EOG Resources Inc (EOG), ConocoPhillips (COP): This Oil Company is Printing Money

Source: EOG Resources Investor Presentation

Like the Eagle Ford, it’s using self-sourced sand to keep its well costs down and it is EOG’s use of sand in the Bakken that is actually a break from what some of its peers are doing. Companies like Halcon Resources Corp (NYSE:HK) and Kodiak Oil & Gas Corp (USA) (NYSE:KOG) have both found the best returns by using more expensive ceramic proppants. Kodiak Oil & Gas Corp (USA) (NYSE:KOG), for example enjoys an internal rate of return as high as 84% on its long lateral Bakken wells that cost it $9.5 million to drill. These wells also have estimated ultimate recoveries of about 850,000 barrels of oil equivalent. Meanwhile, Halcon Resources Corp (NYSE:HK) is seeing dramatic improvements in its initial production rates as well as a 40% boost in its estimated ultimate recovery rates which is boosting returns. That being said, EOG is enjoying estimated ultimate recoveries of 940,000 barrels of oil equivalent for wells that cost around the same price. EOG has an even better position in the play, which is a key to producing these tremendous returns for the company. 

Permian Basin
If dominate profits in the two hottest shale oil plays wasn’t enough, EOG added another triple digit returning shale play this year. While the company has acreage in both the Delaware Basin and Midland Basin portions of the Permian Basin, it’s the Leonard Shale of the Delaware Basin that’s currently yielding big returns. Again, EOG is able to earn triple digit after tax returns every time it puts a drill into the ground. One of the drivers of its returns here is that it’s able to get premium prices for its oil by utilizing its rail infrastructure and sending its oil to St. James.

Final Foolish Thoughts
EOG is in a great spot these days. It’s earning triple digit returns pretty much on every well it drills. Best of all, it has about a dozen years of drilling left in both the Bakken and Eagle Ford and an even larger number of future wells in the Permian to keep that cash flow train rolling. That should help keep EOG leading America’s amazing oil boom.

The article This Oil Company is Printing Money originally appeared on Fool.com is written by Matthew DiLallo.

Fool contributor Matt DiLallo owns shares of ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned.

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