Bakken Update: EOG Resources Is Bucking The Trend With Short Laterals

| About: EOG Resources, (EOG)

In my two prior articles, I have covered Whiting (WLL) and Continental (CLR) to give an idea how they are progressing in the Williston Basin. Both are very good operators, that have leveraged to the Bakken. The reasoning for these articles is to give an idea of how each operator is working the play. This is difficult as each field may be drilled and completed differently, giving a wide range of results.

One of the bigger worries going forward has to do Bakken differentials. These differentials will improve. Reasons I believe this will happen have been covered in this article. EOG Resources (EOG) may have done the best job of getting Bakken crude to other areas such as St. James. EOG seems to be leading the way in both the Bakken, Eagle Ford, Niobrara, and Permian (and others). It may be the best United States' large cap in oil and gas given its management and work with the drill bit. What is interesting is EOG's insistence to stay with short laterals, while all others are working approximately 10000 feet.

EOG Resources is well known for its work in Parshall Field, which at one time was one of the more exciting areas in the country. Given its work here, it is obvious EOG is comfortable with this field. Because of this, it is the focus of what EOG is trying to accomplish in the Bakken. The table below shows how EOG is progressing.

2010 EOG Resources Parshall Field Results
Name Date Choke Stages Water Proppant 60Day IP (Bo/d) 120Day IP
Fertile 40-1718H 8/11 38/64 12 20454 2213890 300 296
Fertile 43-2821H 9/11 24/64 20 36458 3691578 335 305
Fertile 45-29H 6/11 48/64 14 19725 1660635 469 368
Fertile 19-29H 6/11 24/64 15 18777 1662714 337 300
Fertile 41-3328H 9/11 28/64 15 32408 2994951 216 197
Liberty 24-2531H* 12/11 24/64 25 41000 3421231 892 811
Liberty 10-36H 2/11 40/64 15 23516 1765323 775 688

All of the wells listed above were short laterals except for Liberty 24-2531H. This is why we see a marked improvement in oil production over the first 120 days. EOG has been consistent to this point using 12 to 15 stages per short lateral but is experimenting with 20 stage fracs. I would keep in mind a short (one mile) lateral using a 20 stage frac is like a long (two mile) lateral using forty stages. The Liberty 10-36H had very good numbers, and producing 775 Bo/d over the first 60 days of the well. Given the number of stages and amounts of water and proppant, I would guess the number is still quite good even with a wider choke. EOG only has two wells on confidential status in 2012. Here are the results of those wells.

2012 EOG Parshall Field Results
Name Date Choke Stages Water Proppant IP rate (Bo/d)
Wayzetta 157-2835H* 3/12 36/64 37 20337 1705785 60Day=714
Wayzetta 124-3334H 3/12 24/64 32 79855 6867099 63Day=770

The first well result above is a long lateral, while the second well is around 6500 feet. Given its length, Wayzetta 124-3334H had a great result and backs my assertion large water and proppant volumes may be as important as the number of stages. This well used around the same volume of water Kodiak (KOG) regularly uses and almost twice the proppant. To know for sure costs would need to be figured on not just the water (which is running around 70 cents a barrel) and the type and cost of proppant. This result is even more impressive when the choke is figured in.

The final two wells of 2012 may be the most important. Parshall 20-03H and Wayzetta 4-16H are waterfloods. The results from these and others coming down the pipe could completely change the amount of resource we believe to be extracted from the middle Bakken and upper Three Forks. I would guess we will get more information on this in the next quarterly earnings announcement.

In summary, EOG continues to do shorter laterals between 5500 and 7000 feet when compared to other players in the Bakken. I do not know if it believes this produces a better result or gives better control of the well. EOG also does shorter laterals in the Eagle Ford, so it may be interested in consistency. All said, its most recent well will give a good indicator as to how much water and proppant have on initial production. It is important to note, EOG is optimistic waterfloods could produced a significant amount of additional resource. It would seem now only the Eagle Ford will take precedence.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.