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Jon, you and I share a lifeboat after the sinking of the S.S PM. I had to do some serious rolling “Out and a little bit down” last week. It was ugly. I had originally sold puts at 95 strike when the stock was over 100. Yuck.
I did not add to my position, “To keep the trade positive.” Lord knows how many I would have had to have added!
Bottom line: I am in this trade for a long time.
Always Look On The Bright Side Of Life Dept: The same thing happened to me on WYNN and I lived and prospered.
Good luck,
Pablo
Here’s the story, as carried by WSJ…
Dozens of People Recount Pattern of Sexual Misconduct by Las Vegas Mogul Steve Wynn
Wynn Resorts employees and others described a CEO who sexualized his workplace and pressured workers to perform sex acts. Mr. Wynn responded: ‘The idea that I ever assaulted any woman is preposterous.’
Steve Wynn, CEO of Wynn Resorts, during a press conference in Macau, China, in August 2016.
Steve Wynn, CEO of Wynn Resorts, during a press conference in Macau, China, in August 2016. PHOTO: VINCENT YU/ASSOCIATED PRESS
By Alexandra Berzon, Chris Kirkham, Elizabeth Bernstein and Kate O’Keeffe
Updated Jan. 26, 2018 2:36 p.m. ET
LAS VEGAS—Not long after the billionaire casino mogul Steve Wynn opened his flagship Wynn Las Vegas in 2005, a manicurist who worked there arrived at the on-site salon visibly distressed following an appointment in Mr. Wynn’s office.Sobbing, she told a colleague Mr. Wynn had forced her to have sex, and she repeated that to others later.
After she gave Mr. Wynn a manicure, she said, he pressured her to take her clothes off and told her to lie on the massage table he kept in his office suite, according to people she gave the account to. The manicurist said she told Mr. Wynn she didn’t want to have sex and was married, but he persisted in his demands that she do so, and ultimately she did disrobe and they had sex, the people remember her saying.
After being told of the allegations, the woman’s supervisor said she filed a detailed report to the casino’s human-resources department recounting the episode.
Mr. Wynn later paid the manicurist a $7.5 million settlement, according to people familiar with the matter.
The incident was referenced, in broad terms, in a lawsuit in which Mr. Wynn’s ex-wife, Elaine Wynn, seeks to lift restrictions on the sale of her stock in Wynn Resorts Ltd. WYNN -10.42% Attorneys for Mr. Wynn in a court filing admitted he made the personal payment; in a later hearing, his corporate attorney said there had been “allegations of assault.” Court records in the suit are heavily redacted. Specifics of the allegation and the size of the settlement haven’t been previously reported.
Beyond this incident, dozens of people The Wall Street Journal interviewed who have worked at Mr. Wynn’s casinos told of behavior that cumulatively would amount to a decadeslong pattern of sexual misconduct by Mr. Wynn. Some described him pressuring employees to perform sex acts.
Steve Wynn discussing a planned casino during a press conference in Medford, Mass., March 2016.
Steve Wynn discussing a planned casino during a press conference in Medford, Mass., March 2016. PHOTO: JESSICA RINALDI/THE BOSTON GLOBE/GETTY IMAGES
In response to written questions about the manicurist’s and others’ allegations, Mr. Wynn said, “The idea that I ever assaulted any woman is preposterous.”He continued, in a written statement, “We find ourselves in a world where people can make allegations, regardless of the truth, and a person is left with the choice of weathering insulting publicity or engaging in multi-year lawsuits. It is deplorable for anyone to find themselves in this situation.”
Mr. Wynn said that “the instigation of these accusations is the continued work of my ex-wife Elaine Wynn, with whom I am involved in a terrible and nasty lawsuit in which she is seeking a revised divorce settlement.” He said he remained focused on the company, its employees and its shareholders.
Ms. Wynn declined to speak to the Journal. An attorney for Ms. Wynn said the notion she instigated the Journal’s article “is just not true.”
Mr. Wynn didn’t provide further response to other allegations of sexual misconduct the Journal inquired about.
