EOG Resources Inc (NYSE:EOG) announced that it will probably ramp up its operations in 4Q once crude oil prices stabilizes at $65 per barrel. The company posted a net loss of $169.7 million in the first quarter. It is the first loss generating quarter in more than two years. West Texas Intermediate prices showed improvement and surged above $60 for the first time in 2015 on speculation supply concerns will ease in near future. The crude prices declined by more than 50% from a June high, prompting billions in spending cuts and over 100,000 industry job losses.
William Thomas, the CEO and Chairman of EOG Resources, said that at $65 a barrel the company expects to achieve double-digit growth in FY2016. The company may start with completion work of wells that were left half-drilled in 3Q. The decision on the same matter will be made in coming July. Thomas further added that they don’t want to take a hurried decision, and don’t intend to jump-start well completions. EOG Resources plans to enter 2016 on a strong note.
David Einhorn, a hedge fund manager criticized shale firms including EOG Resources, stating that several companies didn’t report free cash flow even when oil prices were well above $100 per barrel last year. The companies haven’t made necessary adjustments after the sharp fall of oil prices last year.
EOG Resources operates mainly in West and South Texas, North Dakota’s Bakken formation and in the Rocky Mountains. The company recently stated that it can report profits even as U.S. crude trades for around $58 per barrel. EOG expects the prices to surge by year-end. Fadel Gheit, who is an analyst with research firm Oppenheimer & Co., said that the company has remained a leader, and many people are waiting to see their next steps.
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