The EOG Resources Third Quarter 2023 Earnings Results Conference Call began with an introduction from the operator, followed by opening remarks from EOG's Chief Financial Officer, Tim Driggers. He reminded listeners that the call is being recorded and discussed the company's forward-looking statements and non-GAAP financial measures. Other executives, including Chairman and CEO Ezra Yacob, also spoke about the company's success in increasing production, decreasing costs, generating free cash flow, and returning value to shareholders while reducing debt. Yacob credited the company's employees for embracing the EOG culture.

The third quarter results for the company have exceeded expectations due to the strong performance of employees and assets, leading to an increase in oil production guidance and a decrease in operating costs. The company has also demonstrated confidence in their business by increasing dividends and committing to returning 70% of annual free cash flow to shareholders. This increase reflects progress in cost structure and confidence in the company's expanding portfolio of premium assets, including the recently highlighted Utica combo play.

In the third quarter, EOG has seen success in organic exploration, leading to low-cost reserves and a decrease in DD&A rate. They have committed to a minimum of 70% cash return to shareholders, with a potential for special dividends and share repurchases. Their cost structure has improved, and their portfolio quality has grown, resulting in better capital efficiency and potential for free cash flow. EOG's financial performance has been excellent, with a 4% increase in oil production and a 9% decrease in per unit cash operating costs. Capital expenditures were below target due to timing of non-well related expenditures.

In the third quarter, the company has exceeded its forecast for volumes, operating costs, and capital expenditures. This is due to improved operational performance and increased efficiencies, particularly in the Eagle Ford and Delaware Basin plays. The company is on track to return a significant amount of cash to shareholders this year.

The company has been able to increase their full year oil guidance due to improvements in well productivity. They have also reduced their full year guidance for cash operating costs and have seen a decrease in capital expenditures. They are currently evaluating their plans for 2024 and expect to maintain similar levels of activity. They anticipate additional wells in the Utica and Dorado plays.

EOG is focused on managing costs through the cycle by contracting for 50% of services and leveraging their scale and partnerships with service providers. They are excited about the opportunities for the remainder of the year and into 2024. Jeff discusses the unique characteristics of their Utica asset, including low cost of entry, mineral rights position, held by production status, geologic operating environment, and downstream infrastructure status. They have added 25,000 net acres and now have 430,000 net acres in the volatile oil window. The leasehold cost of entry remains low, and they have acquired 100% of the mineral rights. Over 90% of the acreage is held by production, allowing for more control over development and the opportunity to drive down costs through efficiencies.

The target zone in the Utica play is shallow and consistent, making it ideal for drilling long laterals and precise targeting. This allows for significant efficiency improvements and low-cost operations. The initial 4-well Timberwolf package has been performing well above type curve, with each well delivering an initial 30-day production averaging 2150 barrels of oil equivalent and an 85% liquid cut. The Utica also benefits from abundant midstream infrastructure, with existing pipelines and a new one being built in the south. Plans for 2024 include running one full drilling rig to test optimal well spacing and improve operational efficiencies.

The paragraph discusses EOG's successful Utica asset and their strategy of building a diverse portfolio through low-cost organic exploration. This has resulted in continuous improvement to the company's capital efficiency and has positioned them to create shareholder value. The company has also recently completed two projects in their South Texas Dorado play, which will increase their gas sales options and save on transportation costs. EOG's approach remains differentiated and has been successful due to their track record of successful exploration and strong operational execution.

The company's premium return standard investments are governed by a high hurdle rate of 30% direct after-tax rate of return. They prioritize organic exploration to add inventory and reserves at lower costs. Their assets are unique and they have built a large and diverse portfolio. They also use technology to improve productivity and lower costs. The company has recently taken steps to increase shareholder returns, including raising the minimum cash return to 70%.

The company's commitment to shareholders has led to continual improvements and a stronger balance sheet. This has allowed them to increase their minimum cash return to shareholders from 60% to 70%. The company's investments in higher-return, lower-cost reserves and strategic infrastructure spending have lowered the breakeven point and expanded free cash flow potential. They have also retired a $1.25 billion bond and have a positive cash balance. The company expects similar activity in 2024 as in 2023, with potential for additional wells in the Utica and Dorado.

Billy Helms, a representative from a company, is discussing their plans for 2024 and how they will be based on the macro environment and the optimum level of activity in each of their plays. He mentions their core plays, the Eagle Ford and the Delaware Basin, and their emerging plays, the Utica and the Dorado. He states that they are pleased with their current activity levels and see continuous improvement in each play. He also mentions that they may see a few additional wells in the emerging plays next year. Helms notes that maintaining these levels of activity allows them to improve their cost basis and operational execution. He then moves on to discuss the Utica, stating that they have brought a new package of wells online.

The speaker is excited about the results of the latest well package in the Utica and believes that the new completion design is contributing to the success. They plan to further test the spacing in the area and are confident in achieving a sub-$5 F&D cost. They are still in the early stages of learning in the play and have room for operational efficiency gains and infrastructure development.

During a conference call, Arun Jayaram from JPMorgan Securities asks for Ezra's thoughts on 2024. Billy Helms responds, stating that it is too early to give specific plans, but activity levels for core plays are expected to remain consistent with some additional wells in emerging plays. He also mentions that service costs have moderated in the industry, but their focus remains on efficiency and using the latest technology. There have been drops in tubular and casing costs for next year which will help reduce overall well cost.