Wynn Resorts said it is committed to maintaining a safe and respectful culture, requires annual anti-harassment training for all, and offers an anonymous hotline. “Since the inception of the company, not one complaint was made to that hotline regarding Mr. Wynn,” the company said.
Mr. Wynn, turning 76 on Saturday, is a towering figure in Las Vegas and the wider gambling industry. As builder of the Mirage, Treasure Island, Bellagio, Wynn and Encore casinos in Las Vegas—lavish, multiuse resorts with features such as artificial volcanoes, dancing fountains and French chefs—he brought a new level of sophistication and scale to the Strip.
Mr. Wynn no longer owns the Mirage, Treasure Island or Bellagio, but his empire now includes two casinos bearing his name in the Chinese gambling enclave of Macau, and he is building a $2.4 billion Wynn casino in the Boston area. He is the chairman and chief executive of Wynn Resorts.
Steve Wynn, third from right, breaks ground in 2002 for Le Reve, a 2,700-room luxury hotel casino that would eventually become the Wynn Las Vegas resort.
Steve Wynn, third from right, breaks ground in 2002 for Le Reve, a 2,700-room luxury hotel casino that would eventually become the Wynn Las Vegas resort. PHOTO: CHRIS FARINA/CORBIS/GETTY IMAGES
Dozens of powerful men have faced consequences in recent months after publicly aired accusations of sexual improprieties. Those against Mr. Wynn are the first in this wave to center on the CEO and founder of a major publicly held company, in this case one operating in a tightly regulated industry.Mr. Wynn owns nearly 12% of Wynn Resorts, a stake worth $2.4 billion, and is considered integral to its success. His signature is the company logo. In a recent securities filing citing possible risks to the business, the company said, “If we lose the services of Mr. Wynn, or if he is unable to devote sufficient attention to our operations for any other reason, our business may be significantly impaired.”
Mr. Wynn’s political profile also has grown. He is a former casino-business rival of President Donald Trump, who said in 2016 that Mr. Wynn was a “great friend” whose advice he valued. After Mr. Trump’s election, Mr. Wynn became the Republican National Committee’s finance chairman.
Mr. Wynn is a regular on his casino floors, known for a keen attention to details and what employees say is a temper that can flare when they fall short. He has frequently had services such as manicures, massages and makeup application performed in his on-site office at the Wynn Las Vegas.
The contrast between Mr. Wynn’s position and that of the salon and spa employees is stark. Former employees said their awareness of Mr. Wynn’s power in Las Vegas, combined with the knowledge that the jobs they held were among the best-paying available there, added up to a feeling of dependence and intimidation when Mr. Wynn made requests of them.
Some said that feeling was heightened at times by the presence in a confined office space of one or more of his German shepherds, trained to respond to commands in German.
The Journal contacted more than 150 people who work or had worked for Mr. Wynn; none reached out to the Journal on their own. Most of those who spoke to the Journal about Mr. Wynn said they worried that doing so could hurt their ability to work elsewhere because of his influence in the casino industry and the state.
Mr. Wynn, center, with businessman Phil Ruffin, left, and now-President Donald Trump in 2005 in Las Vegas.
Mr. Wynn, center, with businessman Phil Ruffin, left, and now-President Donald Trump in 2005 in Las Vegas. PHOTO: JOE CAVARETTA/ASSOCIATED PRESS
Former employees said they sometimes entered fake appointments in the books to help other female workers get around a request for services in Mr. Wynn’s office or arranged for others to pose as assistants so they wouldn’t be alone with him. They told of female employees hiding in the bathroom or backrooms when they learned he was on the way to the salon.“Everybody was petrified,” said Jorgen Nielsen, a former artistic director at the salon. Mr. Nielsen said he and others repeatedly told high-level company executives Mr. Wynn’s sexual advances were causing a problem, but “nobody was there to help us.”
One former massage therapist at the Wynn Las Vegas spa said that several years ago, when Mr. Wynn was booking multiple appointments a week with her in the private massage room in his office suite, he would continually adjust a towel to expose himself. Then at one session, she said, he threw it off and said, “Just get this thing off of me.”
