Explorers award goes to EOG Resources

Reinvention can be a slow and tedious undertaking. For most companies, charting a new overall strategy and instituting change takes years, if not a decade.

Not EOG Resources. Since Chairman and CEO Mark Papa took the helm ten years ago, the company has been successfully reinvented twice. EOG has shifted from a conventional natural gas, to an unconventional shale gas leader, to a first-mover in unconventional oil.

“Mark and his team have been able to not only reinvent the company twice in the past decade, but consistently make it more successful, productive, efficient, and technologically driven,” says Charlie Jones (Forum Energy Technologies), Chairman of the PESA Explorers of Houston Committee.

Together with Robert Workman (National Oilwell Varco) and Galen Cobb (Halliburton), Jones selected EOG for PESA’s highest award, the 2010 Explorer’s Award. The award is given annually to the E&P company that has demonstrated excellence in technological innovation and leadership in the industry.

When Papa took on the challenge of becoming EOG’s Chairman and CEO in 1999, 81 percent of their total wellhead revenues and 86 percent of their North American volumes were natural gas. Then came shales.

“EOG captured early-mover acreage positions in the Fort Worth Barnett, British Columbia Horn River Basin, Haynesville and Marcellus Shales,” says Jones. “I think we all can attest to the fact that the EOG team has done a fantastic job of reinventing the company from a conventional gas player to a major shale gas producer.”

But a few years ago, Mark and the EOG team began steering the company toward reinvention once more, this time moving the company’s exploration budget away from natural gas and toward crude oil and natural gas liquids.

“This move was a calculated bet, a risk that not many others took at the time—they based their decision on their long-term view of North American natural gas and global crude oil market fundamentals,” says Jones. “I think we can safely say they were right—they made the right bet at the right time.”

This year, for the first time in EOG’s history, revenues from liquids production exceeded those from natural gas. Revenues for the year are expected to be divided almost equally between liquids and natural gas.

Jones says that last year EOG was the epitome of agility, inventiveness, and industry leadership. The company holds a position of over 500,000 acres in the North Dakota Bakken, and crude production in the region soon exceeded pipeline capacity.

“They designed and opened a rail transportation system to transfer 60,000 gross barrels from a crude oil loading facility in Stanley, North Dakota to an unloading facility in Stroud, Oklahoma and then a 17-mile pipeline running from that point to a terminal in Cushing, Oklahoma. That’s getting the job done.”

PESA Chairman Bill Coates had his first interaction with EOG in Trinidad and has watched the evolution over the past 15 years. He says their technical expertise is second to none.

“If you ever wanted to know what was going on technically in North America all you had to do was listen to a conference call for EOG,” says Coates. “They gave the most fascinating
scientific explanation of what they’re doing in the Eagle Ford earlier this year, discussing the molecule size of oil versus the pore space.”

Papa was on hand to accept the award for EOG, along with Senior Vice Presidents Loren Leiker and Gary Thomas, as well as Purchasing Director Doug Runkel.

“It would be easy to say that EOG was a first-mover and we thought through all this and came up with these eureka moments,” says Papa. “But the reality is that at least half of the credit for this discovery of gas and oil in horizontal wells is due to the service industry.”

“Without the advances in the service industry, EOG would have never gotten there and neither would the rest of the industry. The ability to keep a horizontal well in zone for 10,000 feet following the structural contours is something that five years ago we dreamed that we could do. The ability to run sophisticated logging tools, hydraulic stage fracs, and the like—it wasn’t EOG that invented that stuff. We just took what you built and adapted it.”

Papa quickly discussed coming trends in the industry, which are a direct result of horizontal drilling and frac techniques for oil and gas.

“I think that within 5 to 10 years, we’ll see a significant penetration with natural gas vehicles, probably with 18-wheelers—it’s such a slam dunk that natural gas transportation will happen,” he says. “We’ll see a lot of large oil fields that have yet to be found in the U.S.—fields that dwarf what we thought were still available onshore. Our own calculation is that the Bakken and Eagle Ford plays are likely the fifth and sixth largest oil fields ever discovered in the U.S. including Alaska and the deepwater Gulf.”

Finally, Papa thanked PESA members and the service and supply sector for their technological expertise.

“Thank you to everyone in this room for the help you’ve provided to us. You’ve made us look better than we really are, and we appreciate that very much.”