EOG Resources Inc. (EOG), the shale driller that helped discover the prolific Eagle Ford formation in South Texas, has identified the Rocky Mountains as the next great opportunity in North American oil.
The company, which is known for quietly building up positions in areas before their potential is widely recognized, said in a statement yesterday that its land in the DJ and Powder River basins in Colorado and Wyoming may hold the equivalent of 400 million barrels of oil. Shares rose 3.8 percent to $103.06 at 9:32 a.m. in New York.
EOG’s decision to identify the region as one of four central elements of its drilling portfolio is significant because the company has been among the most conservative in describing the potential of new developments. In an industry full of wildcatters talking up their own prospects, Houston-based EOG has been far more cautious in approaching new drilling prospects, said Fadel Gheit, an analyst at Oppenheimer & Co. in New York. So when they commit to an area, others follow.
“They are always, always, always leading the pack,” said Gheit, who rates the company a buy and doesn’t own shares. “They tend to sniff things out a lot sooner than competitors.”
EOG yesterday reported first-quarter profit that surpassed analysts’ estimates as the company boosted oil production by 42 percent and raised forecasts for crude output growth. First-quarter net income rose to $661 million, or $1.21 a share, from $495 million, or $0.91, a year earlier, the company said yesterday in a statement. Per-share profit was 21 cents higher than the $1.19 average of 31 analysts’ estimates compiled by Bloomberg.
EOG joins Anadarko Petroleum (APC) Corp. and Noble Energy Corp. in recognizing the Rocky Mountains as the next significant opportunity in the U.S. energy renaissance. New drilling techniques involving hydraulic fracturing, or fracking, have helped the country surpass Saudi Arabia and Russia as the world’s largest producer of oil and natural gas, according to estimates by the U.S. Energy Information Administration.
As the drilling boom matures, the stakes are high for explorers in shale rock to continue making new finds. About half the growth in U.S. oil production has come from just two areas: North Dakota’s Bakken shale and South Texas’s Eagle Ford formations.
The Rocky Mountain reserve base is small compared to the 3.2 billion barrels EOG says lies beneath its acreage in the Eagle Ford. The company has boosted reserves in many of its key drilling regions as it develops expertise about the unique geological characteristics of new areas.
To contact the reporter on this story: Bradley Olson in Houston at firstname.lastname@example.org
To contact the editors responsible for this story: Susan Warren at email@example.com Jasmina Kelemen