EOG'sEdge | Russell T. Rudy Energy LLC
Reflecting back on $100 oil is reminiscent of Bruce Springstein’s song, “Glory Days”. However, for EOG Resources, a more appropriate theme might be the line from Carly Simon “These are the good old days”. In a recent article in “Rigzone”, EOG Chairman and CEO, Bill Thomas, contends that his company can post strong returns at $40 a barrel and triple digits at $60. While it would be easy to dismiss this as over optimism, we must bear in mind that EOG is widely regarded as one of the most efficient operators in the U. S. Thomas maintains that his company enjoys a $15-$20 per barrel cost advantage over competitors who need at least a sustained price of $60 per barrel to achieve modest growth.
One EOG strategy to achieve its projected results is what the company calls “premium drilling”, or cherry picking. According to Thomas, the company only drills prospects that offer at least a 30% after tax rate of return. EOG also has enjoyed great success with their enhanced oil recovery efforts in the Eagle Ford shale of South Texas.
As oil prices collapsed, other, more heavily indebted, shale operators had to cut back on drilling and production in the face of high break-even costs. Thomas predicts that as domestic production continues to fall and gasoline demand strengthens, the market will rebalance and prices recover. However, even if it doesn’t, some industry observers contend that cost efficient companies such as EOG could increase production at current prices.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/144374/CEO_EOG .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
