Horizontal drilling combined with the application of optimal completion technology has become a critical tool in developing new economic resources as EOG moves forward. In 2003, 11 percent of EOG’s wells in the United States were drilled using this technology. In 2008, we expect more than 50 percent of our domestic wells will be horizontal. This shift reflects both EOG and the industry’s appreciation for the opportunities that can be realized through horizontal drilling in tapping remaining reserves in the United States. In 2007, 22⁽²⁾ percent of all domestic wells drilled across the industry used the technology, versus 10⁽²⁾ percent just three years ago.

Technology Makes the Difference

In 2007, EOG recorded strong results using horizontal drilling technology in the Fort Worth Barnett Shale, North Dakota Bakken and South Texas.

Refinements in well completion processes resulted in higher well production and reserve recovery rates for Johnson County in the Fort Worth Barnett Shale. EOG’s Johnson County horizontal wells far exceeded the average peak month of production of any other operator’s wells in the area. Reflecting a more efficient drilling program and improved well results, our overall natural gas production from the Barnett Shale exceeded internal estimates with EOG exiting 2007 at approximately 375 MMcfed. The Western Counties, which remain in the early stages of development, are performing as expected. EOG has implemented cost reduction measures utilizing automated rigs and fracture treatment savings, which will improve overall returns during 2008.

EOG reported successful drilling from the Bakken Formation in North Dakota where we have accumulated approximately 320,000 net acres. During 2007, we increased our estimated reserves in the Bakken from 60 to approximately 80 MMbo, net. Currently, the North Dakota Bakken is the highest rate of return play in our drilling program.

In South Texas, EOG identified previously bypassed reservoirs that are amenable to horizontal drilling and by further experimenting with completion techniques, we have set up a good inventory of high rate of return drilling locations.

Also during 2007, EOG discovered several plays that we expect will have a role in driving future reserve and production growth. We developed these opportunities by focusing on previously uneconomic reservoirs using horizontal drilling and completion methods coupled with analyzing technical data from previously drilled industry wells.

Using the same techniques that gave us an early mover advantage in prolific Johnson County, we have unlocked economic crude oil reserves by extending the Fort Worth Barnett Play further north to Montague, Clay and Archer Counties. EOG has accumulated 250,000 net acres and based on initial results, the estimated reserve potential of the Fort Worth Basin crude oil play is approximately 225 to 460 MMboe, net.

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