EOG Resources Inc. (EOG)

[Timothy Smith]

Quite notable is the recent move by EOG Resources to increase their presence in the East Texas Eagle Ford play. EOG has initially acquired ~19,000 net acres in Walker and Madison Counties. In addition, in a series of farm-in transactions, EOG acquired from ZaZa Energy (ZAZA) a total of 39,000 net acres (net of acreage swaps) and has an option to acquire an additional 10,500 net acres. This brings EOG's total position in the play to at least 58,000 net acres plus 10,500 net acres under option.

EOG's total capital commitment in the play has already added up to a figure that is material even for a very large company as EOG. Adding to the amounts paid for the acreage are significant drilling commitments that EOG assumed in the ZaZa transactions (EOG is obligated to drill a total of 6 wells on the ZaZa acreage, in which ZaZa will have a 25% carried interest; three of these wells are expected to be drilled by the end of this year). Interestingly, EOG made the decision to exercise its farm-in options on ZaZa's acreage ahead of time, prior to seeing the results from the initial three test wells it planned to drill. EOG's move provided much needed financial liquidity to ZaZa and, that way, eliminated certain risks related to the farm-in. Still, EOG's decision clearly reflects the company's strong interest in the play.