April 7, 2010 / 7:05 PM / in 8 years

UPDATE 3-EOG boosts oil and gas reserves, shares up 7 pct

* Sees new reserves from Bakken, Barnett shales

* Oil finds in Texas, North Dakota and Colorado

* Shares climb 7 percent, hit 7-month high

* Divesting $1-$1.5 billion in N. American assets (Adds details from meeting, share price)

By Anna Driver

HOUSTON, April 7 (Reuters) - Oil and gas producer EOG Resources Inc EOG.N increased its reserve estimates and said it made new crude oil discoveries in three states, helping send its shares up 7 percent.

“We’ve been working for three years to shift this company to a higher liquids mix,” Mark Papa, the chief executive of EOG, told analysts in remarks broadcast over the Internet on Wednesday.

EOG is building up large North American acreage positions in areas where it can use horizontal drilling to explore for crude oil trapped in rock like shale.

Oil and gas companies are increasingly looking to tap those reserves as crude prices trade in a broad range around $70 to $80 per barrel, while large inventories have weighed on natural gas prices.

To help fund its exploration program, EOG said it plans to sell $1 billion to $1.5 billion of its North American assets in late 2010 or early 2011, but declined to provide any details.

The company said it may also seek a joint venture partner to help its develop its shale gas assets, which include the Horn River in British Columbia and the Marcellus Shale in the eastern United States.

This year, EOG expects to spend $5.1 billion, including gathering and processing expenditures. In 2009, EOG spent $3.1 billion on exploration -- excluding acquisitions -- and $326 million on gathering and processing.

HIGHER OUTPUT

While EOG left its 2010 production growth target unchanged at 13 percent, it said production would grow 19 percent in 2011 and 21 percent in 2012, driven by higher crude oil output.

Drilling successes at the Bakken and Three Forks formations in North Dakota boosted the company’s reserve potential there to 420 million barrels of oil equivalent from the 80 million BOE it had booked as proven reserves at the end of 2009, the company said in a statement ahead of its annual presentation to analysts.

The Houston company’s Barnett Shale reserves potential in Texas rose to 370 million BOE from the 56 million it had booked at the end of the year.

EOG said initial results from its Eagle Ford acreage in South Texas indicated reserve potential of 900 million barrels of oil, with first production expected next year.

The Eagle Ford has the potential to be one of the largest U.S. discoveries in the last 40 years, Papa told analysts.

At its Spearfish holdings in North Dakota, early drilling indicated reserves of 20 million barrels of oil equivalent, and the company was still evaluating a find in Colorado.

Shares of the company were 7 percent higher at $104.26 on the New York Stock Exchange. In contrast, the ARCA natural gas index .XNG was down 0.5 percent. (Reporting by Anna Driver in Houston and Matt Daily in New York; Editing by Derek Caney)

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