The operator introduces the EOG Resources Fourth Quarter and Full Year 2023 Earnings Results Conference Call and turns it over to the Vice President of Investor Relations, Pearce Hammond. Pearce provides some information about the call and introduces the speakers, including Chairman and CEO Ezra Yacob. Pearce also mentions the availability of a replay of the call and the possible inclusion of forward-looking statements and non-GAAP financial measures. Ezra thanks Pearce and highlights the company's strong performance in the previous year.

In 2023, EOG had a successful year with record production and strong financial performance, including exceeding volume targets and earning a high return on capital. They also returned a significant amount of free cash flow to shareholders through dividends. EOG's value proposition is consistency in delivering reliable operating results and consistent financial performance through industry cycles. This is achieved through their capital discipline and operational execution, including a competitive multi-basin organic growth portfolio and superior technical expertise.

EOG's proprietary information technology allows for real-time data-driven decision-making and a focus on continuous improvement. The company also prioritizes sustainability and has achieved impressive environmental performance. EOG's unique culture, which values collaboration and decentralized decision-making, is a key factor in its success. The company's cash return strategy includes a regular dividend and a commitment to returning at least 70% of annual free cash flow to shareholders.

EOG is committed to delivering sustainable growth and value to its shareholders through consistently lowering costs and generating free cash flow. The company has a track record of increasing its regular dividend and has one of the highest dividend yields in its peer group. In addition to regular dividends, EOG also paid special dividends and repurchased shares, while also strengthening its balance sheet by retiring debt. EOG's strong balance sheet is seen as a competitive advantage and all of its 2023 free cash flow was used for dividends, buybacks, and debt retirement.

In the last fiscal year, EOG has seen a significant increase in its financial profile, making it well-positioned to generate long-term value for shareholders. The company has presented a three-year scenario that demonstrates its ability to create value, with an expected $12 billion to $22 billion in cumulative free cash flow and a 20% to 30% return on capital employed. In 2024, the company plans to increase oil volumes by 3% and total production by 7%, with a break-even point of $45 WTI. The company expects to generate $4.8 billion in free cash flow and an ROCE of over 20% at $75 WTI and $250 Henry Hub. EOG plans to return at least 70% of its free cash flow to shareholders, which would result in a minimum return of $3.4 billion this year. The company's CEO, Billy, expressed gratitude to employees for their exceptional performance in 2023.

In 2023, EOG delivered above its original guidance for oil production while maintaining capital spending at the midpoint. They were able to grow oil volumes by 3% and total production by 8% year-over-year, reaching a milestone of 1 million barrels of oil equivalent per day. EOG has nearly doubled production in the last 10 years through their organic growth approach. They have also made efficiency gains in drilling and completions operations, resulting in reduced downtime and improved completed footage. Production teams have optimized production and expenses, reducing cash operating costs and methane emissions. EOG's approved reserve base increased by 260 million barrels of oil equivalent in 2023, representing a 6% increase and a 202% proved reserve replacement rate. Jeff will discuss operations and the 2024 plan.

In the 2024 plan, the company forecasts a $6.2 billion CapEx program to deliver 3% oil volume growth and 7% total production growth. The company expects some deflation and a decrease in well costs due to reduced tubular and ancillary service costs. The plan also includes increased investment in long-term strategic infrastructure in the Delaware Basin and Dorado, which will reduce operating costs and expand margins. The company's capital efficiency is improving, and they are able to grow volumes for less direct CapEx due to improved well performance and operational efficiency. The company will continue to progress each of their plays at a measured pace and maintain consistent activity in their foundational plays, while also remaining excited about the potential of the Dorado asset.

The company has made progress in improving operational efficiencies and recoveries in the past year. They expect to have moderate activity in 2024 and will balance their investment in the Dorado play while monitoring the natural gas market. In the Utica play, they have seen great progress and plan to increase activity and test well spacing in the coming year. They also plan to test packages in the Niobrara Formation in their primary development area while continuing to develop the Mowry Formation in the Powder River Basin. The company thanks its employees for their hard work and is excited about their 2024 plan.

EOG is focused on long-term success and has made strategic investments in infrastructure to lower costs and increase margins. They are building a natural gas processing plant and gathering system in the Delaware Basin and expanding their Verde pipeline in South Texas. These investments are expected to provide cost savings and revenue uplift, and have a high rate of return.

