Russia’s 2022 invasion of Ukraine not only led to the demise of Russian pipeline gas supplies to Europe and caused prices to spike, but it also helped create new arbitrage opportunities for U.S. LNG shippers. In today’s RBN blog, we look at the different approaches the U.S. upstream has adopted in response.
There’s been a surge in E&P interest in the Utica Shale’s volatile oil window the past couple of years, and EOG Resources has been particularly optimistic about its potential for producing large volumes of condensate, the lightest of superlight crude oils. A few days ago, EOG — known for growing its business organically, not via M&A — announced one of the largest acquisitions of the year so far: the planned purchase of Encino Acquisition Partners (EAP), the Utica’s #1 condensate producer by far, for $5.6 billion, including the assumption of EAP’s debt. As we discuss in today’s RBN blog, the deal will give EOG its third “foundational” focus area (the others are the Eagle Ford and the Permian's Delaware Basin) and supports the view that the Utica really is an up-and-comer.
While many larger E&Ps have been growing bigger through massive, headline-grabbing acquisitions, EOG Resources — by market cap, the second-largest non-integrated U.S. producer — has been expanding for a quarter century now by focusing on the stealthy exploration and development of new resource plays. The results of EOG’s long-standing strategy have been impressive, and include finding and development (F&D) costs that are significantly lower than its Oil-Weighted peer group and a higher-than-average reserve replacement rate. In today’s RBN blog, we analyze the scope and impact of EOG’s singular focus on organic growth instead of M&A.
As U.S. E&Ps deal with a slew of shorter-term challenges such as broken supply chains, labor shortages, and infrastructure constraints, they’re also paying increasing attention to a longer-term concern: “inventory exhaustion.” There is a growing chorus of analysts asserting that oil and gas producers’ inventory of top-tier drilling locations has been significantly depleted as the nation’s major unconventional resource plays mature. Many producers have continued to rein in their capital spending and husband their current resources and several have boosted inventories through bolt-on acquisitions. Premier E&P EOG Resources has taken a different approach, emphasizing organic exploration that has led to the discovery of two new significant plays over the past two years, including the recent announcement of a new Utica Shale combo play that it describes as being “almost reminiscent” of the early Delaware Basin. In today’s RBN blog, we discuss EOG’s dramatically different approach to building inventory and dive into the details of its new Utica discovery.
Oil-Weighted exploration and production companies (E&Ps) are slashing capital spending in 2015, as they need to regain control of their costs in today’s lower oil price environment. With robust oil prices over the past three years, these companies only posted middling profitability as capital and operating costs ate up much of their incremental revenue. The Large Oil Weighted E&Ps are cutting back less than the Small/Mid-Sized Oil Weighted E&Ps as they are more financially secure and have more ability to spend through the price cycle. The Small/Mid-Sized Oil Weighted E&Ps are focused on getting their spending in line with cash flows and to get to a point where they are self-funding their capital investment. Today we explore how each of the companies in the two oil-weighted peer groups is trying to resolve these issues.
