EOG Resources Inc., the company with major well operations in Oklahoma is already making plans to rebound with its production and exploration.
Known as America’s largest shale-focused producer, EOG said it plans to “accelerate” ouput in the second half after shutting in about a quarter of its crude production in May.
EOG’s exploration chief Ken Boedeker revealed the plans this week at an RBC Capital Markets conference.
EOG’s optimism is due, in part, to the woes that lie ahead for the rest of the U.S. shale industry. Companies will struggle to find the money to drill new wells, meaning less oil over the short to medium term, Boedeker said.
“We see very little capital flowing into the industry and we see higher declines from all the shale players throughout the rest of the year,” he said. “Starting to drill in the high $30s? I’m not sure I see that.”
EOG’s strategy “is to really accelerate our production into what we see as a price recovery in the second half of the year,” Boedeker said. The company, which began shutting wells in March and took 125,000 barrels a day off the market in May, recently reduced its hedge position, eliminating some protection against lower prices in a sign of confidence the price recovery will take hold.
Oil has steadily gained in the past month after virus-related lockdowns caused the price of West Texas Intermediate to collapse to minus $40 a barrel on April 20. While the U.S. benchmark is still about 40% below its January high point, it’s now above $35, which means some wells closed to save cash are now profitable again. Futures were up 2.9% to $36.47 at 1:45 p.m. in New York.
In the Permian Basin, producer Parlsey Energy Inc. is already turning wells back on and in North Dakota’s Bakken formation, producers are doing the same.
Parsley will restore the “vast majority” of the 26,000 barrels of daily output it turned off last month, it said in a slide deck for an investor presentation.” Meanwhile, shut-ins in the Bakken totaled 475,000 barrels a day as of May 28, about 7% less than a fortnight earlier.