Tickers in this Article: EOG, DVN, UNT, COG
EOG Resources (NYSE:EOG) rapidly increased production of oil and other liquids during the second quarter of 2011, as the company continued to exploit the large inventory of these types of plays in its portfolio. TUTORIAL: Commodity Investing 101

Q2 2011
EOG Resources reported a 46% increase in the production of crude oil, condensate and natural gas liquids in the second quarter of 2011. The company achieved this rapid growth primarily through the aggressive development of the Eagle Ford Shale and the Barnett Shale combo play in the Fort Worth Basin.

Goodbye Natural Gas
As recently as three years ago, EOG Resources revenue mix was heavily skewed towards natural gas, with 71% of 2008 revenue derived from the sale of this commodity. This balance has now reversed and the company estimates that 70% of revenue in 2011 will come from the sale of crude oil and natural gas liquids.

Eagle Ford Shale
EOG Resources has focused on a number of onshore plays in the United States to help accomplish this transition. The company has assembled 610,000 net acres of leasehold prospective for the Eagle Ford Shale, with 88% of this acreage in the oil window of the play.

EOG Resources exited the second quarter of 2011 producing 35,000 barrels of oil equivalent (BOE) per day from the Eagle Ford Shale and estimates it has potential reserves of 690 million barrels of oil on its acreage. The company is currently operating 22 rigs here, up from 10 at the beginning of 2011.

The potential reserves might be understated, as during the second quarter of 2011, EOG Resources reported the results of wells in Gonzales County that were drilled on tighter spacing. These wells achieved peak initial production results ranging from 1,238 to 1,487 barrels of oil per day. If this down spacing is successful across the company's leasehold, the level of potential reserves will be even higher.

Barnett Shale Combo
EOG Resources is also developing the Barnett Shale combo play in North Texas, where the company has 195,000 net acres under lease. The company is operating eight rigs here and plans to drill 230 net wells in 2011.

Other companies involved in developing the Barnett Shale include Devon Energy (NYSE:DVN). Devon reported average production of 213,000 BOE per day from this play in the second quarter of 2011.

Other Oily Plays
EOG Resources also realized higher crude oil production from the development of the Niobrara in Colorado, along with other plays in the Oklahoma Panhandle and Permian Basin regions.

EOG Resources has several hundred thousand acres in the Permian Basin that is prospective for the Bone Springs, Leonard Shale and Wolfcamp formations. The company reported a number of successful wells here during the second quarter of 2011.

EOG Resources also disclosed a new development program in Oklahoma, where the company is working on the Marmaton sandstone. The company reported several successful wells on its 34,000 net acre position and is currently acquiring seismic data on its properties.

Other companies active in the Marmaton include Unit Corp (NYSE:UNT), which has 70,000 net acres under lease and plans 36 wells in 2011. Cabot Oil and Gas (NYSE:COG) recently reported the company's first well completion into the Marmaton. The well produced 646 BOE per day during an initial 24 hour period.

Bottom Line
EOG Resources was prescient in moving into highly productive oil plays before a frenzy built up and moved property values higher. The company is continuing to seek out new and higher return oil and liquids plays, and this strategy should continue to create shareholder value long term. (For additional reading, see What Determines Oil Prices?)

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