EOG Resources Inc (NYSE:EOG) reported strong financial performance with $1.6 billion in adjusted net income and $1.2 billion in free cash flow.
The company demonstrated robust cash return to shareholders, distributing over 100% of free cash flow through dividends and share repurchases.
EOG Resources Inc (NYSE:EOG) has a diverse and high-return multi-basin portfolio, with significant contributions from new additions like the Utica combo play.
Operational excellence was highlighted with production and total per unit cash operating costs beating targets.
The company is well-positioned for future growth, maintaining capital discipline and focusing on sustainable cost reductions and operational efficiencies.
Negative Points
Natural gas market expected to remain soft through the end of the quarter, with a cautious outlook for immediate future despite longer-term bullishness.
Challenges in scaling up new plays like the Utica combo play without outrunning the learning curve and maintaining cost efficiency.
Potential volatility in oil prices due to dynamic global market conditions, despite a generally constructive environment.
The retirement of key personnel like Billy Helms could impact the continuity of innovation and operational strategy.
While strategic infrastructure investments are expected to yield long-term benefits, they require significant capital outlay and carry execution risks.
Q & A Highlights
Q: Ezra, could you discuss the gas outlook, especially regarding Dorado, considering the current forward curve and potential changes in rig activity? A: Ezra Y. Yacob - CEO & Chairman, EOG Resources, Inc.: Yes, despite high inventory levels from warm winters, we anticipate strong summer demand for power, which could significantly reduce inventory levels in the second half of the year. We maintain flexibility in our investment in gas plays, particularly Dorado, preferring to keep some rig activity to retain operational efficiencies. We have flexibility in completion schedules and no obligations to fill infrastructure, allowing us to focus on returns-based decisions.
Q: Given the significant return of over 100% of free cash flow this quarter, what does this signal to the market? A: Ezra Y. Yacob - CEO & Chairman, EOG Resources, Inc.: Our business has strengthened, allowing us to return a high percentage of cash flow, mainly through buybacks rather than special dividends. This trend will likely continue, reflecting our confidence in the undervalued state of EOG and the broader energy sector. Our cash flow allocation priorities remain focused on regular dividends, but we will be opportunistic with buybacks to take advantage of market volatility.
Q: How does the timing of strategic infrastructure spend influence CapEx, and what is your confidence in hitting the $6.2 billion full year CapEx guide for 2024? A: Jeffrey R. Leitzell - Executive VP & COO, EOG Resources, Inc.: Our 2024 plan is on track, with CapEx slightly higher in the first half due to strategic infrastructure projects. We are confident in our total CapEx budget of $6.2 billion, with strategic projects like the Janus gas plant and Verde pipeline expected to come online soon, providing significant long-term savings.
Q: Could you discuss the operational strategies in mature fields like the Eagle Ford and Bakken to extend their life and deepen inventory? A: Jeffrey R. Leitzell - Executive VP & COO, EOG Resources, Inc.: In the Eagle Ford, we're completing about 150 net wells this year, focusing on operational efficiencies like faster drilling and longer laterals, which have improved economics despite the maturing asset. In the Bakken, we're focusing on infill drilling around existing developments, maintaining productivity and managing depletion effectively.
Q: What needs to happen for the Utica play to become a more significant part of your capital allocation and production going forward? A: Ezra Y. Yacob - CEO & Chairman, EOG Resources, Inc.: The Utica play is progressing well, with encouraging results from initial development packages. We are focused on not outrunning our learning curve and will continue to develop the play at a pace that allows for operational and cost efficiencies. The play's integration into our broader portfolio will be gradual, ensuring it competes effectively on returns and cost.
Q: How do you view the potential for refrac and recomplete activity in the Eagle Ford compared to new plays like the Utica? A: Jeffrey R. Leitzell - Executive VP & COO, EOG Resources, Inc.: We monitor refrac technology but find that our robust inventory across multiple basins offers better opportunities. Current refrac technologies do not yet provide the productivity uplift of new wells, so we prefer to focus on new drilling or infilling existing developments for better returns.
