August 5, 2011 [Reuters] - EOG Resources Inc and Nustar Energy LP signed a deal to build a rail offloading facility in Louisiana to receive oil from U.S. shale oil prospects like the the Eagle Ford in South Texas.
Crude’s steep premium to natural gas has speeded the development of shale oil in Texas, North Dakota and other states, while pipeline development has lagged. Companies are relying on tanker trucks and railcars to move the crude, but both are in short supply.
To ease the crunch, EOG and Nustar will build a 70,000 barrels-per-day facility in St. James, Louisiana.
Capacity could double to 140,000 barrels per day with minimal investment, EOG Chief Executive Mark Papa said on a conference call with analysts.
EOG reported stronger-than-expected second-quarter results as well as encouraging well data on Thursday after the close of regular trading, news that pushed the company’s shares up nearly 7 percent on Friday.
“In every one of our horizontal oil plays, we have upbeat news that we shared with you this quarter,” Papa told analysts. “And that’s pretty rare.”
Analysts at Raymond James characterized the quarter as a good one for EOG and analysts at Howard Weil in New Orleans upgraded the stock to “market outperform” from “market perform.”
The companies plan to build a new rail unit in the first quarter of 2012 and two storage tanks with a combined 360,000 barrels of capacity by May 2012.
EOG built rail in the Bakken shale to move its oil from the region. The company has a sand mine in Wisconsin to source sand used in its hydraulic fracturing jobs, a way to combat soaring oilfield service costs, the company said.
Papa also told investors he plans to retire in 18 months after turning 65 in September. He said his successor will be a long-time EOG executive with “EOG DNA.”
Shares of EOG climbed $6.42 to $98.55 in morning trading on the New York Stock Exchange.
