EOG Resources’ budget down 40% to $4.9-5.1 billion

EOG Resources Inc., Houston, plans a capital budget of $4.9-5.1 billion in 2015 including production facilities and midstream expenditures, representing a 40% reduction compared with last year’s budget.

EOG Resources Inc., Houston, plans a capital budget of $4.9-5.1 billion in 2015 including production facilities and midstream expenditures, representing a 40% reduction compared with last year’s budget.

The company also reported net income of $2.915 billion in 2014, up compared with $2.197 billion for full-year 2013.

“EOG's primary goal for 2015 is to position the company to resume long-term growth once crude oil prices recover,” the company said in a news release on Feb. 18. “The company is not interested in accelerating crude oil production in a low-price environment.”

Specifically, EOG does not plan significant development of its DJ basin or Powder River basin assets until crude prices improve. Capital will be allocated primarily to EOG's highest rate-of-return oil assets in the Eagle Ford, Delaware basin, and Bakken plays.

To improve capital efficiency, EOG plans to utilize rigs under existing commitments and delay a significant number of completions. The company noted that delaying completions increases returns, adds substantial net present value, and prepares EOG to resume strong oil growth when commodity prices recover.

Due to reduced capital spending and delayed completions, EOG expects to complete 45% fewer wells in 2015 vs. 2014. Because of the reduction, the midpoint for total company crude oil production guidance this year is flat year-over-year.

In the Eagle Ford, EOG plans to complete 345 net wells this year compared with 534 in 2014.

Spending will increase in the Permian basin as the company expects to complete 95 net wells, a 53% increase from 2014. Capital will be directed to development drilling in the northern Delaware basin targeting EOG's three highest-return plays—the Leonard, Second Bone Spring Sand, and Wolfcamp.

Capital allocated to the Bakken will decrease significantly in 2015. EOG expects to complete just 25 net wells compared with 59 in 2014.

EOG plans to minimize investment in domestic dry natural gas drilling. As a result, its US gas production and total company production are expected to decline modestly.

The company said it also expects to capitalize on opportunities created by the low-price environment to add high-quality acreage.

“The downturn in oil prices will drive significant reductions in global supply and the market will rebalance,” said William R. Thomas, EOG Resources chairman and chief executive officer. “Our goal at EOG is to exit this downturn in better shape than we entered it.”

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