EOG Resources has increased its capital expenditure for 2017 as it benefits from lower costs and higher prices. Announcing its full-year 2016 results on February 27, the company said it had trimmed its net loss in 2016 to US$1.1 billion, from US$4.5 billion in 2015.
Capex in 2017 should range from US$3.7 to US$4.1 billion, with 480 net wells targeted for completion this year, from 445 wells in 2016. Capex in 2016 was US$2.6 billion.
Well costs should range from “flat to lower” versus last year, with EOG striking a positive note on continued efficiencies and service contract expirations, offsetting potential cost increases.
Production in 2016 declined to 282,500 bpd of oil, down by 1%, while exploration and development spending was reduced by 42% – demonstrating the strength of improved capital efficiency. Growth came from the Delaware Basin principally, which was offset by declines in the Bakken and Eagle Ford. Oil production is expected to grow by 18% this year, based on oil at US$50 per barrel, while holding dividends flat on 2015.
Lease and well expenses were down by 20% and transportation costs were down 8%. Total costs were down 15% year on year.
“EOG achieved near company-record returns on new capital in 2016 in spite of the lowest crude oil prices in 13 years,” said the company’s chairman and CEO, William Thomas. “Through continued improvements in well productivity, cost reductions and expanded resource potential, EOG is positioned to excel as crude oil prices continue to recover. More than ever, EOG continues to lead the industry through its innovative technology and disciplined culture.”
The spending focus will be on the Eagle Ford, the Delaware Basin, the Rockies and the Bakken.
“EOG's goal during the last two years was to exit the industry downturn in better shape than when we entered it," Thomas said. “We made major technology advances in our proprietary well targeting, completion designs, drilling practices and production operations. EOG is now set to resume strong oil growth within cash flow.”
Reserves at the end of 2016 reached 2.15 billion boe, of which 55% was crude. The company replaced 163% of production in 2016, excluding price revisions, with a finding and development cost of US$5.22 per boe.
Of particular interest in EOG’s presentation was its discussion of enhanced oil recovery (EOR) in its Eagle Ford acreage. The company carried out a 32-well pilot in 2016, which increased reserves by 30-70%, with an investment of around US$1 million per well.
“Having previously tested four pilots successfully, EOG now will test more areas to determine how much of the Eagle Ford is conducive to EOR,” a note from FBR said.