Major independent oil and gas exploration and production
EOG Resources Inc.
) focus on the Texas Eagle Ford shale formation is now paying
off. Per the preliminary data released by the Texas Railroad
Commission, daily output in Mar 2013 from the nine geographic
fields that make up the majority of Eagle Ford yielded 529,874
barrels of crude. This is an uplift of more than 77% year over
year. The fields produced 298,266 barrels daily in Mar 2012.
Apart from EOG, other major leaseholders in the Eagle Ford shale
formation benefitting similarly include
Chesapeake Energy Corp.
One of the largest U.S. independent oil and gas exploration
and production companies, EOG is proactive in its liquid
ventures. These efforts will be further aided by its deep focus
on major oil and liquids rich plays, while holding its core
natural gas and Combo acreage in the Barnett, Leonard and
Wolfcamp plays for the long term.
EOG Resources' key growth assets continue to show strength.
The company's Eagle Ford resource potential increased by 600
million barrels of oil equivalent (MMBoe) to 2.2 billion barrels
of oil equivalent (BBoe) based on continued production
improvements and successful downspacing pilots. Owing to
downspacing, EOG Resources has approximately 4,900 Eagle Ford
drilling locations. This reflects enough drilling inventory for
more than a decade.
Again, the company is busy expanding its liquids production
level. Although it expects to cut North American gas volumes by
15%, total liquid production is likely to surge 23% in 2013. The
primary driver will likely be production in Eagle Ford, Barnett
EOG Resources expects production from crude oil to grow 28%
for 2013, reflecting the third successive year of significant
double-digit increase in volumes. Natural gas liquids is also
expected to see strong growth of 23%. Although projected natural
gas declines will impact overall production, the boost in higher
margin products are expected to drive the underlying cash
Though we view EOG as a favorable long-term story, the
risk-reward pay-off for the company is still uncertain due to its
natural gas weighted production and reserves base as well as cost
overruns. EOG's large portfolio of high-return projects and
strong technical competence are the key long-term drivers.
The company retains a Zacks Rank #3, which is equivalent to a
Hold rating for the period of one to three months.
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