wells in the Three Forks in the first bench and then we did complete an excellent well in the second bench this year,” Thomas said. “It has been very successful.”
In the Antelope area, Thomas said, EOG believes that the third bench — and possibly the fourth bench — have potential. He 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.
EOG now has 12 years of inventory in the Bakken, Thomas said
“As next year and the years go along, we believe that we will be drilling more wells each year in the Bakken,” Thomas said. “Even with our modest drilling this year, we have been able to continue to grow production there and we are setting production records there quite often in the pocket.”
Papa to retire
EOG said Papa will continue as a member of the board of directors following his retirement at the end of the year.
He was named executive chairman of the board in July after serving as chairman of the board and CEO for more than 13 years. He joined Belco Petroleum Corp., a predecessor of EOG, in 1981 and has been with EOG and its predecessor companies for more than 31 years.
As Papa passes the baton to Thomas, the company is on an upward trajectory.
EOG reported third quarter 2013 net income of $462.5 million, or $1.69 per share. In third quarter of 2012, the company’s net income was $355.5 million, or $1.31 per share.
