Oil and gas companies have to constantly design new strategies to maximize profit in cash-strapped times such as these. EOG Resources is one such company making an effort to maximize profitability despite the depressed oil price.
In a recent statement to investors, Bill Thomas, CEO of EOG Resources, stated that due to shifts in the company’s strategy, “We expect well productivity to improve more than 50 percent in 2016.”
EOG Resources’ enlightened new strategy entails putting a hold on its more inefficient drilling operations in order to focus solely on premium opportunities. By concentrating on areas such as South Texas’ Eagle Ford Shale, where returns on $40 oil are at least 30%, the company is confident that it can make “triple- digit” returns when oil reaches $60.
This is an indication that companies operating within the Oil and gas field are going to have to start making certain changes to remain viable in this challenging environment. It represents quite a contrary attitude to the lax demeanor most companies had when the oil price was soaring at $100 a barrel and profitability was rarely an issue.
EOG Resources has put a hold on over 200 wells that have already been drilled but are not yet producing. The company believes that these are the wells which will require a higher oil price to meet EOG’s profitability standards.
The company stressed that this move, while certainly beneficial during a time of lowered commodity prices, is to remain a permanent strategy in the company’s ongoing operations.
Article written by HEI contributor Timothy McNally.