An executive for Wyoming’s leading producer of crude oil promised continued interest in the state’s prolific Powder River Basin despite uncertain prices in a call with investors Tuesday.
“We look forward to a more active program in the Powder River Basin throughout the remainder of 2017 and beyond as we continue to block up acreage on our current plays and explore for new plays in this resource-rich basin,” said David Trice, executive vice president of exploration and production for EOG Resources.
The Houston-based company followed the current earnings trend for the first quarter of 2017, reporting gains that stand in contrast to the epic losses of 2016. EOG reported net income of $28.5 million, or 5 cents per share. Last year, EOG started off with a $472 million loss.
Like other companies reporting in the last few weeks, EOG’s gains were thanks to the rise in commodity prices, increased production and cost reductions, according to the company statement.
Prices were relatively stable through the start of the year, with the WTI spot price hovering around $50 a barrel and natural gas eclipsing $3 during the cold months. EOG’s executives said they have adapted to the low price environment by focusing on their best assets and controlling operations. Though prices have faltered again in recent months, the company expects continued growth internally through the rest of the year.
“As you may recall, last year we made a permanent shift to premium drilling, which means that new wells must earn a minimum total weighted 30 percent return on direct drilling and completion capital at $40 oil and $2.50 natural gas,” said CEO William Thomas. “We now believe we can deliver 18 percent oil growth within cash flow at $47 oil, a record for the company.”
The company operates in the Powder River, DJ and Greater Green River basins and has proved to be a prolific horizontal player in the state for both oil and gas. The Powder River play has delivered for EOG so far this year, though the company’s new activities there have been modest.
“In the Powder River Basin, we continue to delineate and analyze this large and complex basin,” Trice said Tuesday. “While completions were limited in the first quarter, the results are consistently premium.”
Those sweet spots of production are the secret to growth despite the poor price environment, said Thomas, the CEO.
“Generating high returns in today’s price environment is a testament to the power of premium,” he said.
The company completed five wells in the PRB, which averaged 1,160 barrels of oil equivalent per day on 4,900-foot laterals. The average cost to complete a well in the Powder River Basin was $5 million, according to the company.
In contrast, the firm completed 27 wells during the first quarter in neighboring North Dakota, with an average production of 715 barrels of oil equivalent. Twenty-four of those wells were first drilled before 2016.
Three of the five completed wells in the PRB were legacy wells, with shorter laterals than the company would have preferred due to leasing issues, Trice said. In the future, the Powder wells will be 2-mile laterals.
EOG was the top producer of oil in Wyoming for the last two years, with the lion’s share of its 8.7 million barrel production in 2016 coming from the Powder River, followed by the DJ Basin, in the southeast corner of the state.