UPDATE 1-EOG says U.S. refineries can absorb surging output from shale

Wed Aug 6, 2014 10:04am EDT

(Adds comments on crude-by-rail safety)

Aug 6 (Reuters) - EOG Resources Inc, which produces oil and natural gas in North Dakota and Texas, said on Wednesday that while it supports U.S. exports of crude oil, it believes the North American refining market can absorb the excess production from shale formations.

"Even without exports, we still see several years of headroom in the North American refining market," Chief Executive Officer William Thomas said on a conference call with investors.

Several companies have begun exporting so-called "stabilized condensate," a lightly processed form of ultra-light crude oil, although it is unclear how much processing is required to legally sell U.S. crude oil abroad. The U.S. Commerce Department is studying the matter now.

Separately, EOG said it plans to use newer rail cars to ship its crude oil as its leases for existing DOT-111 models end. The DOT-111 tank car, the model used almost exclusively to ship oil by rail, has been criticized as not strong enough after a string of recent derailments and explosions, and many in the industry have pushed for updated models.

"We will be going with the cars of the future," Thomas said.

EOG said it has no plans to drill any new wells this year that would primarily produce methane, also known as dry gas, citing relatively low natural gas prices that it does not expect to rise.

EOG reported a better-than-expected quarterly profit on Tuesday night. [ID:"nL2N0QB2K5] (Reporting by Ernest Scheyder; Editing by Jeffrey Benkoe and Tom Brown)