HOUSTON EOG Resources Inc (EOG.N) plans to spend less on "money-losing" natural gas drilling next year, which will result in lower capital expenditures, the company's chief executive said Tuesday.
EOG is drilling for pricier crude oil in basins including the Eagle Ford in south Texas and the Bakken in North Dakota while slowing natural gas drilling. Huge supplies have depressed natural gas prices, causing energy companies to re-direct capital to oil exploration and production.
"Higher crude oil volumes and higher crude oil price realizations ... and less money-losing North American natural gas volumes equals more net income," EOG CEO Mark Papa said on a call to discuss the company's third-quarter earnings.
EOG, which reported better-than-expected results after the market close on Monday, said oil production rose 45 percent in the quarter.
Next year the crude oil growth rate may slow somewhat, as EOG becomes a "bigger oil company," Papa told analysts.
EOG shares jumped 4.5 percent to $122.03 on Tuesday.
"EOG remains far ahead of peers in the shift to unconventional liquids," Bernstein Research analyst Bob Brackett said in a note to clients on Tuesday, citing the company's well results in the Eagle Ford and increased production growth for the third time this year.
This year the company expects to spend about $7.6 billion, but next year's budget will shrink as EOG spends less on drilling on natural gas acreage.
Marathon Oil Corp, which is also drilling for crude in the Eagle Ford shale, reported an 11 percent rise in its third-quarter profit on Tuesday as output rose.
Marathon's total production available for sale, excluding Libya, was 438,000 barrels oil equivalent per day during the quarter, up from 386,000 a year earlier.
Shares of Marathon rose 8 cents to $30.59 in morning New York Stock Exchange trading. (Reporting By Anna Driver; Editing by Gerald E. McCormick and Leslie Adler)