She said he wouldn’t let her use a towel to cover his genitals after that, contrary to state licensing regulations, and he also began rubbing her leg while she massaged him.
After a few weeks, the former employee said, Mr. Wynn instructed her to massage his penis to climax. “Don’t ignore it anymore,” he said, according to her recollection. The woman said that because he was her boss, she felt she had no choice but to agree to some of Mr. Wynn’s requests, including that one. She said masturbating him became a frequent part of the massage sessions for several months.
At the end of each hourlong massage session, she said, he handed her $1,000 in cash, which was the same amount as before the sexual activity began.
In subsequent sessions, the woman said, Mr. Wynn asked her to perform oral sex on him and described in detail how he wanted it done. This request she refused, she said.
19701980199020002020
19701970s: A onetime bingo-parlor operator and liquor distributor, Steve Wynn gains a controlling stake in the Golden Nugget, an aging downtown Las Vegas casino. He remakes it into one of Las Vegas’s most popular resorts. PHOTO: ASSOCIATED PRESS
Mr. Wynn completes the Mirage, a lavish resort with an erupting artificial volcano and an aquarium in the lobby that is credited with starting a wave of mega-resort construction on the Las Vegas Strip. PHOTO: GETTY IMAGES
After adding to his Strip portfolio with the Bellagio and Treasure Island casinos, his company, Mirage Resorts Inc., is acquired by Kirk Kerkorian’s MGM Grand Inc. amid a sharp drop in its share price and pressure from investors.PHOTO: ASSOCIATED PRESS
Now without a Las Vegas casino, Mr. Wynn was awarded a coveted license to operate in Macau, the Chinese gambling enclave. He has built two casinos there since. PHOTO: REUTERS
Mr. Wynn returns to the Strip with the opening of the Wynn Las Vegas, a sleek bronze resort that opened on the birthday of his then-wife, Elaine.PHOTO: ASSOCIATED PRESS
Mr. Wynn and Ms. Wynn divorce after 46 years of marriage–the couple’s second divorce. They agree to split their holdings in the company, but he receives voting control over her shares and her ability to sell them is restricted. That agreement has since become the subject of a long-running legal dispute.PHOTO: REUTERS
Mr. Wynn wins a license to operate in Boston. The $2.4 billion resort is now under construction.PHOTO: GETTY IMAGES
Mr. Wynn, outspoken on politics, is named finance chairman of the Republican National Committee after his former business rival Donald Trump is elected president, making Mr. Wynn the Republican party’s chief fundraiser.PHOTO: GETTY IMAGES
The woman said she told Mr. Wynn at a later session she was uncomfortable with his requests, and he then stopped asking for massages from her.
She said she didn’t tell anyone what happened at the time because she was embarrassed, adding she is still trying to deal with the incident emotionally. She did tell a colleague in a general way that Mr. Wynn had been inappropriate with her, that colleague recalled in an interview.
The colleague said she offered advice to the massage therapist—but didn’t mention that Mr. Wynn had also made advances toward her while she massaged him in his office’s private massage room. The colleague said in an interview Mr. Wynn would remove his towel and, while she massaged the front of his thighs, would tell her to “go higher,” which she understood to mean touch his genitals. She said she told him this made her uncomfortable, and then his requests for massages became less frequent.
Dennis Gomes, who was an executive at the Golden Nugget in Las Vegas when Mr. Wynn was running that casino decades ago, said in a deposition in an early-1990s lawsuit that Mr. Gomes “routinely received complaints from various department heads regarding Wynn’s chronic sexual harassment of female employees,” according to a court filing that summarized his testimony.
In the suit over Mr. Gomes’s departure to work for a Trump casino, Mr. Gomes described what he called a “disgraceful pattern of personal and professional conduct” that he said included Mr. Wynn’s directing him to get the home phone numbers of casino cocktail waitresses.
Mr. Wynn denied the allegations in the suit in Nevada state court. The parties agreed to drop the suit in 1994.
