Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Tom Gardner – Simmons & Co.
Tom Gardner – Simmons & Co.
Mark, I'm intrigued by your gas macro comments. You mentioned you're encouraged about 2010 and 2011. Do I read from that that given the steep inventories that industry appears to have and their ability to grow production, do you think we're poised for a rebalancing and an overshooting going from a short position to a long position in 2012? And is there any thoughts on how industry might smooth out the highs and lows, so to speak, with respect to supply and demand long-term?
Mark Papa
Yes. I mean, that's certainly a possibility. We just haven't forecast past 2011, Tom. As you know, I mean trying to forecast the gas market even more than 12 months out is a hazardous business. And we haven't focused at all on the demand side. We don't purport to be demand experts.
But what we have done is really sharpened our pencil on the supply side. And what we do see is that the next 12 to 18 months is, we believe, pretty well already cast in stone really kind of regardless of what happens to the go-forward rig count. And we think that the situation is that production is going to be falling quite a bit.
You may recall on our last earnings call pretty much exactly what we said is we said that we would have to endure another two or three EIA-914 reports, and we expected either the April or the May EIA report to be the first break of a significant decline. And indeed that's pretty much exactly what's happened. So we've got a fair degree of confidence in our model at this point, and the model is showing that we're now on the slippery slope.
Unfortunately, what's going to happen with the model is we think the July data or the June data, which will be the next data point to come out, will be pretty accurate. But then the subsequent two or three months may well be clouded by storage induced shut-ins or curtailments. So we're not going to have that much accurate data. But we think that it's pretty well inevitable that there's going to be a significant decline over the next 12 months in domestic production.
Tom Gardner – Simmons & Co.
Jumping over to your comments on tax in British Columbia, it's my understanding that the government's rolled out an energy stimulus package to attract more investment there. To what degree will EOG be able to take advantage of that both in Horn River and elsewhere? And what difference does that make with respect to the well economics?
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