The EOG First Quarter 2024 Earnings Conference Call is being recorded and will include forward-looking statements. The call will also reference certain slides and may contain non-GAAP measures. The participating members are introduced, including Chairman and CEO Ezra Yacob, who notes that EOG is off to a great start in 2024.

EOG's commitment to capital discipline, operational excellence, and sustainability, along with its unique culture, are the primary drivers of the company's value. Strong first quarter execution from all operating teams has led to exceptional returns, with production and cash operating costs beating targets. The company generated $1.6 billion of adjusted net income and $1.2 billion of free cash flow, which was paid out to shareholders through dividends and share repurchases. EOG's operational execution and diverse multi-basin portfolio have resulted in strong returns and cash flow generation. The company's recent addition of the Utica Combo play showcases its differentiated approach to expanding its premium inventory at a low cost. EOG's successful exploration, operational execution, and applied technology have positioned it to create shareholder value through industry cycles.

The oil macro environment is expected to remain dynamic but overall positive this year. Global demand is increasing, led by a strong U.S. economy. U.S. production is expected to be more moderate due to flat rig counts and a decrease in drilled but uncompleted inventory. Spare capacity globally is keeping inventory levels around the five-year average, with more barrels expected to return to the market in the second half of the year. EOG is well positioned in this environment as a low-cost producer. Natural gas market is expected to remain soft in the current quarter but strengthen in the second half of the year due to increasing demand, particularly from LNG feed gas and other industrial sectors. EOG's Dorado dry gas play is well positioned to benefit from this demand growth. EOG has diverse sales agreements and expects to increase its sales from 140,000 MMBtu per day to 900,000 MMBtu per day in the next three years.

EOG's approach to organic exploration, use of technology, and diverse marketing strategy have allowed them to remain a top producer with sustainable value creation. The company has updated their 2024 forecast to reflect higher commodity prices and expects to generate significant free cash flow for the year. They have already committed to returning a minimum of 70% of this cash flow to shareholders through share repurchases and dividends. EOG also plans to continue monitoring the market for opportunities to repurchase shares. Last quarter, they provided a three year scenario to demonstrate their ability to generate free cash flow and create value for shareholders.

In the first quarter, the company provided an additional price scenario to demonstrate their potential for free cash flow over the next three years. They anticipate generating $21 billion of free cash flow with the same commodity prices as the past three years. This is a 17% increase from the previous three years. The company attributes this success to their strong operational execution, focus on well performance, cost reductions, and disciplined growth. The Chief Operating Officer thanked employees for their safe and efficient operations. The company's capital forecast for the year remains at $6.2 billion, with a 3% increase in oil volume and 6% increase in total production. They expect capital to be slightly more weighted in the first half of the year due to investments in two infrastructure projects. By the end of the second quarter, the company will have spent about 56% of their capital plan.

The company's oil production and capital plan for the year remains unchanged, but they are actively managing activity in their Dorado asset due to a weaker natural gas market. They will continue to operate a full rig program throughout the year to maintain operational momentum and improve the play. The company remains positive about the long-term gas outlook in the U.S. and has secured 50-60% of their service costs for 2024. They are also seeing some deflation in service costs and are focused on driving efficiency gains throughout their portfolio.

The article discusses the significant increase in efficiencies driven by longer laterals in the Delaware Basin and Eagle Ford. Plans for increasing lateral length in the Eagle Ford and balanced development approach in the Powder River Basin are also mentioned. The company expects a low-single-digit percentage decrease in well costs for the year. The technical teams are focused on innovation, cost reduction, and sustainability. The results of the first three packages of development wells in the Utica Combo play are also mentioned.

The company has gathered six months of production data from their first two wells, which have exceeded expectations. They have recently brought on their third package, the White Rhino, which is performing well and has a higher liquids mix than the previous wells. The southern portion of their acreage has better geomechanical properties and benefits from significant economic uplift. The company expects performance to vary across their acreage, but overall, the Utica Combo play has shown high liquids productivity. The company's large acreage position allows for the development of a long-term, cost-effective play that can compete with other major unconventional plays in North America.

