TITLE: Sod house. McKenzie County, North Dakota (Photo credit: Wikipedia)
EOG : NYSE : US$135.69
BUY
Target: US$194.00
EAGLE FORD DRIVES FURTHER GAINS IN CAPITAL PRODUCTIVITY
Investment thesis
We increased our target price $18 to $194 per share due to ~10% increase in capital productivity (underpinned by the Eagle Ford) and a
higher oil price realization. The Eagle Ford comprises almost 50% of EOG’s capital outlays this year. Simply put, EOG’s Eagle Ford leasehold
generates the highest returns of any large-scale NAM resource play.
Our liquids growth outlook of ~28% is toward the high end of guidance (16%-30%). The calibration of capital and production imply EOG’s
capital productivity is ~15% superior to industry (liquids-normalized).
Investment highlights
Further improvement in Eagle Ford well performance: In the latest quarter, ~20 select wells in Gonzales/Karnes Counties (“east area”)
commenced production at over 4,000 Boepd (~90% liquids) suggesting recoveries of 2,000+ Mboe. Year-to-date, Eagle Ford wells have commenced production at ~1,200 Bopd the first 30 days, suggesting a recovery of ~850 Mbo for a cost of ~$6 million per well.
This represents a ~30% improvement in well performance versus last year. Wells in the “east area” average ~1,600 Boepd the first 30 days, suggesting recoveries of 1,000-1,100 Mboe and wells in the “west area” average ~800 Boepd the first 30 days, suggesting recoveries of 500-600 Mboe.
Strong initial Three Forks Second Bench test, continued robust 160- acre down spaced results in core Parshall field: Recent infill Bakken
tests in the Parshall field on 160-acre spacing have commenced production at an average 30-day rate of ~2,000 Bopd, suggesting recoveries of ~1,000 Mbo per well. In the Antelope area, southwest of the Parshall field in McKenzie County, a Three Forks Second Bench test commenced at 3,150 Bopd.
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