Ahead of the Curve

EOG is at the forefront of what is being characterized as one of the greatest advancements for the North American onshore exploration and production industry in recent years. New resource plays and hydrocarbon formations that once were effectively uneconomic or only marginally profitable through development with vertical drilling now are being unlocked with horizontal wells. Our success in applying and advancing innovations in horizontal drilling and completion technology is reflected in our 2007 performance and gives us optimism for 2008 and beyond.

Horizontal Drilling and EOG’s Niche

Our corporate strategy remains consistent. Rather than adding reserves through major acquisitions, EOG focuses on organic growth through the drillbit while continuing to rank as a low-cost producer with high reinvestment rates of return. We also place a high priority on maintaining a very conservative balance sheet.

Keeping that proviso in mind, EOG recognized that conventional vertical drilling would always have its place, but horizontal drilling together with improved completion techniques showed promise as a tool for turning previously bypassed reservoirs into economic resources.

Over the last eight years, we have honed our skills in identifying the rock types that hold the most potential for applying the right combination of horizontal drilling and completion technology. These breakthroughs in geologic understanding help EOG target accumulations with significant amounts of hydrocarbons in-place and locate the ‘sweet spots’ where the highest rate of return wells can be drilled. Through systematic experimentation with horizontal drilling and completion techniques, we then optimize reserve recoveries and production rates, turning marginal vertical plays into highly economic, larger-scale horizontal plays.

By identifying possible reservoirs amenable to horizontal drilling in areas where there is little or no activity, EOG has established a first-mover advantage in several evolving onshore North American fields. Leasing large acreage positions with many viable drilling locations provides EOG with the opportunity to drive down drilling, completion and production costs, as well as refine our completion techniques throughout the development phase of these projects.

continued