The operating team at EOG is focused on increasing efficiencies and driving down costs. They have recently achieved a record lateral length for a well and plan to continue improving efficiencies across their assets. The company's exploration and innovation strategy has led to a diverse and high-return portfolio. They have consistently delivered strong operational performance and are confident in their future prospects. The company's commitment to cash returns to shareholders demonstrates their confidence in their business. The retirement of Billy Helms, a key champion of innovation at EOG, is also mentioned.

The paragraph discusses the retirement of a colleague and then moves on to a question-and-answer session about the gas outlook for the company. The speaker, Ezra Yacob, mentions that gas inventory levels are high due to warm winters, but demand is expected to remain strong. The company plans to maintain flexibility with investments in gas plays, particularly in the Dorado area, and continue to capture operational efficiencies.

During the COVID pandemic in 2020, the company had to shut down some of its programs, but it plans to continue operating in the area and potentially build DUCs. They have flexibility in their completion schedule and are focused on returns. They have no commitments to fill infrastructure and will base their investment on returns. In a $3.50 to $4 price environment, they may increase activity, but want to maintain efficiency. They believe they can serve upcoming demand along the Gulf Coast.

The speaker emphasizes the importance of keeping costs low in their gas play, as gas prices can be volatile due to factors such as weather. They plan to increase activity in the future, but at a measured pace in line with their learning. They returned over 100% of their free cash flow this quarter, which is above their target for the year, and this is not uncommon as they returned 86% last year.

The company has been focusing on buybacks rather than special dividends, which has been the trend for the past few quarters and is likely to continue. The company's business has been strong, especially in emerging plays, which gives them confidence to continue buying back shares. Their cash flow allocation priorities remain the same, with a focus on regular dividends and opportunistic share buybacks. The company has been receiving positive feedback from shareholders for their approach and will continue to evaluate opportunities for returning cash to shareholders. The company has already spent 56% of their full-year CapEx in the first half, but they are confident in hitting their full-year CapEx guide for 2024.

The speaker discusses the timing and budget for their company's CapEx, noting that it will be slightly higher in the first half due to indirect costs and strategic infrastructure projects. They mention the planned completion dates for these projects and the expected cost savings. The speaker also addresses their approach to extending the life and deepening the inventory of their assets in the Eagle Ford and Bakken fields, highlighting their consistent program and in-line well performance. They acknowledge the expected productivity degradation in mature assets and mention their move to lower quality pay in the West.

The company has been able to improve the economics of the Eagle Ford play through operational efficiencies, longer laterals, and cost reductions. They have also increased the lateral length by 20% this year. In the Bakken, they are running a program of 10 net wells and staying ahead of depletion. They have also been able to bring additional wells online due to new available capacity. The company is excited about the well productivity and the upcoming OPEC meeting, which may impact the oil macro.

Ezra Yacob, an expert on oil commodities, discusses the current state of the market and his predictions for the rest of the year. He expects demand to strengthen and inventory levels to decrease, with moderate growth in US supply. He also mentions the upcoming OPEC meeting and the potential reentry of spare capacity into the market. Neal Dingmann from Truist Securities congratulates Billy, who has been helpful in the past.

Keith Trasko, responding to a question about the Utica play, discusses the company's focus on the eastern side of the volatile oil trend and plans to acquire seismic data on the western side. He mentions that there may be slightly lower productivity and costs on the western side, but overall the play competes well for capital. The company plans to stick to their 2024 plan of 20 net wells and will let returns drive future activity.

During a Q&A session, Lance Terveen discusses the company's marketing opportunities, specifically around the export side. He mentions their advantage in the Gulf Coast and their facility in Ingleside, which has recently increased its dredging capabilities. They have been loading VLCCs and pushing more across the dock into the export markets in the most recent quarter. Scott Hanold asks about the Utica and what needs to happen for it to become a more significant part of their capital allocation. Ezra Yacob responds by saying they are happy with their position and have two packages that are exceeding their initial expectations.

The company is making progress in their project and the next step is to get seismic data to determine the complexity of the area. They recently acquired a package in the south, which is exciting because they own the minerals there. The company is taking a cautious approach and not rushing to increase activity in any one asset, as they have a diverse portfolio of high-return options.

The speaker discusses the company's plans to bring capital efficiency learnings from other resource plays into the Utica. They are not looking to drastically increase their rig program, but rather make decisions based on returns and shareholder value. The speaker also mentions their current activity in Trinidad, where they are running a one rig program and have successfully completed two wells. They are also installing a platform in the SMR Block.

