EOG Resources Will Rise On New Horizontal Oil Plays

Today, we will explore the options of an energy player as I examine the potential rewards for the energy stocks that are involved in America’s energy boom. EOG Resources Inc. (NYSE:EOG), is a 56.15 billion energy player that explores , develops, produces and markets crude oil and natural gas primarily in producing basins in the United States of America , Canada, The People’s Republic of China (China), and from time to time, select other international areas.

You will remember that EOG Resources delivered top-notch fourth quarter results that left many people wondering about the possibility of surpassing such wonderful results in a news quarter. EOG Resources is back again to reward its investors with an impressive first quarter result.

Highlights of Q1 2014 Earnings

  • Net income grew 33.6% with a reported $660.9 million or $1.21 per share compared to the net income of $494.7 million or $0.91 per share that was reported in the same quarter last year
  • Revenues was reported with a 21.7% increase at $4.08 billion
  • The company  reports 42 Percent Increase in Total Company and 45 Percent Growth in U.S. Crude Oil and Condensate Production Year-Over-Year
  • The company  raises 2014 Full-Year Crude Oil Production Goal to 29 Percent from 27 Percent
  • The company  adds High Rate-of-Return Horizontal Drilling Inventory in Four U.S. Crude Oil and Combo Plays with Total Estimated Potential Reserves of 400 MMboe.

My interest today is in the last part of the highlights, which deals with the addition of High Rate-of-Return Horizontal Drilling Inventory in Four U.S. Crude Oil and Combo Plays

What New Horizontal Plays Mean for EOG’ Top and Bottom Lines

According to the Investor’s Presentation (opens PDF), EOG Resources had uncovered horizontal oil plays in the Rocky Mountains in line with its history of positioning itself for the first mover advantage in new oil plays. EOG Resources has uncovered new oil plays in DJ Basin Plays and in the Powder River Basin.

Possibilities DJ Basin Horizontal Oil Plays

 

  • Codell

EOG Resources has discovered a 72,000 Net Acres in Sweet Spot where it has already dug five wells. The initial production rates of the 5 wells range from 1,165 to 1,400 Bopd. EOG Resources calculates the drilling cost of each well at $7.3 million; yet, the initial production rates projects a 100% after tax return rate on the wells.

  • Niobrara

EOG Resources has discovered a 50,000 Net Acres in Sweet Spot where it has already dug three wells. The initial production rates of the 3 wells range from 670 to 700 Bopd. EOG Resources calculates the drilling cost of each well at $9 million; yet, the initial production rates projects a 40% after tax return rate on the wells.

Possibilities in the Powder River Basin Horizontal Oil/Combo Plays

  • Parkman

EOG Resources has discovered a 30,000 Net Acres in Sweet Spot where it has already dug three wells. The initial production rates of the 3 wells range from 686 to 746 Bopd. EOG Resources calculates the drilling cost of each well at $5 million; yet, the initial production rates projects a 100% after tax return rate on the wells.

  • Turner

EOG Resources has discovered a 63,000 Net Acres in Sweet Spot where it has already dug 2 wells. The initial production rates of the 2 wells range from 1,165 to 1,400 Bopd. EOG Resources calculates the initial production rates projects an after tax return rate beyond 100% on the wells considering the fact that this oil play has the potential for substantial volume of gas.

How to Trade EOG Options

The addition of these new horizontal oil plays to EOG Resource’s acreage shows that the company is far from reaching a glass ceiling inasmuch as production or an increase in share price is concerned. I am bullish on EOG Resources and I recommend call options. The EOG Oct 2014 105.000 call (EOG141018C00105000) looks attractive for as a long bullish play.

— Daily Option Alerts

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