CompanyGraph
EOG Resources, Inc.
EOG · NYSE Arca · United States
Pumps oil and gas from shale rock in Texas and North Dakota using drilling techniques tuned precisely to each underground formation.
EOG Resources drills horizontal wells into specific shale intervals — the Wolfcamp and Leonard in the Permian Basin, the Eagle Ford in Texas, and the Bakken in North Dakota — and fractures each one using designs tuned to that formation's exact rock pressure and geometry, because a frac design that works in the Wolfcamp will bleed pressure and destroy recoverable reserves if applied unchanged to the Eagle Ford. Every well drilled adds pressure-interference data from that specific rock interval, which feeds directly into how the next well on the same acreage is spaced and completed, so the dataset and the production system improve together in a way that only accumulates through years of sequential drilling on those exact acres. A competitor arriving with capital but without that formation-specific record would have to run the same destructive trial-and-error experiments from scratch, damaging the reservoir in the process, which makes the acreage and the dataset effectively inseparable. The whole system is paced by drill rig availability, and because shale wells decline steeply after their first months of production, any scheduling gap that delays new wells immediately shows up as lower total output — there is no cushion of pre-drilled inventory to smooth it over.
How does this company make money?
The company sells crude oil, condensate, and natural gas at market prices, primarily benchmarked to West Texas Intermediate for oil and Henry Hub for natural gas. Revenue each month is the volume produced multiplied by whatever the market price is that month, minus the cost of shipping the product and any quality adjustments. When prices are high and wells are producing well, revenue rises. When prices fall or new wells are not coming online fast enough to replace declining ones, revenue drops.
What makes this company hard to replace?
Gulf Coast refineries have signed long-term supply contracts that specify Eagle Ford condensate by its exact quality characteristics, because their equipment is configured to process that particular type of crude. The pipelines connecting individual wellheads to the main transmission network are dedicated infrastructure that ties those refineries to this supply chain physically. On top of that, multi-year drilling rig contracts lock the company into its operating areas for years at a time, making it impractical for either side to simply walk away and find a substitute.
What limits this company?
The number of available drill rigs caps how fast new wells can be brought online. That matters a lot here because shale wells produce very heavily at first and then drop off quickly. If new wells are not drilled fast enough to replace that falling output, total production shrinks. There is no stockpile of ready wells to draw from — the drilling schedule has to keep moving or the numbers fall.
What does this company depend on?
The company cannot operate without drilling permits from the Texas Railroad Commission and the North Dakota Industrial Commission. It needs hydraulic fracturing sand from mines in Wisconsin and Texas to crack the rock open. Specialized completion crews trained in unconventional well work must be available when needed. Saltwater that comes up with the oil has to go somewhere, so disposal well capacity in each basin is essential. And once the oil is produced, it has to travel by pipeline from the Permian Basin to Gulf Coast refineries — without that takeaway capacity, the oil has nowhere to go.
Who depends on this company?
Gulf Coast refineries are built to process the light, clean crude that comes from the Eagle Ford, and they would lose a key feedstock if this supply stopped. Petrochemical plants in Mont Belvieu depend on natural gas liquids that come out of Permian Basin production. Natural gas utilities in Texas rely on associated gas produced alongside Eagle Ford oil — a production stop would leave gaps in their supply.
How does this company scale?
The horizontal drilling and fracturing techniques the company has developed can be repeated efficiently across similar rock in the same shale plays, so adding wells in proven areas is relatively straightforward to replicate. What cannot be scaled is the land itself — the best-quality rock with the right reservoir characteristics sits inside fixed geographic boundaries, and the most valuable acreage in the core of each play is finite and largely already claimed.
What external forces can significantly affect this company?
Federal methane regulations require leak detection equipment to be installed across every production site, adding cost and operational complexity. Global crude oil prices are influenced by Chinese economic activity, which affects demand for exported Eagle Ford condensate. When the US dollar strengthens, the exported light crude and condensate this company produces becomes more expensive for foreign buyers, which can push prices down.
Where is this company structurally vulnerable?
If the Texas Railroad Commission or the North Dakota Industrial Commission changed their permitting rules in a way that restarted the approval process for each new well — or if federal methane regulations placed strict restrictions on how hydraulic fracturing jobs can be carried out — the sequential drilling programs would stop. Without new wells being drilled, no new pressure data accumulates. The completion designs stop improving, and the knowledge built up over years of drilling slowly becomes less useful as underground conditions keep changing without any new measurements to track them.