Mr. Gomes died in 2012. His widow, Barbara Gomes, in an interview for this article, said, “I remember him saying, ‘I’m not his pimp,’ ” referring to Mr. Wynn.
The lobby of the Wynn Las Vegas, shown here in 2011.
The lobby of the Wynn Las Vegas, shown here in 2011. PHOTO: MARK RIGHTMIRE/THE ORANGE COUNTY REGISTER/ZUMA PRESS
Shawn Cardinal, who was a personal assistant to Elaine Wynn while she was married to Mr. Wynn, said that around 1987, Mr. Wynn repeatedly asked her to spend time with him outside of work. She said he continued asking, often approaching her at her desk outside his wife’s office, despite her telling him she had plans with her husband and child.On the phone, he would ask, “What are you wearing? Why don’t you hang out with me after work?” said Ms. Cardinal. “I was not brave enough to say, ‘How dare you?’ I just joked my way out of it and I made sure I was never alone with him.”
Several former employees said Mr. Wynn often walked around some areas of the complex in extremely short shorts without underwear, and he would sit in the salon to get pedicures in such a way that his genitals were exposed.
One former employee said after she had performed services in Mr. Wynn’s office for years, one day he asked if he could kiss her. She said she laughed off the request, hoping to leave without upsetting him.
Another time, this employee said, she was performing services in her own workplace at the casino when Mr. Wynn said, “So when are you going to come into my office and f— me?”
Record Revenue
Wynn Resorts reported its highest-everrevenue in 2017, following years of declines inits Macau business beginning in 2013.
Wynn Resorts’ revenue
Source: FactSet
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She said that she again laughed off the proposition. “I would say, ‘Oh Mr. Wynn.’ ” she recalled. “I was just trying to get on with my job.”One time as she did her work in Mr. Wynn’s office, this woman said, he repeatedly rubbed his genitals, which were falling out of his shorts, and made comments about things he would like to do with her sexually. On one occasion as she was leaving his office, the former employee said, Mr. Wynn grabbed her waist as she stood against a wall and told her to kiss him. She said she slipped out of his hold and left.
After around two weeks of pursuit, this woman said, Mr. Wynn stopped.
The former employee’s supervisor and another colleague confirmed being told of these advances in detail at the time. The employee and the supervisor said they sought to manage the situation rather than report it because they believed there would be repercussions if they did.
The 2005 allegations of the manicurist that led to the settlement were the most striking described by former employees. In this instance, a woman who was a salon manager at the time said she filed a written report to human resources. She said she got a call from an executive, Doreen Whennen, castigating her for filing to HR and saying she should have taken the matter directly to Ms. Whennen.
The former manager said no one followed up with her about the matter. The manicurist soon left.
Ms. Whennen, who is no longer at the company, declined to comment.
Continued Comeback
After bottoming out two years ago amidworries about the future of Macau, WynnResorts’ stock price has since rallied.
Wynn Resorts’ share price
Source: WSJ Market Data Group
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In the lawsuit between the Wynns, Ms. Wynn cited a “multimillion dollar payment” made by Mr. Wynn following allegations he had engaged in “serious misconduct” on company property against an employee not named in the suit. A filing said Ms. Wynn had learned of the settlement in 2009.In the suit, Ms. Wynn, who is a co-founder and former board member of Wynn Resorts, is seeking to free herself from restrictions on the control of her estimated $1.9 billion of stock that were imposed by a 2010 agreement with Mr. Wynn.
Her attorneys have argued that in making a settlement with a former employee without telling the board, Mr. Wynn recklessly exposed the company and other directors to liability.
Wynn Resorts, in its statement to the Journal, alleged that Ms. Wynn was trying to “tarnish the reputation of Mr. Wynn in an attempt to pressure a revised divorce settlement.” The company called it noteworthy that despite knowing of the allegations since 2009, Ms. Wynn didn’t make them known to the board, of which she was a member, or raise them until after she lost her board seat.
An attorney for Ms. Wynn said she raised the issue internally when she learned of it.
Mr. Wynn’s attorneys have argued the settlement wasn’t relevant to the Wynns’ dispute, which is headed for a trial this spring.
