According to current industry statistics, horizontal wells account for approximately 10 percent of all onshore drilling in the United States and Canada. While the industry ratio is expected to grow to 30 to 35 percent within the next five years as more resource plays are developed, EOG is already ahead of these forecasts. In the United States, we are currently drilling approximately 50 percent of our wells horizontally, refining our skills and seeking improvements as we go. This gives our company a technical edge, which we expect will allow us to capture additional large North American resource plays.

First Mover Advantage

Using this highly developed skill set to identify plays that share unique reservoir characteristics, in 2006 EOG was able to accumulate sizeable acreage positions at attractive prices in three prolific domestic basins during the early stages of their development.

The first, a southern extension of the Fort Worth Basin Barnett Shale Play, confirmed that this is a much bigger natural gas field than originally thought. With approximately 610,000 total net acres leased in the play at year-end 2006, EOG estimates that it may have captured approximately 4.5 to 6.7 net Tcf of potential reserves, of which only 829 Bcfe were booked as proved reserves at year-end 2006.

In the second play, the South Texas Wilcox near Laredo, EOG is drilling horizontally in sandstone. The net natural gas reserve potential in that play is estimated to be in the range of 400 to 600 Bcfe.

EOG’s third new play is the Bakken Shale Oil in North Dakota, where the company has accumulated 130,000 net acres. There, the company estimates that net potential reserves may be in the range of 30 to 70 MMBbl of oil.

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