The speaker discusses their plans for the upcoming year, including exploration for new oil plays. They are pleased with their current price realizations and are confident in meeting demand. The speaker then hands over the discussion of marketing to someone else. The next question asks about activity levels and DD&A rates, to which the speaker responds that there is ongoing exploration and that the Utica has been a major success for them. They continue to focus on oil plays that will improve their overall portfolio.

The company is focused on finding new resources that will be beneficial to their returns, cost of reserves, and development costs. They are currently drilling initial wells to test exploration ideas and are in a delineation phase for other wells. The company is not drilling to see if the rock is productive, but rather to see if it is economic and can compete with their existing portfolio. The DD&A increase in the first quarter was due to a one-time adjustment and is expected to moderate for the rest of the year. The expected DD&A for the remainder of the year is $10.50.

Leo Mariani asks about the company's outlook on natural gas demand and prices for the near-term, specifically in 2025. Ezra Yacob responds that they are not necessarily bullish, but they are constructive and have seen surprising demand for natural gas due to coal retirements and low pricing. They expect this trend to continue and for supply to decrease, leading to potential progress on inventory levels and increased LNG feed gas. Paul Cheng then apologizes and wants to ask about Utica.

Keith Trasko from EOG Resources discusses the company's plans for moving from appraisal to production mode in their new play. He mentions that there is still room for improvement in well costs and efficiency, and that the play has the potential to benefit from EOG's learnings in other plays. The well performance is comparable to the Permian, and the development program will be based on a market-driven portfolio.

Paul Cheng congratulates Billy and asks a question to Ann about the $400 million strategic infrastructure spending for this year. Ezra explains that these projects have a high rate of return and will provide significant value for shareholders, but they are rare and typically the margins get squeezed down.

The speaker discusses the potential for the company to capture value for shareholders every five, eight, or 10 years. The next question is about the differences in geology between the north and south of the Utica play, with the speaker noting that the south has better geomechanics and rock properties. The company is happy with the well results in all areas, including the White Rhinos in the south, which are still being monitored. The speaker then answers a question about the potential for the PRB Niobrara to compete with other plays in terms of returns.

Jeff Leitzell, speaking on behalf of the company, discusses the progress made in the Powder River Basin (PRB) and the focus on the deeper Mowry section. He mentions a 10% increase in productivity with package development in the Mowry and plans to move up to package development in the Niobrara. He compares the PRB to the Permian Basin and notes advantages such as low F&D cost and potential for expansion. The team is making good strides and seeing premium returns in the PRB. The next question from Nitin Kumar is about refrac and completion activity in the Eagle Ford, and he congratulates Billy on his retirement.

Jeffrey R. Leitzell, a representative from a company with a long history in the basin, discusses the potential for refracturing technology in the industry. However, he believes that their robust inventory and multi-basin portfolio make it more beneficial to either offset existing completions or drill new wells. He also mentions that current refrac technology is still limited and they see more potential in their existing resources. In response to a follow-up question, Lance Terveen, another representative, mentions that they have a strong marketing arm and are starting to see demand from producers, AI, and Mexican exports.

The speaker is pleased with the execution of their operations and mentions the pillars of diversification, control, and flexibility. They believe these factors will help them reach attractive markets and improve price realizations. The speaker also mentions the Utica and how it sets up perfectly for their operations, with plans to continue pushing the limits and drilling longer laterals. They also mention other drivers for cost reduction and expect to see longer laterals in the future.

David Deckelbaum asks about the incremental spending on strategic infrastructure and how it will affect the capital intensity of the company in the future. Ezra Yacob responds by saying that the company is not aggressively seeking out these projects, but will take advantage of opportunities with high rates of return. The focus is on expanding cash flow and free cash flow margins, as seen in the three-year scenario. The operator then concludes the question session and turns the call back over to Ezra Yacob.

Billy is wrapping up the call and thanking everyone for their time. Lloyd Helms expresses his gratitude for the opportunity to work with everyone and be a part of the company for 43 years. He will miss the daily interactions but has confidence in the leadership team and looks forward to the company's continued success. The conference has now ended.

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