EOG Resources: Eagle Ford Shale is ‘steaming ahead’

 A natural gas drilling site in the Eagle Ford Shale. (Jake Lacey/Houston Chronicle file photo)
A natural gas drilling site in the Eagle Ford Shale. (Jake Lacey/Houston Chronicle file photo)

EOG Resources, the company with the most acreage in the Eagle Ford Shale, reported its first-quarter earnings recently. And basically, EOG is making a lot of money in South Texas.

Mark Papa, CEO and board chairman of EOG, said the Eagle Ford continues to surprise “in an upside manner.”

EOG’s U.S. crude oil production increased 24,200 barrels per day over the fourth quarter of 2012, mostly thanks to the Eagle Ford.

Oil boom: Eagle Ford oil production hits record high

The company is getting a rate of return on its South Texas wells greater than 100 percent.

During the first three months of the year, EOG completed 27 “monster wells” with initial production rates higher than 2,500 barrels of oil per day. Nine of those wells started production higher than 3,500 barrels of oil per day.

“To summarize the Eagle Ford, this asset has the best large play economics in North America, and continues to provide upside production surprises,” Papa said.

EOG plans to drill 425 Eagle Ford wells this year, and while it plans wells across its acreage, it says its best property is in Gonzales County. A recent investor presentation said the company has 12 years of drilling.

Papa said the Eagle Ford (which is “steaming ahead”) and North Dakota and Montana’s Bakken Shale will be the major drivers of growing domestic crude oil production.

But he’s not concerned that the U.S. shale fields will overproduce, driving down crude oil prices.

“We think there’s only really two major driving forces of U.S. oil growth: Bakken and Eagle Ford,” Papa said. “Eagle Ford is going to surpass the Bakken likely this year as the biggest oil growth rate. Bakken is slowing down. Permian is really not on that fast of a track. And then there’s what I would classify as all others. And the all others are not growing at a very fast pace at all.

“So we’re not as concerned as others that U.S. oil growth is going to flood the total market and ruin global oil prices.”

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And why is EOG getting such good results in the Eagle Ford?

Papa’s lips are sealed about what he called a “secret sauce” in its hydraulic fracturing operations.

EOG is shipping most of its crude to its terminal in St. James, La., where it fetches a better price than West Texas Intermediate. EOG got prices about $12.23 per barrel higher than WTI in the first quarter and expects a $9.25 premium in the second quarter.

You can read a transcript of EOG’s call with analysts here on SeekingAlpha.