The company’s estimated net reserves in the Eagle Ford are in the range of 1.6 billion-2.2 billion barrels of oil equivalent. The best thing about this shale play is that as the lateral (horizontal) length of the fracked well increases, production rate goes up. According to the company’s latest investor presentation, average initial production rate per well has progressively climbed to 1,226 barrels per day in 2013 from a lowly 483 bpd in 2009. Well costs are also falling with an average $5.8 million per completed well in 2013 — a far cry from the $9.1 million spent per well in 2009.
The company’s Bakken wells are superior to even those of Statoil and Continental Resources, Inc. (NYSE:CLR). The four highest producing wells in this region belong to EOG Resources Inc (NYSE:EOG) with production ranging between 2,271 bpd and 1,846 bpd. However, Continental Resources, Inc. (NYSE:CLR) has set the benchmark in well economics in the Bakken by averaging $8.2 million in completed well costs. In comparison, EOG Resources Inc (NYSE:EOG) completes a Bakken well for an average $9.5 million. With more than 4,900 drilling locations yet to complete in the Eagle Ford, as well as a 12-year drilling inventory in the Bakken, EOG Resources Inc (NYSE:EOG) is expected to have the best in class crude oil growth for the next few years.
Anadarko Petroleum Corporation (NYSE:APC) is another company which simultaneously focuses on growth as well as value. Unlike EOG Resources Inc (NYSE:EOG), its immediate growth prospects aren’t exactly phenomenal, but the net value derived is huge. Along with a solid exposure to onshore U.S. shale resources, the company’s Gulf of Mexico operations look promising for the future. Anadarko Petroleum Corporation (NYSE:APC) is focusing on increasing takeaway capacity for shale resources by enhancing infrastructure. The dedicated midstream segment with over 15,000 miles of pipelines and about 2.5 billion cubic feet per day of processing capacity should help improve efficiency and price realizations.
Production from the Wattenberg Shale play grew 37% in the second quarter year over year to 60,000 bpd and management expects to ramp up production to 90,000 bpd by the first quarter of 2014. The Eagle Ford Shale play also figures high on management’s radar with more than 2,500 drilling locations identified as costs per well completion move down. This kind of growth should translate into returns. Additionally, the five deepwater discoveries in the Gulf and off the coast of Mozambique are what investors should keep an eye on.
Foolish thoughts
Higher oil prices do not necessarily translate into higher returns for exploration and production companies. However, companies like EOG Resources and Anadarko Petroleum Corporation (NYSE:APC) are strategically positioned to take advantage due to higher efficiency and lower costs incurred.
The article 2 Companies Taking Advantage of Skyrocketing Oil Prices originally appeared on Fool.com is written by Isac Simon.
Fool contributor Isac Simon has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
