EOG Resources had a successful first quarter in 2024, reporting $1.6 billion in adjusted net income and generating $1.2 billion in free cash flow.
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EOG Wells Drilled Since 2023
They maintained a commitment to returning value to shareholders, with over 100% of free cash flow being allocated to dividends and share repurchases. Operational performance exceeded targets, driven by a diverse multi-basin portfolio and a focus on efficiency gains. Despite a soft natural gas market, EOG anticipates demand growth in the second half of the year, particularly in LNG and industrial sectors. The company highlighted positive results from its Utica Combo play and recognized the retirement of long-time employee Billy Helms for his contributions to innovation and operational excellence.
Drilling & Completions
The earnings call discussed various aspects of drilling operations. Specifically:
- Efficiency Gains: EOG emphasized its focus on driving efficiency gains throughout its multi-basin portfolio. Longer laterals, averaging about 10% longer company-wide, were highlighted as a significant driver of efficiency improvements, leading to lower per-foot well costs and improved well economics.
- Operational Momentum: Despite moderating activity in certain areas like the Dorado asset due to market conditions, EOG maintains a full rig program throughout the year to maintain operational momentum, capture efficiencies, and advance its plays. This balanced approach allows them to manage volumes while continuing to develop assets.
- Service Costs: The company discussed trends in service costs, noting that bids for standard spot services have been trending lower, while stable pricing was observed for high-spec rigs and frac fleets. EOG has secured a significant portion (50% to 60%) of its service costs for 2024, primarily with high-spec, high-demand services to ensure consistent performance.
- Record Lateral Length: EOG achieved a company-wide record lateral length with a 3.7-mile lateral drilled in the Utica asset. This achievement reflects the company’s commitment to innovation and efficiency in its drilling operations.
Overall, EOG Resources appears focused on leveraging technology, optimizing drilling practices, and managing costs to drive operational excellence across its portfolio.
Natural Gas Price
The earnings call addressed the outlook for natural gas prices as follows:
- Current Market Conditions: EOG acknowledged that the natural gas market remained soft in the first quarter of 2024, similar to conditions observed in the previous year.
- Expectations for Improvement: Despite the current softness, the company expressed optimism about the natural gas market strengthening through the second half of the year.
- Drivers of Growth: EOG highlighted several factors expected to drive natural gas demand growth in the long term, including increased demand for LNG feed gas, electrification initiatives, exports to Mexico, coal power plant retirements, and industrial demand growth.
- Positioning and Strategy: The company discussed managing its Dorado dry gas play to align with demand expectations, particularly in anticipation of improving market conditions in the second half of the year.
Overall, EOG Resources appears to maintain a positive outlook on natural gas prices, driven by expected demand growth trends and strategic management of its assets to capture value in evolving market conditions.
Permian
The earnings call provided insights into EOG Resources’ activities and outlook regarding the Permian Basin as follows:
- Foundational Play: The Permian Basin serves as one of EOG’s core assets, contributing significantly to the company’s operational performance and financial results.
- Efficiency Improvements: EOG emphasized ongoing efforts to drive efficiency gains in the Permian, particularly through the use of longer laterals. The company reported plans to increase the average lateral length in the Eagle Ford by about 20% to unlock new potential across its acreage footprint.
- Operational Success: EOG highlighted consistent execution and success in drilling and completing longer laterals in the Permian Basin, particularly in the Delaware Basin, where they drilled four three-mile laterals in 2023 and planned to drill more than 50 in 2024.
- Strategic Importance: The Permian Basin remains strategically important for EOG, with the company leveraging its expertise and technology to maximize well performance and optimize capital allocation in this prolific resource play.
Overall, EOG Resources appears committed to maximizing the value of its Permian Basin assets through operational excellence, efficiency improvements, and strategic investment to drive long-term growth and profitability.
Eagle Ford
The earnings call provided insights into EOG Resources’ activities and outlook regarding the Eagle Ford as follows:
- Operational Focus: The Eagle Ford remains a key focus area for EOG, contributing to the company’s overall operational performance and financial results.
- Efficiency Improvements: EOG highlighted plans to increase the average lateral length in the Eagle Ford by about 20% as part of ongoing efforts to drive efficiency gains and unlock new potential across its acreage footprint in the region.
- Success and Performance: The company reported consistent execution and success in drilling and completing longer laterals in the Eagle Ford, leading to increased efficiencies, lower per-foot well costs, and improved well economics.
