EOG slows down at Marcellus, JV partner cuts outlook

Wed Jul 25, 2012 5:48pm EDT

* Seneca Resources cuts production forecast to 92-105 bcfe

* Seneca cuts capex to $400-$500 mln

* EOG may no longer have rights for additional acreage

July 25 (Reuters) - Seneca Resources Corp, a unit of National Fuel Gas Co, cut its production and capital expenditure outlook for 2013 as its Marcellus shale joint venture partner EOG Resources Inc will not be able to complete the minimum drilling target agreed upon for this year.

The company now expects production of 92 billion cubic feet equivalent (bcfe) to 105 bcfe, down from its previous forecast of 100-115 bcfe.

Capital expenditure outlook was cut by $50 million to $400 million to $500 million.

Seneca said "should it (EOG) not meet that minimum, EOG would no longer have the right to earn additional acreage from Seneca."

Seneca, which sold off its Gulf of Mexico oil and gas properties in March last year to focus on Marcellus acreage, reported a 91.5 percent increase in production from Marcellus wells in the first quarter. The JV with EOG was formed in 2006.

EOG's decision comes when falling natural gas prices have pushed oil and gas companies to roll back production, or sell acreage, to focus on high-margin-generating oil and natural gas liquids assets.

Under the JV deal, EOG has the opportunity to earn an interest in Seneca acreage by drilling a minimum number of wells per year in a defined area of mutual interest at Marcellus.

Shares of EOG closed at $95.69, while those of National Fuel closed at $48.25 on Wednesday on the New York Stock Exchange.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.