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.