Operator Series: EOG Resources steps up Trinidad game

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Friday, March 2, 2018

Trinidad and Tobago's energy minister Franklin Khan said recently that "one of the clear indications of a resurgence in the domestic energy sector is the increase in development and exploration drilling."

This year, 17 exploration wells are scheduled to be drilled versus one in 2017, Khan told an energy event in January where he highlighted EOG Resources' plans to drill four exploration wells in the company's U(b) block this year.

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In its Form 10-K filed with the US Securities and Exchange Commission, Houston-based EOG said it expects to focus on exploration and the acquisition of additional seismic in the Caribbean nation in 2018.

"Our exploration efforts are focused on leveraging new seismic data to identify prospects to drill in 2019 and beyond in order to maintain natural gas production and supply the domestic Trinidad gas market for many years to come," EOG E&P executive VP David Trice said during the company's fourth quarter and full year 2017 results conference call.

Last year, the operator conducted a seismic survey in the U(a) block and participated in a seismic survey program with a joint venture partner in the Ska, Mento and Reggae area, according to the document.

EOG attributed a 16% increase in 2017 exploration costs to US$145mn primarily to increased geological and geophysical spend in Trinidad. Such costs in the country for the company totaled US$26.3mn versus US$2.65mn in 2016.

PRODUCTION

Last year, EOG completed and brought online two net wells, finishing its program in the Sercan area and drilled and completed five additional net wells in the Banyan and Osprey fields.

"The outperformance of these new wells allowed our Trinidad division to produce 15Mf3/d of gas more than initially forecasted in 2017," Trice added.

The energy ministry expects that gas output in the near term will be enhanced by compression projects proposed by EOG for Osprey.

The operator also signed a new multi-year contract last year to supply future natural gas volumes to National Gas Company of Trinidad and Tobago (NGC) beginning in 2019.

The developments come amid calls by the government to sustain and increase hydrocarbons output, in particular gas.

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In 2017, EOG's net production from Trinidad averaged 313Mf3/d gas and 900b/d of crude oil and condensate.

Information from Trinidad's energy ministry shows that EOG accounted for 15.5% of average gas output last year - the second largest gas producer after BPTT - and 1.97% of average crude oil and condensate output.

EOG sells all the gas output to NGC and oil and condensate production to the country's state oil company Petrotrin.

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FIELD METRICS & RESERVES

Last year, EOG drilled 74,282ft, completed eight wells and had 312 rig days, according to the ministry. In 2017, total depth drilled in the country was 398,282ft, completed wells 55 and rig days 1,824.

The company's net proved reserves for Trinidad at end-December were 898,000b crude oil and condensate and 313Bf3 gas.

At end-December, EOG held 115,274 net undeveloped acres in Trinidad out of a total of 182,747 net acres it has in the Caribbean nation.

FINANCIALS

In 2017, EOG's earnings before income taxes in Trinidad increased 113% to US$107mn.

The company's net operating revenue from Trinidad crude oil and condensate rose 41.4% to US$13.6mn and grew 15.8% to US$271mn from gas.

The operator's average Trinidad crude oil and condensate price in 2017 was US$42.30/b and US$2.38/1,000f3 for gas compared to US$33.76 and US$1.88 the previous year.

The SEC filing adds: "In 2017, a large majority of the wellhead natural gas volumes from Trinidad were sold under contracts with prices which were either wholly or partially dependent on Caribbean ammonia index prices and/or methanol prices. The remaining volumes were sold under a contract at prices partially dependent on United States Henry Hub market prices. The pricing mechanisms for these contracts in Trinidad are expected to remain the same in 2018."

HOLDINGS

In Trinidad, EOG also holds interests in the South East Coast Consortium and 4(a) blocks, the Pelican field and anhydrous ammonia plants at Point Lisas owned and operated by Caribbean Nitrogen and Nitrogen (2000).