EOG Will Resume Major Oil Growth at ‘Stable’ $65 Price

EOG Will Resume Major Oil Growth at ‘Stable’ $65 Price

By Bradley Olson/Bloomberg

12:23 PM BRT
May 5, 2015

An well pump near Sweetwater, Texas.

Photographer: LM Otero/AP Photo

EOG Resources Inc., the biggest shale-oil producer, will resume major growth in output once crude prices are stable at $65 a barrel.

The company will likely start to ramp up activities again in the fourth quarter, Chairman and Chief Executive Officer William Thomas said on conference call Tuesday. The company yesterday reported a $169.7 million net loss for the first quarter, it’s first negative results in more than two years.

The price of West Texas Intermediate, a U.S. benchmark, rose above $60 for the first time this year on speculation a supply glut will ease. Prices fell by more than half from a June high, spurring billions in spending cuts and more than 100,000 industry job losses.

At $65 a barrel, EOG anticipates it will return to double-digit growth in 2016, Thomas said. The company may begin finishing wells that it has left half-drilled in the third quarter and will make a decision about that in July.

“We don’t want to get in a hurry,” Thomas said. “We don’t want to jump-start completions” and then see the price fall. EOG will be “heading into 2016 on a very strong note,” he said.

Hedge fund manager David Einhorn on Monday sharply criticized shale companies including EOG, saying many didn’t generate free cash flow when oil was trading above $100 a barrel last year. Many haven’t adjusted to the new reality of oil at almost half of last year’s prices, he said.

EOG, which operates predominantly in South and West Texas, the Rocky Mountains and in North Dakota’s Bakken formation, has said it can turn a profit even as U.S. crude sells for about $58 a barrel, about 45 percent of its price in mid-June. Still, the company opted to cut back, predicting that prices would rise by year-end.

“They are always ahead of the pack, and a lot of people are waiting to see what they will do,” Fadel Gheit, an analyst with Oppenheimer & Co., said Monday before earnings were released.