EOG: Emerging Ohio Utica Combo Play Competes with Premium Portfolio
EOG Resources continues to see promising results from its acreage in the Ohio Utica Shale—a region that could compete among the E&P’s premium developments going forward.
So far this year, Houston-based EOG has added 25,000 net acres to its footprint in the Ohio Utica Combo play. The company now has around 430,000 net acres in the Ohio Utica, predominately in the volatile oil window of the play.
EOG has also acquired 100% of the mineral rights across 135,000 acres of its Utica leasehold.
The company’s leasehold entry cost in the play remains less than $600 per net acre. Meanwhile, comparable acreage in the Utica is now around $8,000 per acre, according to analysts at Truist Securities.
EOG is seeing “strong and consistent well results” spanning across its Ohio Utica Combo position, Jeff Leitzell, EOG’s executive vice president of exploration and production, said during the company’s third-quarter earnings call.
The company’s initial four-well Timberwolf package, drilled at 1,000-ft spacing, has been performing well above the general curve for the play: Each three-mile lateral delivered a 30-day IP average of 2,150 boe/d at an 85% liquid cut (55% oil).
“With a large amount of liquids in the product mix, all of the wells we have drilled today support double premium potential across our acreage position,” Leitzell said.
EOG has been fine-tuning a new completion design in the Wolfcamp Formation of the Delaware Basin; Leitzell said the company was able to implement its new completion design with the Timberwolf test wells in the Utica.
EOG is tightening to an 800-ft spacing design with the Xavier well package, which is coming online during the fourth quarter.
“With that application of new completion design, it's going to be tough to tell if that's really what the big mover is,” Leitzell said. “But, we’re extremely excited about the results that we’re seeing so far.”
Truist Securities analysis suggests that some of EOG’s most recent Utica results could be among the company’s best, competing with its top, most economic wells in the Permian Basin.
EOG estimates that it has more than 10 years of double premium drilling inventory—based on $40/bbl WTI oil prices and $2.50/Mcf Henry Hub natural gas pricing.
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Scale in South Texas
EOG also anticipates drilling a few more wells in its Dorado play—a premium dry natural gas play in the southwestern Eagle Ford Shale, near the Texas-Mexico border.
The company recently completed two projects to service future gas flows from the Dorado play: a natural gas treatment facility and the first phase of a 36-inch gas pipeline.
The facility, recently placed into service, treats Dorado gas before transportation in the pipeline system, said Lance Terveen, EOG’s senior vice president of marketing.
The pipeline’s second phase, which will terminate at the Agua Dulce sales hub outside of Corpus Christi, Texas, will begin construction in early 2024. The project is expected to be completed late next year.
“Our pipeline will be instrumental in expanding our gas sales options for the 21 Tcf of net resource potential we've captured in Dorado—and perhaps more importantly, save $0.20/Mcf to $0.30/Mcf in transportation costs over the life of the asset versus third-party alternatives,” Terveen said.
Like its plans in the Utica, EOG anticipates drilling a few additional Dorado wells this year because of the strong results produced by the gassy play.
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Raining returns
Strong free cash flow generation is enabling EOG to step up returns to shareholders, Chairman and CEO Ezra Yacob said in the company’s earnings release.
EOG raised its regular quarterly dividend 10%, up to $0.91/share, or $3.64/share on an annualized basis.
The company also committed to returning a minimum of 70% of its annual free cash flow to shareholders.
So far in 2023, EOG has returned approximately 75% of free cash flow—$4.1 billion—to investors. That includes $1.9 billion in regular dividends, as well as $2.1 billion in special dividends and share buybacks.
EOG is seeing promising results from its emerging plays in the Utica and Dorado plays, but strong efficiency from its foundational positions in the Eagle Ford and the Delaware Basin contributed to a production beat for the third quarter.
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