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1.5¢ samson oil & gas limited

EOG also entering 2015 "hot" (like PXD, APA and SSN) which a...

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cmonaussie

10,768 Posts.

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20/02/15

09:03

Post #: 14788467
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Originally posted by cmonaussie ↑

Well the Cowboy with the biggest, whitest hat reported today - EOG - with a wide miss on earnings and some very interesting commenatry:

* 2015 Capex reduction by 40% - 45%
* YoY production to be flat (so in other words QoQ will be reducing)

So while the Red Queen has caught up - she is presently "stranded" outside of the moat of EOG's castle - their balance sheet. EOG is FCF (to the tune of many $100sM) and is forecast to continue to be so.

A few excerpts

"EOG delivered both high returns and strong growth in 2014, a unique accomplishment in the energy sector," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "Our returns-focused capital discipline has been at the core of EOG's culture since the very beginning. We are confident we will continue to earn healthy returns on our capital program during this commodity down cycle and, more importantly, emerge stronger and poised for significant long-term growth."

"Finally, the company expects to use its strong balance sheet to capitalize on unique opportunities created by this low-price environment to add high-quality acreage.

"The downturn in oil prices will drive significant reductions in global supply and the market will rebalance," Thomas said. "Our goal at EOG is to exit this downturn in better shape than we entered it.

"The current environment brings more opportunities to lower our finding costs, improve our returns and add high-quality drilling inventory. As prices recover, EOG will be poised to resume strong U.S. oil growth," Thomas added."

2015 Capital Plan
EOG's primary goal for 2015 is to position the company to resume long-term growth once crude oil prices recover. The company is not interested in accelerating crude oil production in a low-price environment

"North Dakota Bakken
In 2014, EOG's drilling activity in North Dakota was directed to two key areas, the Bakken Core and the Antelope Extension. The focus this past year has been to drive down drilling costs and further advance completions to improve well performance and allow for additional downspacing. In the fourth quarter, EOG completed a six-well pattern in the Bakken Core area spaced at 700 feet between wells which delivered a combined initial production rate of 9,450 Bopd and 5 MMcfd of rich natural gas. Initial results from these completion and downspacing pilots are very encouraging, and additional pilots and testing in 2015 are designed to uncover the best long-term development plan for this crude oil growth play.

Also in 2014, EOG stepped out from the Bakken to test the Three Forks formation, particularly in the Antelope Extension, with some notable well results. Due to the low-price crude oil environment, additional development of this high-potential target will be put on hold.

Capital allocated to the Bakken will decrease significantly in 2015. EOG expects to complete about 25 net wells compared to 59 in 2014. "

It is worth reading the entire conference call transcript to get a full view of how America's most successful shale driller is planning and executing in this current environment.

Overall though - while it was a crappy Qtr per se and 2015 is a "batten down the hatches" type sentiment the net net is shale production Growth is flat - as in there isn't any and that goes to addressing the fundamental macro problem of overproduction.

Expand

EOG also entering 2015 "hot" (like PXD, APA and SSN) which a back log of about 200 completions.

This is directly from the Q&A where an analyst asked "Would $60 crude be sufficient for you to start wanting to work that down or perhaps that in combination with some other factors on completion cost or that sort of thing can you just elaborate a bit how your thinking about it. "

"Bill Thomas (Chairman, CEO):
Certainly because we are deferring these completions because we do believe that prices will be better in the future and even a $10 increase in oil price gives us a significant additional return on our investment and NPV upside. Really our rate of return focus on our capital on return focus is really what's driving the deferral.

Let me kind of walk you through. There's two parts of this deferral. One is as Gary said we're starting out 2015 with about 200 uncompleted wells in our inventory. That uncompleted well inventory will grow throughout 2015.

And if oil prices improve and they look something like the forward curve in the $60 range than we would begin completing many of those wells starting in the third quarter of 2015. And that would reflect additional growth in the fourth quarter, heading into 2016. So we want to head into 2016 on an uptick in production growth.

So our curve in 2015 would be U-shaped. It would be the lowest production will be in the second quarter and in the third quarter and then production will begin to increase in the fourth quarter as we head into 2016. Then at the end of the year we will have about 285 wells in inventory to start the 2016 process.

That will give us a bit of an advantage as we go into 2016 and will be able to grow oil at very strong double-digit rates and be able to stay free cash flow neutral in a 625 dollar oil price environment. Hopefully that gives you more understanding of what were thinking."

Maybe if SSN can afford to do so (i.e. not trip the EBITDAX covenant) a further deferral of their well completions might be a good idea - it will become cheaper and possibly oil price will be higher????

SSN Price at posting: 1.4¢ Sentiment: None Disclosure: Not Held
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