One of the major players in northwest North Dakota's oil patch is in the midst of stepping up its operations in the state, with no plans to slow down in the near future.
In addition to its recent announcement that it has moved into its Waskada South field to exploit the Spearfish play, EOG Resources CEO Mark Papa told an analyst conference several weeks ago via teleconference that the Bakken and Three Forks plays are very much part of EOG's immediate and long-term future plans.
In fact, its success in crude has now led the company to the point of considering selling off many of its natural gas assets.
"Our game plan is very consistent and shouldn't surprise anyone," Papa said. "We've been working for three years to shift this company towards a higher liquids production mix, and that's simply because our macroview is that both short and long-term oil prices are going to be superior than short and long-term North American natural gas prices.
"We have a concerted effort to add even more horizontal oil resource plays. We think this is a big breakthrough in technology, and we'll be working on ones in addition to the ones we're disclosing today."
Papa said EOG recognized early that horizontal drilling was going to change both the natural gas and the oil industry.
"In 2007, we were the first public company to make horizontal drilling work in the North Dakota Bakken," Papa said. "In both those plays, we captured core sweet acreage at first mover costs.
"I believe that horizontal oil from unconventional rock is going to be a North American industry game-changer. I believe it is that significant. It certainly will be a game-changer for EOG, but it will be a game-changer for the whole industry."
EOG recently released its first-quarter earnings report, which was highlighted by the news that the company had increased production by 25 percent compared to the first quarter in 2009.
Papa said total company expected growth for 2011 and 2012 is 19 percent and 21 percent, respectively.
Kurt Doerr, executive vice-president and general manager of EOG's Denver division, said EOG has accumulated 580,000 acres overlying the Bakken and Three Forks plays.
"Since our first well in 2003, we have drilled 242 wells (163 Bakken Core, 68 Bakken Lite or outside the core, and 11 Three Forks)," Doerr said. "Currently our net daily production from all this activity is 28,800 barrels of oil equivalent per day."
Cumulatively, 20 million barrels of oil have been produced.
EOG became largest producer on gross production basis in 2009 in N.D.
"With the drilling we've done so far, we believe we have 330,000 net acres of low risk, Bakken Core, Bakken Lite potential," Doerr said. "In addition to this, we have also had the Three Forks perspective under a portion of this net acreage."
More effective acreage could be added as exploration continues over the net acreage, Doerr said.
"With over 100 rigs drilling horizontally for both the Bakken and the Three Forks, we feel that a large portion of the Basin is moving into the exploitation phase of development, with repeatable and generally predictable results."
Doerr said EOG currently has 11 rigs drilling in the Bakken-Three Forks, with plans to add a 12th rig in the second quarter of 2010. He said EOG plans to drill about 75 wells this year.
"Our drilling times are continuing to decrease, subsequently requiring fewer rigs to drill the number of anticipated wells for 2010," he said.
Like Papa, Doerr said reinvestment rates of return range from 27 percent to more than 200 percent in the area.
"The Bakken and Three Forks continue to be a very, very attractive horizontal investment," Doerr said.