US ELECTIONS: EOG will be 'fine,' even in worst-case political outcome: CEO

EOG Resources will be "fine," even if the worst-case political outcome should occur and a new US presidential administration wins the November election and implements measures that restrict oil and gas development, EOG's top executive said Sept. 9.

If Joe Biden, whose statements have suggested he may cancel all new drilling permits for federal lands, wins the presidency from current President Donald Trump, EOG will still be "fine," because it has eight-plus years of drilling inventory on non-federal lands, company CEO Bill Thomas said in webcast remarks during the online Barclays CEO-Power Conference, although he did not mention either candidate by name.

"That [a worst-case scenario] will not take away from our ability to generate high returns or reduce our capital efficiency," Thomas said, without using the names of either Biden or Trump who are in a highly contentious race for the presidency.

"I'm very confident even in the most draconian scenario that you can possibly print, that EOG is going to be fine," he said, adding that the company is drilling more on federal lands this year than in the past.

But he said EOG's shares have been under pressure owing to the federal acreage issue. As recently as late May and June, EOG shares were trading in the $50s and even topped $60 one day. But Thomas believes the decline is largely due to the federal lands-drilling issue.

On Sept. 9, the company's shares closed at $42.20/b, up $1.37.

Biden's comments so far about permits on federal land have generally been interpreted by industry to mean that new drilling permits will not be issued, but that existing permits will be honored.

More new opportunities than ever

However, not only does EOG have a lot of non-federal acreage where it can drill instead of on government-owned lands, but it is also looking for new plays and has more prospects for new projects than it has ever had, including outside the US, Thomas said.

Over the years, the company has periodically unveiled new plays in the US that it has explored and made economic. Internationally, it has operated in Trinidad for 20 years and also has acreage in the Sichuan Basin. It is currently in process of exiting its Canada operation.

In the past, it has also operated in the North Sea, the Gulf of Mexico and East Irish Sea.

But after years of being roughly a 95% US-focused shale player production-wise, EOG is looking for more international opportunities, Thomas said.

The company, which has over 25 years of operating in Trinidad's shallow waters, recently made a find off the country's southeast coast which whet its appetite for non-US opportunities that match its skill set. The discovery, which EOG called "significant" and has estimated gross resource potential of up to 1 Tcf or 500 Bcf net to the company, are based on results from four wells drilled in the past year on three shallow-water blocks.

"We have exploration efforts going on in that kind of environment in multiple places in the world, not just in Trinidad – and we're hopeful that will be a meaningful part of the company," he said.

EOG is working on prospects in 10-plus basins, not only in the US but internationally. "You'll be hearing more about those in the future," he said.

Searching for 'meaningful' non-US horizontal play

Thomas suggested these could include horizontal plays in unconventional basins, which domestically account for the bulk of the US' roughly 10 million b/d of oil production.

But outside the US, few unconventional plays have proven economically successful. Only the Vaca Muerta in Argentina has been an exception.

"We been looking for years for a meaningful horizontal play internationally," Thomas said. "Geologically, they're abundant; the issue is the geopolitical risk ... the business environment, and more importantly, the deal structure."

But transactions are starting to open up, he said, but did not elaborate on geographies or timelines for potential announcements.

"We're seeing some opportunities where the deal structures are now modifying to where the returns on some of these plays could be equal or better than what we have in the US," Thomas added. "The reserve potential is very large on plays like this [and] we're excited about the opportunity."

"We've never had more opportunities than we have right now," he said.