EOG Resources (NYSE:EOG) is quite simply firing on all cylinders right now. It's made a big bet on Eagle Ford oil and gas, which is paying off handsomely in the company's favor. After a strong performance last year across most operating metrics important to an oil and gas exploration and production company, EOG is keeping the momentum going in 2014.
EOG wrapped up a very successful 2013 by increasing its oil production, profits, potential recoverable reserves, and its stock dividend. And, recent positive well tests at its most critical oil and gas field mean 2014 could shape up to be just as impressive.
A lot has been made of the Eagle Ford shale, and the hype is not overstated. The Eagle Ford field is one of the top-producing ones in the entire country, and is contributing to the oil and gas production boom in the United States. EOG is staking its claim there, which sets up the company extremely well this year and beyond.
New wells yield favorable results
According to Bloomberg, EOG recently filed drilling disclosures with the Texas Railroad Commission that held very promising results from five new wells. These wells in the Eagle Ford formation are pumping approximately 13,000 barrels of crude oil per day, which is especially impressive since these wells were completed just a few weeks ago.
These positive well results have the potential to add a significant amount of production to EOG's already impressive totals. Last year, EOG increased its crude oil and condensate production by a spectacular 40%. EOG produced 235,000 barrels of oil per day in the United States last year, so the recent well results themselves could add as much as 5% production growth. EOG management hopes to increase crude oil production by 27% this year, so these five wells will help contribute to that goal.
The Eagle Ford is critical to EOG's future
EOG Resources has bet its future on the Eagle Ford, which is looking like a smarter decision with each passing quarter considering the massive potential of the region. To put it into some perspective, EOG's current reserve potential is almost four times what the company initially thought when it discovered the play just four years ago. And, EOG is essentially doubling down on the Eagle Ford this year. It's planning to build as many as 520 net wells there during 2014.
EOG Resources is joined in the Eagle Ford by other oil and gas exploration and production companies including Devon Energy (NYSE:DVN), which last year purchased $6 billion worth of oil and gas assets at the Eagle Ford shale to expand its presence there. Devon Energy is hoping this new investment in the Eagle Ford shale, when combined with its existing Permian Basin operations, will give the company a two-sided production boost. This was already starting to happen in the fourth quarter, when Devon Energy increased its production 17% to a new company record.
EOG sets its sights on Eagle Ford oil
EOG Resources continued investment in the Eagle Ford onshore oil field continues to pay dividends. It's ramping up oil production there, which is resulting in significantly higher cash flows. EOG grew its production, potential reserves, and cash flow last year, and plans further growth this year due largely to the Eagle Ford. Recent strong well results are an early indication that EOG's hopes of increasing production even more in 2014 will come to fruition.
EOG Resources management is extremely confident in the long-term opportunities presented by the Eagle Ford shale. To that end, the company expects it still has roughly 6,000 net wells to drill across its massive 120-mile crude oil window at its Eagle Ford position. It's clear that EOG has big plans for Eagle Ford oil, and its excellent results at the recently drilled wells mean 2014 is off to a good start.
These companies when EOG Resources' production surges
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don’t miss out on this timely opportunity; click here to access your report -- it’s absolutely free.
Bob Ciura has no position in any stocks mentioned. The Motley Fool owns shares of Devon Energy and EOG Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.