Oil companies will not produce enough crude at $40 a barrel to meet global demand, the chief executive of EOG Resources, one of the largest independent oil companies in the U.S., said on Friday.
EOG can grow production at $50 oil, Chairman and CEO Bill Thomas told analysts in a third quarter earnings call. But, he continued, “we believe the U.S. industry as a whole needs sustained $60 oil prices and extended lead time to provide a moderate level of growth.”
EOG is widely viewed as a leader in efficient oil production; companies refer to EOG production rates and drilling costs as standards for the industry.
At the same time, Thomas said EOG was increasing its own expectations for oil production. Last quarter, the company said it could boost volumes by 10 percent a year if oil prices held at $50 a barrel, and by 20 percent at $60 barrels. But Thursday, Thomas said EOG was bumping those rates up by 5 percentage points, to 15 and 25 percent, respectively.
“Given the size of our base production today, that growth is remarkable,” he told analysts.
The company said it reduced production costs by 29 percent and lease costs by $500 million since 2014. Most of those gains come from more efficiently drilling wells and producing oil, executives said. But EOG has also replaced about half of its high-cost drilling and completion contracts with rates 40 percent lower.
“We are in the best cost and inventory position I’ve seen in my near 40 years with the company,” said Chief Operating Officer Gary Thomas. He said he does not expect service cost increases in 2017.
Still, said CEO Bill Thomas, the company is looking forward to a drop in the global oil glut by late 2017.
“After two years of this down cycle,” he said, “we are more than ready to resume high-return oil growth.”
U.S. crude prices settled on Friday at $44.07, down 59 cents.