EOG is making progress with its strategic infrastructure investments, which will lower costs, increase operational control, and diversify their access to customers. They have recently finalized a sale and purchase agreement for their natural gas index to Brent and a U.S. Gulf Coast gas index, which will expand their pricing exposure to international markets and growing LNG demand. EOG's strong financial position and value proposition, including capital discipline, operational execution, leadership, sustainability, and culture, have contributed to their consistent shareholder value and will continue to do so in the future.

EOG is focused on optimizing free cash flow and delivering high returns through disciplined investments in oil, organic exploration, and strategic infrastructure. The company is confident in its ability to compete and create value for shareholders, and is committed to being a part of the long-term energy solution. They plan to be flexible with natural gas production, reducing activity and adjusting completion schedules based on market conditions.

The speaker discusses the company's gas growth and gas guide, specifically mentioning the unique increase in gas growth from Trinidad. They explain that Trinidad has a high demand for natural gas and the company's projects there are competitive due to advantageous pricing. The majority of the gas growth in the US is from associated gas in liquids rich and oil plays. The speaker then shifts gears to discuss the importance of the PRB play for the company.

The speaker is discussing the company's recent activity in the Utica and PRB regions. They mention a decrease in activity in the PRB, but attribute it to a shift in focus towards developing the Niobrara formation. They also mention success in their Mowry program and plans to test the Niobrara formation in order to maximize the value of the asset. A question is then asked by Neal Dingmann of Truist Securities.

The speaker, Billy Helms, answers a question about the Utica oil play and confirms that they are continuing to add acreage at a low cost. They are still testing the play and have yet to determine how far west they can go. The speaker also discusses their use of their strong balance sheet to optimize stockpiles of pipe and other materials, and mentions that they are currently running in real time.

In response to a question about their inventory and deflationary trends, Jeffrey Leitzell, a representative from the company, explains that they typically carry a six-month to 12-year inventory, which allows them to take advantage of opportunistic purchases. He also mentions that their procurement team has been able to find good deals on pipe, resulting in a projected 10-15% decrease in tubular costs this year. The company is also seeing a decrease in ancillary services related to drilling and completions. In terms of free cash flow, the company has provided visibility for this year and expects to see growth in future years. However, there may be a flatlining of free cash flow over the period due to potential increases in CapEx and sustaining capital as their volume grows.

The company's three-year scenario shows a 10% increase in cumulative free cash flow compared to the previous three years, due to expanding margins. The company's maintenance capital is expected to range from 4.2 to 4.8, depending on various factors. The three-year scenario also shows a 6% compound annual growth rate in cash flow and free cash flow per share. The company plans to use buybacks to help with this growth. The mix of gas and oil production is shifting, with the company focusing on growing gas production in the Utica and Dorado areas with one rig.

The speaker was asked about the next steps of EOG's organic strategy and whether they would be looking at Canada again. The speaker responded by saying that they are always exploring for new opportunities, but their current focus is on building a low-cost gas business in South Texas. They are agnostic to the type of hydrocarbon they produce and are optimistic about the U.S. domestic gas market in the long term. They plan on being a part of the solution for the growing demand for LNG.

During a conference call, Scott Hanold of RBC asked EOG CEO Ezra Yacob about the company's willingness to use its strong balance sheet to buy back stock and support its current valuation. Yacob acknowledged that EOG's multiple has compressed along with the rest of the industry, but stated that the company's focus is on creating long-term shareholder value. He also mentioned that EOG plans to return 70% of its free cash flow to shareholders, with a potential increase in buybacks due to the current dislocated market environment. Yacob also noted that EOG was active in buybacks in 2023 during periods of market dislocation, but scaled back in Q3 when oil prices and share prices rose.

In the fourth quarter, EOG experienced multiple compression in the industry and the company stepped back to consider their strength and potential for generating high returns. They believe they are currently in a dislocated environment. EOG plans to continue improving and expanding free cash flow potential over the next three years. They will be completing more Wolfcamp M wells in their 2025 program, but will also codevelop with the upper Wolfcamp in order to maximize value and minimize depletion. The Wolfcamp M is a prolific oil producer with premium returns and a quick pay out time.

