Mark G. Papa: Directionally it would be relatively flat with this year is a 13% case and up at 7%.
David Heikkinen (Tudor Pickering): Could you give the production associated on Appalachia?
Gary L. Thomas: It was 17 million a day.
David Heikkinen (Tudor Pickering): The Bakken is 20 miles long and how long is it wide?
Mark G. Papa: It is several miles wide.
Robert Morris (Banc of America): When will you give the capital spending guidance for next year?
Mark G. Papa: It will be either at the next earnings call.
Robert Morris (Banc of America): Your deferred tax continues to run at about 80%. That moves down as the gas price moves up. In modeling all that what would you assume is the deferred tax rate in the $8 case?
Timothy K. Driggers: It is going to be in that same range because of the high IDC we have going into that program. In the $7 case we are likely to get into an odd man position which we will not have in the $8 case.
Robert Morris (Banc of America): The incremental looks like 45,000 acre plus of acreage you bought in Bakken. What is the pricing going for on that acreage?
Mark G. Papa: 200 to 300 dollars an acre is what we pay for that incremental acreage.
Robert Morris (Banc of America): How much did you pay for your sand mine?
Gary L. Thomas: We have got 1000 acres in Hood County and it is adjacent to the Unema mine and we paid $500,000 for the lease and essentially the same with the oil and gas lease. We have control of that as long as we are mining, and we are going to be spending somewhere around $15 million to have everything functionable and we will start using sand there in December.
Robert Morris (Banc of America): Is there an operating cost that will show up in LOE or line item for that going forward?
Mark G. Papa: It will all show up as it will come through the DD&A line. It is not an operating cost side. It will be part of the well completion cost or that well cost.
Gary L. Thomas: Half the completed well cost is on the drilling side and about half on the completion and that half of the completion is a stimulation portion, and about half of our stimulation is the sand. With those owning the sand then there is a tremendous reduction in the cost of that. It is 2 cents per pound versus cost of service companies somewhere around 8 cents per pound. That is where a large part of the savings comes in. That is a fraction of how much sand we use and we will continue to use more sand for the work. Per well is per completion. That is how we get the $350,000 savings per well.
Gil Yang (Citigroup): Why are you limited to only about 30 wells?
Gary L. Thomas: We are going to have 3 frac spreads that we have contracted and we will just be able to get about a third of our wells completed with those three frac spreads. Once we get the sand, the sand mine operating and see that we can produce more sand than those three frac spreads can utilize. We have got other service companies that are interested in using EOG''s sand which will be also a cost savings to EOG.
Gil Yang (Citigroup): Would that appear in offset to DD&A?
Gary L. Thomas: Yes. That will reduce well cost and half our cost is on the drilling side. Large portion of that is a rig so that is why we went to the automated rigs and then we look at the other part of that equation that being the completion and what we can do to improve our efficiency and lower our costs on that side as well. |