The prospect of Iran and Libya flooding the world with crude has skittish investors oil shy as concerns rise that global crude capacity will tank WTI prices.

Libyan production rose to about 600,000 barrels per day late last week according to the National Oil Corp., including 300,000 barrels per day from the Sharara oil field that recently re-started. That compares to lows of about 200,000 barrels of oil per day a few weeks back.

Improving supply from Libya remains fragile given ongoing civil unrest, but it has contributed to oil price weakness year-to-date, said Bill Herbert, managing director and co-head of securities for Simmons Co. International.

Iran has also agreed to curtail its nuclear program and allow more intrusive inspections in exchange for sanctions relief, which may ultimately result in additional crude on the market.

But in the wake of supply glut fears, there could be opportunity since gas prices continue to struggle in the low $4 range, said Bob Brackett, senior analyst for Bernstein Research.

Brackett’s view is that “oil supply in the U.S. will not increase to the level baked into market projections.

“We believe upside potential remains with those companies that have core acreage in plays such as the Eagle Ford and Bakken,” he said in a Jan. 13 report.

And the best of the bunch, Brackett said, is EOG Resources Inc. (NYSE: EOG).

EOG has grown oil production 43% annually for the past three years and could become the top U.S. crude oil producer by 2018. The company named Bill Thomas president and CEO in July after serving as president since September 2011.

Yet it’s trading down 15% from its 52-week high, prior to oil-price worries. With projected cash flow per share at 24% from 2015 and 2014, EOG stands to see a 35% upside -- for a company with deep inventory, low costs, advantaged execution and quality management, Brackett said.

While EOG holds 320,000 net acres in the Permian, including 113,000 in the Midland Basin and 207,000 in the Delaware, the company does not view it as the next Eagle Ford or Bakken.

Thomas, a geologist, noted that he has already “lived twice” in the Permian and this is his third time to work the basin, Brackett said.

Thomas thinks the reservoir will not live up to the Eagle Ford and Bakken, pointing to lower horizontal production than those plays when they were at the same level of development.

Despite promising early oil results, he predicts that the reservoir will quickly become gassier as the pressure declines.

Still, the company and oil are dealing with skepticism.

EOG and Brackett share the view that the market is overestimating upcoming U.S. oil production. The Bakken and Eagle Ford have been the two major drivers of horizontal crude growth from 2005-2013 and account for 79% of current horizontal crude production.

EOG, at the same time, has been a leader in both plays.

In the Bakken, EOG had a strong year, showing the highest IPs in the play. EOG's average IP nearly doubled that of peers.

In the Eagle Ford, EOG is far and away the leading oil producer.

EOG Production Growth, 2012-2017E

2012

2013E

2014E-2017E

Crude oil, condensate

39%

39%

Double digit growth

NGLs

32%

17%

Total liquids

37%

33%

North American gas

  • 9%
  • 13%

Flat to modest growth

Other gas (Trinidad, U.K., China)

9%

  • 7%

Flat

Company Total

10%

9%

Source: EOG presentation

The company plans to continue using rail assets to choose between WTI-based Cushing and LLS-based St. James in spite of narrowing spreads. EOG anticipates the spread between WTI and LLS at $3-$4 per barrel for the long-term.

As for natural gas, the company remains uninterested.

In the future, it will be the fuel of the future. But for now, the company remains unattached until at least 2018 -- the earliest that LNG exports could happen -- and plans drill “zero dry gas wells in 2014.”

Thomas said that prices would need to be about $5.50 per thousand cubic feet (Mcf) in order to compete with oil for EOG’s capital expenditures.