- Strategic Importance: EOG emphasized the strategic importance of the Eagle Ford in its portfolio, leveraging technology and operational expertise to maximize well performance and optimize capital allocation in this resource-rich play.
Overall, EOG Resources appears committed to maximizing the value of its Eagle Ford assets through ongoing operational excellence, efficiency improvements, and strategic investment to drive long-term growth and profitability.
Utica
The earnings call provided detailed insights into EOG Resources’ activities and outlook regarding the Utica formation, particularly the Utica Combo play, as follows:
- Exploration Success: EOG highlighted the Utica Combo play as one of its recent exploration successes, noting that it has added significant value to the company’s portfolio. The Utica Combo play was described as competitive with other premier unconventional plays across North America.
- Production Performance: Production data from the Utica Combo play indicated positive results, with wells exceeding expectations. Daily production rates per well were reported to average over 1,000 barrels of oil, 600 barrels of NGLs, and 4 million cubic feet of gas over the first six months of production.
- Geological Insights: The company discussed geological differences across various areas within the Utica Combo play, highlighting variations in thickness and geomechanical properties. For example, the Southern area of the play was mentioned to have better geomechanical properties and a slightly higher liquids mix.
- Operational Milestones: EOG reported significant operational milestones in the Utica, including the drilling of record-length laterals, such as a 3.7-mile lateral, which reflects the company’s commitment to innovation and efficiency in its drilling operations.
- Development Plans: EOG outlined its plans for continued development in the Utica, including drilling and completing additional wells across its acreage position. The company expects to drill and complete 20 net wells in the Utica throughout 2024, supporting a full rig program and enabling significant well cost reductions.
Overall, EOG Resources appears optimistic about the Utica formation, highlighting its potential as a significant contributor to the company’s future growth and value creation.
Production
The earnings call provided extensive information about EOG Resources’ production activities, including achievements, targets, and strategies. Here are the key points regarding production:
- Operational Performance: EOG reported strong operational performance in the first quarter, with production exceeding targets across various metrics. Total crude oil equivalent daily production increased compared to the previous quarter, demonstrating the company’s ability to deliver consistent results.
- Production Growth: EOG outlined its production growth targets for the year, including expectations for oil volume growth of 3% and total production growth of 6% in 2024. These targets reflect the company’s confidence in its operational capabilities and asset portfolio.
- Efficiency Improvements: The company highlighted efforts to improve production efficiency through initiatives such as longer lateral drilling, which contributes to lower per-foot well costs and improved economics. Efficiency gains were reported across multiple plays, including the Delaware Basin and Eagle Ford.
- Resource Potential: EOG discussed the resource potential of its assets, particularly highlighting recent exploration successes such as the Utica Combo play. The company sees these discoveries as significant contributors to future production growth and value creation.
- Balanced Development: EOG emphasized a balanced approach to development, ensuring that production activities are aligned with market conditions and optimized for long-term value. This includes moderating activity in response to market dynamics while maintaining operational momentum.
Overall, EOG Resources’ production outlook appears positive, supported by strong operational performance, targeted growth initiatives, and a strategic approach to development across its asset portfolio.
Budget
The earnings call provided insights into EOG Resources’ budget and capital allocation strategies. Here are the key points regarding the budget:
- Capital Expenditures: EOG outlined its capital expenditure forecast for 2024, stating that the budget remains at $6.2 billion for the year. This budget reflects the company’s planned investment in drilling, completion, infrastructure, and other capital projects across its asset portfolio.
- Allocation Priorities: The company emphasized its commitment to capital discipline and prudent allocation of resources. Despite market volatility, EOG maintains a disciplined approach to capital allocation, ensuring that investments are directed towards projects with the highest potential for returns and value creation.
- Shareholder Returns: EOG reiterated its commitment to returning capital to shareholders, highlighting its robust cash return program. The company has already committed to returning a significant portion of its free cash flow to shareholders through dividends and share repurchases, demonstrating its focus on delivering shareholder value.
- Balance Sheet Strength: EOG emphasized the importance of maintaining a strong balance sheet, which provides financial flexibility and resilience amid market uncertainties. The company’s capital allocation decisions are guided by its commitment to preserving financial strength and liquidity.
Overall, EOG Resources’ budget reflects a balanced approach to capital allocation, prioritizing investments in projects that drive long-term value while maintaining financial discipline and flexibility.
