Multi-basin exploration and production firm EOG Resources Inc. is maintaining its natural gas activity as it looks toward better demand dynamics next year, management said in its 2Q2024 earnings call.
“Regarding North American natural gas during the second quarter, inventory levels moved closer to the five-year average, and we expect this trend to continue due in part to supply curtailments and increasing year-over-year demand,” EOG CEO Ezra Yacob said in an earnings call last week.
“We remain optimistic on the long-term outlook for gas demand beginning in 2025,” Yacob added. “As a result of additional LNG capacity coming online and continuing increases in demand from electricity generation, we will continue to prudently manage our Dorado activity as the current environment continues to highlight the importance of being a low cost supplier of natural gas with access to multiple diverse markets.”
Low-Cost El Dorado
The Dorado natural gas play is situated in the Austin Chalk and Eagle Ford in South Texas. Last year, the company built the first phase of a 36-inch-diameter natural gas pipeline from the field to the Agua Dulce sales point in South Texas near Corpus Christi. The company is advancing a second stage this year, management said.
Management also said that cash costs at Dorado were about $1/Mcf, making it “one of the most competitive, lowest cost and highest return natural gas plays in North America.”
As part of its natural gas strategy, the company is working to diversify its marketing. This includes “additional natural gas pipeline connections, further reducing our exposure to in-basin differentials and exposing us to multiple demand centers,” Yacob said.
EOG’s Lower 48 footprint includes operations in the Anadarko, Denver-Julesburg, Permian, Powder River and Williston basins, as well as the Barnett, Eagle Ford and Utica shale formations. The firm also operates in the Columbia Basin of Trinidad and Tobago.
The company’s total natural gas production in the United States in the quarter was 1.668 Bcf/d, up compared with 1.513 Bcf/d in the same period last year. Production was also up 1% from the first quarter.
[Want to visualize Chicago Citygate, Henry Hub, Houston Ship Channel or any of our 170+ spot natural gas price indexes? Check out NGI's daily natural gas price snapshots now.]
EOG sees U.S. natural gas production rising in the third quarter to the 1.70-1.76 Bcf/d range. Volumes and per-unit operating costs were also better than guidance midpoints, management said.
COO Jeffrey Leitzell said the drilling team has achieved a 13% increase in drilled feet per day so far this year.
He added, “I think electricity is trending on about a 4.5% increase year-over-year. And so all those things continue to be positive in the longer term.”
“Longer term, as I said, we do expect we're very bullish on pricing... And so we are managing the drawdown program to align with demand. We prefer to manage Dorado on the upfront kind of investment side.”
Net income was $1.7 billion ($2.95/share), compared to $1.6 billion ($2.66) in the same quarter last year.
