EOG rules out production boost

US independent EOG Resources ruled out a production boost, even as most of its peers raise output targets amid falling costs.

"The company is choosing to refrain from growing oil production into an over-supplied market," EOG said in an earnings statement. "EOG's focus in 2015 is on capital efficiency to improve returns and quickly transition the company to be successful in a lower commodity price environment."

Key shale oil producers including Hess, Anadarko and Continental Resources have raised their 2015 output guidance, citing the twin tailwinds of lower service costs and improved efficiency that allows them to squeeze more oil from fewer rigs. Production increases run the risk of prolonging a domestic oversupply. Benchmark US WTI futures have plunged by half since a year ago amid rising supplies and weak demand.

EOG plans to maintain its 2015 oil production guidance and reduce its 2015 capital expenditure (capex) guidance by $200mn. The producer, which had set a capex budget of $4.9bn-$5.1bn for the year, saw its capex drop by 40pc in the second quarter compared with a year earlier.

Full-year guidance for crude oil and condensate is 283,900-291,600 b/d, 74,000-77,000 b/d for natural gas liquids (NGL) and 1.23-1.26 Bcf/d for natural gas. Crude oil and condensate output was 288,900 b/d last year, while NGL output was 80,300 b/d and natural gas 1.35 Bcf/d.

Second-quarter operational highlights include increasing its net resource potential in the Bakken in North Dakota and Three Forks areas to 1.0bn bl of oil equivalent (boe) from about 400mn boe and increased the total net drillable locations from to 1,540 from 580.

The company earned an average of $57.45/bl for crude oil and condensate versus $102.47/bl a year earlier, while it earned $15.54/bl for NGLs versus $34.41/bl a year earlier and $2.40/Mcf for natural gas versus $4.04/Mcf a year earlier.

The company posted a net income of $153mn in the second quarter versus $796mn a year earlier.

mg/dcb

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