Monday, August 18, 2008

EOG Milestones

The following was provided courtesy of Larry:

June was a milestone month for EOG on two fronts.

EOG operated wells in Mountrail County produced their 5 millionth barrel in June. From the first well that came on production in May 2006 through June 2008, EOG operated wells have produced 5,060,448 barrels.

EOG set another enviable milestone in June. Those 5 million barrels have generated a gross revenue of $485 million. After substracting 25% for taxes, royalties, and operating expenses, the EOG operated wells generated a net $363 million dollars.

Through June 2008 EOG has drilled 72 wells at an average cost of $5 million or $360 million for all the wells.

Thus, at the end of June EOG has paid off all its drilling costs on the wells drilled to date so all net revenue on those 72 wells goes directly to their bank account. By comparison the other drillers in Mountrail County have about $300 million in unrecovered drilling costs. It does make a difference when the sweet spot is under your lands.

7 comments:

david said...

THE classic question when something like this is raised is whether the EOG guys are the smartest guys in the room, or whether they just happened to get extraordinarily lucky. It COULD be mostly dumb luck, the company equivalent to and indiovidual winning a Powerball lottery.

I would prefer to believe that if part of this is attributable to luck, the company at least set up the necessary precursor conditions such that they COULD get lucky.

Without EOG taking the first step, would any of what is playing out in western North Dakota have happened. Was there a single other company out there anywhere big or small willing to pony up the cash needed to drill a 5 million dollar well just to check out an idea that had not been tried before?

The state of North Dakota is extremely fortunate in that EOG not only had the expertise to drill a well or two employing long laterals and fracing, they also were adequately capitalized such that they could devote the necessary corporate resouces for doing the job right on the scale we are now seeing.

It looks to me like EOG can continue to develop and expand the field continuously, limited only by the leases they own. The previous wells drilled will fully cover the capital cost of each new phase in the development, whether that be downsizing the current spacings to add more wells within the existing boundaries or expanding the field northward and southward.

Oil drilling has always been about risk and probabilities, as well as geology and economics but for EOG, this is about as good as it can get in that department.

Anonymous said...

What stands out to me is the 72 wells drilled to date. They are putting the drill in the ground at a very nice pace. With all of the rigs in place you are going to see the totals for the basin pick up quickly

Larry said...

It is already showing up in the Mountrail County numbers. In June Mountrail County produced 1.2 million barrels.

A few months ago I had projected Mountrail County would become the top oil producing county in North Dakota in December 2008 by beating Bowman County whose production is on a decline.

I now am fairly confident Mountrail County will take the number one spot in July. I will write more about this in September when the July numbers come out.

While 70% of the Mountrail County oil boom is attributable to EOG, the other drillers are also bringing on some good producers. Whiting, Hunt, and Murex are three of the drillers doing well.

david said...

What I have been learning is that in the South part of the Parshall field, EOG had a pretty good lock on the vast majority of the leases, but particularly as you go north up into Austin and probably into Burke Township, and east into northShell, the lease ownership on many of the sections on EOG drilled or proposed wells tends to be divided with significant acreage also held by other players such as Hunt and Brigham. EOG pretty much had Parshall Twp and most of Wayzetta sewed up before the others knew what was happening, but that will not be the case as the field expands further. I'm still trying to figure out what is going to happen with all the claimed NOG owned leases in Fertile. NOG shareholders (including me) are wondering too. There doesnt seem to be any particular enthusiasm for drilling on a lot of these leases right now by the other drillers, and I just don't see where NOG has sufficient capital to share in the cost of drilling very many wells. The share price went from $7 up to $14 and recently has been trading back around $7 based on investor speculation involving the value of the leases they own in the Bakken areas immediately adjecent to the Parshall field. I'm trying to figure out what is going on here myself, given the way the share price is gyrating from one day to the next. I only have a small amount of money invested in NOG so I am not too concerned but its a pretty weird stock.

Larry said...

David,
I agree with you assessment of EOG's holdings and plans. As of today they have 40 undrilled permits in Burke, Austin, Wayzetta, Parshall, and Van Hook Townships.

Austin Township has only 2 sections unpermitted (13 and 29)

Wayzetta Township has only 3 sections unpermitted (6, 9, 29)

Parshall Township has only 7 sections unpermitted (25, 29, 30, 31, 32, 33, 34, 35)

With 8 rigs operating EOG will keep themselves busy in the Parshall area for the next year.

EOG has 4 undrilled permits in Ross Township so may move a rig there to drill those sections.

EOG has given no indication what their plans are for Northeast Mountrail. Clearwater Section 2 is their only venture into this area.

david said...

I see tonite that EOG is moving the Nabors 337 rig that had been drilling on the south edge of Parshall Township and in Fertile way up north to drill section 16 in Burke TWP next.
They just moved the rig that was on the far NE corner of Wayzetta into Burke as well.
Meanwhile they just permitted Oakland 4 on section 21 which extends the field further east.

They have the "Ruud" site prepped in Model and I'm thinking the Pioneer 57 rig may end up there next.
Section 25 in Parshall TWP will be probleatic as they have to sort out the mineral ownership under the city and that could take time.

Anonymous said...

"Rope steering" and "Forty below...":

http://www.telegraph.co.uk/news/worldnews/
northamerica/usa/2619313/
Oil-boom-is-changing-the-landscape-
and-finances-of-North-Dakota.html