EOG Resources reported stellar oil production results and growth again in the third quarter. EOG is an outstanding company; unfortunately shares are priced richly. Chief Mark Papa always provides clear macro commentary and was the first to see the need to make the shift to oil from natural gas years ago.
If natural gas is about to have its day over oil, Papa does not see it.
From the release:
“In North America, crude oil production increased 45 percent in the third quarter and 51 percent for the first nine months of 2012 compared to prior year periods.”
From the conference call:
“We continue to believe that U.S. shale oil won’t flood the global market for the reasons I articulated on our previous earnings call.” However, ISA continues to note tepid world demand and robust US oil production growth are keeping world oil markets well supplied. The dynamics remain interesting…
As for natural gas:
“North American gas was down 10%…”
Then looking out to next year:
“This year, we spent roughly $700 million, primarily in the Haynesville, Marcellus and Horn River converting leases to held by production, and we expect to spend only about $100 million next year on dry gas drilling.”
Observing the trees and the forest says gas over oil in my humble opinion.
Mighty Exxon Mobil’s third quarter North American natural gas production fell 4% quarter over quarter and management clearly states higher prices are required to bring the capital back.
More? A small fry in the Haynesville: “Still, the company expects a 30% production decline in 2013 (from 110 Bcfe/year to 75). Production declined 10% in Q3 2012.” Haynesville Play
On the demand side, Cheap natural gas fuels plant expansions at the Houston Chronicle.
Off topic: An interesting renewable energy tidbit: My state had six ballot proposals and all went down to defeat. The renewable energy mandate proposal lost by a larger margin than the government union power grab attempts. The public’s attitude toward windmills is interesting. FWIW