Page 7 - NorthAmOil Week 09

NorthAmOil COMMENTARY NorthAmOil
In another parallel with Pioneer, EOG also succeeded in lowering well costs through effi- ciency gains. The company said its improve- ments in the fourth quarter had brought well cost reductions for the full year to 7%, 2% ahead of its target.
EOG’s capex for the fourth quarter totalled $1.4bn, below the low end of the company’s target range, while capex for the whole of 2019 came in at $6.2bn, roughly flat on 2018.
“Significant capital efficiency improvements from strong well productivity and sustainable cost reductions allowed us to deliver higher production with less capital investment than we planned at the beginning of the year,” said EOG’s chairman and CEO, Bill Thomas, in a statement. “We did this while generating substantial free cash flow, strengthening our financial position and increasing the dividend. This was the third consecutive year since our transition to premium drilling that EOG delivered double-digit returns and production growth along with strong free cash flow.”
For 2020, EOG set its capex guidance at $6.3-6.7bn. The company is targeting oil pro- duction growth of 10-14% this year, and has said its capex programme will allow it to fund dividend payments with net cash from oper- ating activities even with oil prices below $50 per barrel.
EOG noted, however, that as a result of low oil prices, its 2020 budget would allocate slightly less capital to growing crude production than in 2019. Instead, the plan will allocate more capital y/y to fund “new high-quality drilling potential
and high-return infrastructure to further lower EOG’s cost structure and environmental footprint”.
The company anticipates completing around 800 net wells in 2020, up from 750 net wells in 2019. It said activity would remain focused on its highest rate-of-return oil assets in the Delaware Basin, Eagle Ford shale and Rocky Mountain region.
What next?
EOG and Pioneer are not the only shale drillers to benefit from rising production. In the Per- mian Basin, Concho, Diamondback Energy and Devon Energy were among the companies to gain from rising output, beating analysts’ profit estimates for the fourth quarter.
In the Bakken, meanwhile, Hess was among the companies to report a surge, with its output in the play up 38% y/y to 174,000 boepd. How- ever, this was not enough to offset the company’s fourth-quarter net loss of $222mn.
Continental Resources was another com- pany that saw its performance boosted by output growth in the Bakken.
But while leading shale drillers continue to benefit from rising production, the prospects for global oil demand are darkening, with the global coronavirus outbreak exacerbating the situation. The longer demand disruptions continue, the more shale drillers will struggle later in the year. Pioneer and EOG have illustrated their ability to adapt to low oil prices and continue to generate returns, but the operating environment at this point looks increasingly more challenging.™
The prospects for global oil demand are darkening, with the global coronavirus outbreak exacerbating the situation.
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