EOG's uncompleted wells to rise three-fold
OREANDA-NEWS. December 10, 2015. EOG Resources will end the year with three times as many uncompleted wells than average, as it seeks to pace output amid a weak market.
EOG will have about 320 drilled but uncompleted (DUC) wells by the end of this year compared with the typical of about 100 DUC wells.
"The pace at which we develop those wells will depend on oil prices," executive vice president for exploration and production Lloyd Helms said in a presentation at the Wells Fargo Energy Symposium today.
Keeping a higher inventory of wells that can be completed and brought online quickly is one of the many strategies independent producers such as EOG and Oasis Petroleum are deploying as they weather the market downturn that has seen prices plunge to near seven-year lows. It will allow them to promptly step up output when the market recovers and prevents them from selling into an already supplied market.
The DUC will be higher as EOG had around 50 rigs working at the start of the year, many of which were under long-term contracts. The independent opted to use those rigs to explore and drill wells instead of canceling those agreements. It expects to exit the year with about 15 rigs as most long-term contracts roll off.
Using those 50 rigs to drill despite the downturn this year is working out to the company's advantage as the producer has been able to reduce costs by improving efficiency, Helms said.
EOG's average completed well costs have fallen to \\$6.6mn from \\$7.8mn in 2014 and the producer has set a target to bring it lower to \\$5.7mn.
EOG, which doesn't have any oil hedges heading into 2016, would like to add them if the opportunity arises, in keeping with its policy to have about half of its production protected. EOG made total net cash gains of \\$661mn from its oil and gas hedges so far this year.
"We will be looking to see what the forward curve looks like and try to take advantage of that opportunity when it presents itself," Helms said.
The independent is also looking for opportunities to snap up assets adjacent to its core acreage, similar to the 26,000 net acres it added in the third quarter to its Delaware basin position, spread over west Texas and southeastern New Mexico, through three acquisitions for a total of \\$368mn.
EOG isn't aggressively pursuing corporate acquisitions because buying a company may also mean getting some poor quality assets that "don't stack up" against what EOG already has. "That is why we moved to more tactical acquisitions," Helms said.