—Jim Oberman, Lisa Schwartz and Zusha Elinson contributed to this article.
Corrections & Amplifications
Shawn Cardinal, who was a personal assistant to Elaine Wynn while she was married to Mr. Wynn, said that around 1987, Mr. Wynn repeatedly asked her to spend time with him outside of work. An earlier version of this article incorrectly stated the date was around 1997. (Jan. 26, 2018)Write to Alexandra Berzon at alexandra.berzon@wsj.com, Chris Kirkham at chris.kirkham@wsj.com, Elizabeth Bernstein at Bonds@wsj.com and Kate O’Keeffe at kathryn.okeeffe@wsj.com
One of the clothing stocks I trade a good bit is VFC. However, it is a multi-line conglomerate composed of about a dozen companies including Wrangler, North Face, Nautica, Timberland. They report Friday morning.
Incidentally, Valerie, please don’t accuse me of being organized! I procured that spreadsheet in about 2 seconds from a service to which I subscribe, Optionslam.
I don’t trade it and it’s not because they managed to poison a bunch of people. It’s because I have a general aversion to restaurant stocks (and single-line clothing stocks).
Good trading,
Pablo
Valerie, here ya go…
What John said. Thx.
Stock at $97.08. Did an April month put credit spread at 95/85 and netted 61 cents.
Wednesday afternoon’s slide in BBBY makes you wonder if the cat got out of the bag ahead of earnings.
Most car-related stuff is down today. GPC is down almost 3%. Did a May put credit spread at 85/65 when stock was $89.74 and netted 84 cents.
You didn’t “throw away,” $300, you just hit a double instead of a home run. Be thankful for base hits. They add up.
Great story on EOG, “the Apple of oil,” in today’s WSJ:
Fracking 2.0: Shale Drillers Pioneer New Ways to Profit in Era of Cheap Oil
Texas producer EOG has led the industry in extracting oil from shale faster and cheaper; challenge to OPEC’s control over prices?
EOG has long focused on innovations to boost returns on its wells.By ERIN AILWORTH
Updated March 30, 2017 1:51 p.m. ET
119 COMMENTS
MIDLAND, Texas—Using a proprietary app called iSteer, Brian Tapp, a geologist for EOG Resources Inc., EOG +0.46% dashed off instructions to a drilling rig 100 miles away. This tool is among the reasons the little-known Texas company says it pumps more oil from the continental U.S. than Exxon Mobil Corp. —or any other producer.A rig worker received Mr. Tapp’s iPhone alert and tweaked the trajectory of a drill bit thousands of feet underground, to land more squarely in a sweet spot of rock filled with West Texas crude.
U.S. shale drillers transformed the energy industry over the past decade with hydraulic fracturing and horizontal drilling, in the early days using brute force to unleash a torrent of oil and gas that altered the balance of power among oil-producing nations and triggered a global glut.
Now, with oil currently trading near $50 a barrel, these producers are trying to unleash fracking 2.0, the next step in the technological transformation of the sector that is aimed at extracting oil even faster and less expensively to eke out profits at that level.
The promise of this new phase is potentially as significant as the original revolution. If more producers can follow EOG’s lead and profitably ramp up output from shale drilling even at lower prices, the sector could become a lasting force that challenges OPEC’s ability to control market prices.
For a sector in which the previous era’s success was tied to the rapid expansion of output, the shift toward finding more cost-effective ways to get to that oil and gas is full of challenges. When oil prices dropped, critics wondered if the shale industry—rife with heavily indebted companies that had never turned a profit—would collapse.
EOG, with its longtime focus on low-cost production, is the producer many hope to emulate, thanks to the iSteer app and dozens of other homegrown innovations. Dubbed the “Apple of oil” by one analyst, EOG made its name as a pioneer in horizontal drilling and in finding ways to get oil out of shale—often dense layers of rock that hold oil and gas in tiny pores—a feat many once believed impossible.
Power Steering
EOG’s rig workers at drilling sites and
geologists miles away in an office share
information through EOG’s iSteer app.
