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Another Positive Development Bodes Well for EOG Resources

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.

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Bob Ciura

Bob Ciura, MBA, has written for The Motley Fool since 2012. I focus on energy, consumer goods, and technology. I look for growth at a reasonable price, with a particular fondness for market-beating dividend yields.

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