The speaker discusses the potential impact of cost on their activity levels for next year. They also mention a type curve for the Utica play, which is consistent across the 140-mile region. They mention the recent outperformance of the Timberwolf package. The speaker also mentions the API of the oil cut and plans to test other parts of the acreage in the exploratory phase.

The company started drilling on the eastern side of the Utica play because of the availability of good quality seismic data. They plan to continue drilling and gathering data in this area before expanding to the western side. They are also happy with their current footprint in the play and have acquired additional acres at low cost. They own minerals across 130,000 acres in the southern portion of the play. They are currently conducting spacing tests and acquiring seismic in different parts of the play to gather more data and provide a better estimate of their assets.

The speaker discusses their company's investment pace and plans for future activity in the Utica region. They have a large acreage position and will continue to gather data and incorporate learnings into their geologic models. They have ample infrastructure in place for both the Southern and Northern Utica areas, and are focused on gathering infrastructure. They have plenty of running room and available capacity for future activity.

Ezra discusses the 70% cash return commitment and how it is based on free cash flow. He explains that this commitment is consistent with their longstanding strategy to build shareholder value and position the company for success through industry cycles. The cash return strategy includes a commitment to a growing and sustainable dividend, as well as potential specials or buybacks to reach the 70% minimum.

EOG is committed to maintaining a 70% free cash flow return, which will allow them to continue paying a competitive dividend even at lower oil prices. They are focused on disciplined investments and have flexibility in the Utica shale play. They are currently seeing high returns in their exploration efforts, but their focus remains on oil due to its higher margins. They are not speculating on their plans for 2026 and are instead prioritizing their current investments.

The speaker discusses the company's premium investment hurdle rate and how they are agnostic to product mix. They have a heavy focus on discovering new market potentials and investing in infrastructure and supply chain to lower costs. They are confident in their high-return inventory and believe it will continue to deliver value to shareholders. The questioner asks about the company's outlook for 2024, and the speaker suggests it is too early to give specifics but points to their current level of activity as a potential indicator of future results.

The company plans to maintain their current level of activity for next year, with a similar amount of spending on their CapEx program. They may see some efficiency gains and cost reductions, and may drill a few more wells in the Utica and Dorado plays. The company is pleased with the results of their 3-mile laterals in the Utica and may consider longer laterals in the future. They believe they can continue to reduce costs and improve efficiency in this area.

The company is expecting to continue drilling longer laterals in various plays, including the Eagle Ford and Delaware Basin. These longer laterals have shown great operational efficiency and cost savings. The enhanced completion technique in the Delaware has also been successful, with a 20% uplift in productivity. The company plans to expand the use of this technique across their plays in the future.

The company has seen a consistent 20% increase in production in the first year of enhanced oil recovery (EOR) in the Permian. They are currently focusing on tests in shallower targets and plan to share results by the end of the year. They also have a test in the Powder River Basin and are seeing good results in the Utica, but are still collecting data. The completion of Phase 2 of the South Texas pipeline next year is not expected to impact their pace of activity in Dorado, as it is more governed by their learnings and results. The pipeline will provide access to multiple markets and cost savings for their reserves. They also have existing capacity with other markets in place.

Billy is excited about the potential for premium markets and the offtake agreements already in place, particularly with Cheniere and the Transco connection. The CCS pilot project has provided valuable learnings and insights that can be applied to larger operations for achieving net zero. These include operational and technical aspects, as well as the company's expertise in geological mapping and drilling.

The company is pleased with the results of their monitoring of CO2 storage and is looking to expand the technology to other projects. The tight market for offshore rigs is impacting their exploration schedule, but they are still pursuing opportunities in Trinidad due to their expertise in drilling efficiently and cost-effectively.

The company is confident in its ability to pursue opportunities around the world and is actively looking for them. They are looking for opportunities that are competitive with their current portfolio and factor in the cost of doing business. In the Delaware, the company is focused on increasing the value of each development unit and has seen a marked improvement in productivity, particularly in the Wolfcamp bench due to a new completion design. The company has a large acreage footprint of over 400,000 acres.

The company has a high number of unique targets in each area due to the specific geology, resulting in variations in well performance. However, the company is satisfied with the results and has incorporated them into their forecast. The company is constantly working to improve long-term recovery rates through the use of technology, which has been a key factor in their success in previous plays. They focus on optimizing completion efficiency in order to improve recovery rates.

The company has continuously improved its production through the use of new technology and understanding of geological factors. This has resulted in a 20% increase in completions and production in the Wolfcamp play. The company has updated its minimum cash return commitment to 70%, but this may increase depending on excess free cash flow. The focus remains on the regular dividend.

The company believes that the regular dividend is the best way to measure its performance and is committed to maintaining it through improved efficiency and a strong balance sheet. The dividend was recently raised to 10%, and the company can support it through various maintenance capital scenarios. The company is also considering both unconventional and conventional opportunities for portfolio growth.

EOG has a diverse portfolio of unconventional plays and is continuously seeking new opportunities. Their exploration program is focused on generating solid returns and includes both conventional and unconventional projects, onshore and offshore. The company is committed to creating long-term value for shareholders and has increased its free cash flow payout and regular dividend. EOG is confident in its ability to deliver value through industry cycles and is positioned to play a leading role in the future of energy.

This summary was generated with AI and may contain some inaccuracies.