They can make corrections within minutes
on a drill bit’s trajectory, compared with an
older process that took at least 30 minutes
to make adjustments. Drill bits can progress
up to 500 feet an hour.
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corrections
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trajectory
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course
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Sensors behind underground drill report data to office
including speed, direction, rock type.
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Geologist in office crunches numbers, using historic databases
and other analysis tools; advises rig of course correction.
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Rig worker revises course, keeping trajectory in 10-to-15 foot
window, which improves well performance and consistency.
3
Source: the company
THE WALL STREET JOURNAL.
Competitors such as Chesapeake Energy Corp. and Pioneer Natural Resources Co. also are finding new ways to profit amid low energy prices. Many are experimenting with longer, supersize wells, and fracking them with millions of pounds of sand. Other producers, however, have said the industry needs oil prices of at least $55 to $60 to truly rebound.The price of oil plunged about 75% from its peak of more than $100 a barrel in mid-2014, and the natural-gas price sank by half in the same period. More than 420,000 oil and gas jobs world-wide have been lost, according to energy consulting firm Graves & Co., and, since the start of 2015, over 200 U.S. energy companies have filed for bankruptcy, according to law firm Haynes & Boone LLP.
EOG, part of Enron Corp. until 1999, now drills horizontal wells in West Texas more than a mile long in 20 days, down from 38 days in 2014. It has done it in as few as 10½ days. It estimates it can get at least a 30% rate of return on wells at $40 a barrel, and that at $50 it can boost oil production at least 15% a year through 2020.
The company said it produced roughly the same amount of oil last year as it did in 2014 with a budget that was 67% smaller.
The iSteer app and other proprietary programs EOG designed are partly why.
EOG uses iSteer to help navigate through rock thousands of feet underground, landing in identified layers with more precision. A device behind the drill bit underground transmits information—including depth and direction but also readings to identify types of rock and the presence of gas—to a geologist at the office. The numbers are crunched, using EOG’s databases on the location’s rock layers and on previous wells, and course corrections are sent to the driller on the rig.
EOG said adjustments can happen in minutes, instead of a process that in the past took at least 30 minutes. The quick modifications keep the drill in a 10-to-15 foot window, which EOG said improves the output and consistency of a well.
The apps help employees work at the “speed of thought,” said Sandeep Bhakhri, EOG’s chief information officer.
The company now uses 65 apps it designed after realizing it needed tools with capabilities it couldn’t find off the shelf. Along the way, it boosted its staff of data scientists, and over the past three years has hired recent computer-science graduates from the University of Texas at Austin.
The apps help EOG answer a range of questions, such as how much pressure to use to crack a particular geologic stratum, to identifying ideal trajectories for drills, to more mundane queries, such as the fastest route to drive from one drilling site to the next.
“I look at [the apps] first thing in the morning, on the exercise bike or during breakfast—it gives me a head start on the day,” said Ezra Yacob, general manager of EOG’s Midland operations.
Tinkering, core to the company’s culture, was evident on a recent visit to the division office in Midland, a city of about 124,000 at the heart of the oil-rich Permian Basin in West Texas.
There, geologists, engineers and technicians could be found constantly on their computers and iPhones using EOG’s apps. The company says all workers are encouraged to fiddle and find novel solutions to problems.
It’s an outgrowth of the company’s habit of ignoring conventional wisdom as it looks for ways to become a better producer.
In the early 2000s, EOG was determined to show that vast supplies of natural gas could be unlocked by drilling horizontally through shale. It drilled 15 uneconomic wells in the Dallas-Fort Worth-area field known as the Barnett, while its employees experimented to find better techniques, according to former CEO Mark Papa. It succeeded on the 16th.
As the shale boom took off, scores of producers borrowed heavily to lease land for drilling. EOG moved in the opposite direction, keeping debt low and favoring technological innovation and returns over rapid growth.
When Mr. Papa in 2007 realized gas prices were headed for a drop, he said the company started shifting to oil. At the time, few in the industry thought oil could be economically extracted from shale formations.
