Wednesday, February 18, 2015

EOG RESOURCES INC., WHICH HAS BOOSTED ITS OIL PRODUCTION BY ALMOST 50 PERCENT ANNUALLY FOR THE PAST FIVE YEARS, IS SLASHING SPENDING 40 PERCENT AND WILL DRILL HALF THE WELLS IT DID IN 2014




FEBRUARY 18, 2015

(Bloomberg) -- The biggest, fastest-growing oil producer in the U.S. said it plans to halt output growth this year, delivering a signal that shale companies are beginning to do what it takes to reduce oversupplies. 

EOG Resources Inc., which has boosted its oil production by almost 50 percent annually for the past five years, is slashing spending 40 percent and will drill half the wells it did in 2014. The Houston-based company fell more than 6 percent in after-hours trading as it reported fourth-quarter profit Wednesday that missed expectations. 

The company joins Apache Corp. in its plan to pump about the same volume of oil as last year. The cutbacks are a sign that shale producers can slow down a lot more quickly than forecasters are expecting, said Michael Scialla, a Denver-based analyst at Stifel Nicolaus & Co. 

“EOG is viewed as the premier company in shale development, and if they’re not going to grow, it is a very important signal to the market,” Scialla said in a telephone interview. “The argument that this slowdown is going to take a while to have an impact on supply is completely wrong.” 

The reductions come as agencies such as the U.S. Energy Information Administration forecast that overall domestic production will grow 7.8 percent to 9.3 million barrels of crude a day this year, adding to the glut that’s pushed down prices. 

‘Not Interested’ 

“The company is not interested in accelerating crude oil production in a low-price environment,” EOG said in a statement. 

The collapse of oil prices by more than half since June has forced major producers and drillers to cut more than $40 billion in spending and fire 50,000 workers. The number of oil drilling rigs working onshore has declined by a third since October. 

Crude prices have rallied in recent weeks to more than $50 a barrel as the pace of cuts has surprised market analysts. The average price for Brent crude, the benchmark used by most of the world, fell 30 percent from a year earlier in the quarter, to $77.07 a barrel. 

The producer’s net income fell to $444.6 million, or 81 cents a share, from $580 million, or $1.06, a year earlier. Profit excluding one-time items was 79 cents a share, less than the $1 average of 36 analysts’ estimates compiled by Bloomberg. 

The earnings report was posted Wednesday after the close of regular trading on U.S. markets.