The speaker discusses their company's strategy for maximizing returns and NPV in the Permian basin, and clarifies that they meant to say 2024 instead of 2025. They also address a question about the supply of natural gas from the US, particularly in the Permian, and mention that they take this into consideration when planning for the development of Dorado. They acknowledge the difficulty in forecasting gas prices due to the interconnectedness with oil prices.

The company's main strategy is to be the lowest-cost producer and they have been moderate in their activity in the Dorado asset. They have invested in infrastructure to increase margins and are focused on developing a pure gas asset in conjunction with the growing demand for LNG in North America. The company's approach is different from their peers as they focus on organic exploration, low-cost operations, and capital discipline to create shareholder value. They have confidence in their existing portfolio and aim to improve financial performance with a 10 billion barrel equivalent premium resource.

The company has significant potential for growth and value in its Utica resource, which has already been captured and is being discussed. The company's three emerging assets, Dorado, Powder River Basin, and Utica, have the potential to represent a smaller midsize E&P company. The company is focused on improving its inventory and proving up its assets to create value for shareholders. The Utica play is performing well and the company is excited about its potential. The pace of development in the Utica is being governed by various factors, such as corporate strategy, gas takeaway, and reducing well costs.

The company is confident in their previous cost estimates and is committed to keeping costs low. They are still gathering data on the EUR of their wells and will ramp up production gradually based on their learnings. They have the flexibility to grow at their own pace and do not need to meet certain targets. Their strategy is to bring value to shareholders without destroying it by growing too quickly.

The speaker explains that the company is focused on developing assets at a pace that aligns with their understanding of each asset. They mention that well efficiencies and longer lateral links have been a major driver of their efficiency gains, and they have been successful in testing longer laterals throughout their multi-basin portfolio. The speaker also notes that the company has been able to optimize economics in San Antonio by utilizing longer laterals and improving completion techniques. They mention that they are seeing an increase in lateral length in the Utica, with the majority of wells being three miles long.

Lance Terveen from EOG Resources discusses their plans for the Permian Basin, including testing three-mile laterals and increasing them to over 50-mile laterals. They expect to see efficiency gains and require fewer rigs and frac fleets while completing a similar amount of lateral length as their 2023 program. They also mention their ability to build out gas processing plants, but note that long-haul gas takeaway in the Permian may remain tight in 2025 and 2026.

The speaker discusses the company's growth in the natural gas and crude oil transportation market and how they have been a leader in this area. They also mention their focus on the Powder region and the potential for oil production in the Niobrara. There has been a shift in the program towards the Utica, but it is not a pause in the overall program. The company has seen good results and efficiency gains in the Mowry target.

The company's plan is to gather data on the overlying layer before moving into the Niobrara, which is expected to be easier to drill compared to the Mowry. The company wants to be strategic in their drilling, staying in the most productive areas. In the Delaware Basin, the development strategy involves targeting multiple zones rather than just the oilier ones. The targeted intervals may shift in the future as the company moves across different sections and the geology changes.

The speaker discusses how the company's approach to codevelopment has resulted in a flexing of their budget over the past four years. They anticipate this flexing to continue over the next few years, with a focus on strategically codeveloping from the bottom up. They also mention that infrastructure projects, such as the ones at Dorado and Delaware, will continue to play a significant role in lowering costs and expanding margins for the company. However, in the Utica play, they do not see the need for large strategic infrastructure projects and will instead focus on gathering lines. Overall, the speaker expects infrastructure to make up 15-20% of their capital budget going forward.

Arun Jayaram from JP Morgan Securities asks about a marketing agreement between the company and Chenier to sell volumes on a JKM link basis tied to Corpus Christi Stage 3. Lance Terveen, a company representative, responds that they are excited about the project's accelerated timeline and are well positioned to meet any early startup. He also mentions the strategic infrastructure and pipeline connectivity that will allow them to commence deliveries in the second half of this year.

During a conference call, Lance Terveen and Arun Jayaram discuss EOG's potential to sell into their agreement, with Ann Janssen mentioning that they have taken an R&D tax credit in the past but do not plan on taking one in the future. The conference call ends with Ezra Yacob thanking shareholders and employees for their support and the call concludes.

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