A bespectacled EOG geologist named Bill Thomas, then the head of the company’s Fort Worth office, was among those who did.
He became CEO in 2013, and now can often be found in his 35th-floor office at EOG’s headquarters in Houston scrutinizing data about well productivity. Instead of a secretary, the assistant outside his office is one of the company’s top geo-technicians, responsible for analyzing information.
The company’s market cap is now $56 billion. Shares closed at $97.17 Thursday, down 18% from their price at oil’s mid-2014 peak, beating the SPDR S&P Oil and Gas Exploration and Production ETF, a common industry benchmark, which dropped 56% in that time.
EOG regularly solves problems in-house. When, in the early days of drilling for crude in North Dakota’s Bakken Shale, the company hit logistical problems getting its oil to market, it built a rail terminal and pipeline to help move it from North Dakota to the trading hub near Cushing, Okla.
These days, it designs its own motors to power drill bits, allowing its engineers to constantly incorporate fixes that improve performance. Oil is pumped into olive-green storage tanks made to EOG’s specifications, cutting down costs and the number of tanks it needs in the field.
It often works with smaller services contractors, instead of giants such as Schlumberger Ltd. and Halliburton Co. , so it can negotiate costs and find expertise tailored to its needs. The partnerships save it money and give it more control over the logistics and supplies needed for any given project, EOG said.
For example, a larger services company might ask EOG to use a particular sand supplier or employ a standard mix of sand, water and chemicals when fracking a well. With a smaller services company, EOG can potentially use sand from a company-owned mine—it bought one in 2008 when the specialized grains started becoming hard to find—and design fracks to meet specific needs.
Heath Work, an EOG drilling manager in Midland, compared the way the company operates to a championship Nascar driver and crew, who make small adjustments that add up over time. “Jimmie Johnson has won seven times and he does it with the same engine as his competitors; he just figures out how to change tires faster,” Mr. Work said.
Competitors are innovating too, as producing oil for less becomes more important than merely finding and pumping new supplies.
Chesapeake Energy recently used a record 50 million pounds of sand to frack a megawell in Louisiana, reaping cost savings via economies of scale. Chesapeake, which some believed was close to bankruptcy in early 2016, said the giant wells are part of its turnaround strategy.
Pioneer Natural Resources said it saves money by mining some of its own sand and has been building its own system to transport the water it needs. Chief Executive Tim Dove said those operations are integral to the company’s goal of producing one million barrels of oil equivalent a day by 2026 while still having cash to cover expenditures.
Critics have questioned EOG’s habit of quickly ramping up production from individual wells, arguing that can cause wells to peter out prematurely. The company used the strategy to supercharge returns in the Eagle Ford, an oil-rich region of South Texas where it was ahead of the pack in leasing more than 500,000 acres for a tiny percentage of what others would pay later.
Mr. Thomas, the CEO, said trial and error has proven its Eagle Ford wells aren’t damaged when allowed to flow aggressively. “You increase your returns because the wells pay out so much quicker,” he said. “If you get a higher return and it doesn’t damage the well, then why not do it?”
EOG expanded in the Permian region by 310,000 acres in October when it acquired Yates Petroleum Corp. for $2.4 billion. Swallowing an entire company was an uncharacteristic move for EOG that will test whether it can export its corporate culture.
A day after the deal closed, EOG was already using its apps and data to steer a Yates well.
“The whole industry has gotten better, but we’ve gotten better a bit faster,” Mr. Thomas said.
Appeared in the Mar. 31, 2017, print edition as ‘Low Oil Price Ushers in Shale 2.0.’
Thanks, John, I think you’re onto something. I played VLO yonks ago and had forgotten about it. I’m looking at its BBs right now and if, in the near future, it slips back down towards today’s low (65.65), I’m going to sell some puts around 64. It’s showing good support at about $64.75. Thanks again. Pablo.
Amy, I’m with you 100% about earnings on EOG. We’re safe for a while…not until May 4. Also, you might want to have a look at historical price movements on EOG after earnings announcements. See attached.