EOG Resources (EOG) has announced its fourth-quarter and full-year 2024 earnings, showcasing a year of robust performance driven by consistent execution and a strong focus on shareholder value. The company exceeded its original 2024 production forecasts for both oil and total company production while maintaining capital expenditures on target. EOG also reported a reduction in cash operating costs year-over-year and increased its regular dividend by 7%. Looking ahead to 2025, EOG plans to build on this success with a disciplined capital plan focused on returns-focused investments and operational excellence, aiming for sustainable growth and enhanced shareholder returns.

The company’s strategic outlook for 2025 emphasizes capital discipline and strategic investments in both foundational and emerging assets, including international ventures in Trinidad and Bahrain. This approach aims to enhance shareholder value through a commitment to strong environmental performance and a significant role in the long-term future of energy. EOG’s 2025 plan focuses on maintaining a pristine balance sheet and leveraging a deep inventory of high-return projects to drive free cash flow potential.

Ezra Yacob, chairman and CEO of EOG Resources, emphasized the company’s commitment to its value proposition, stating, EOG’s consistent execution of our value proposition delivered another year of outstanding performance. He highlighted the $6.6 billion of adjusted net income earned in 2024, representing a 25% return on capital employed. Yacob further noted that EOG has earned an average 28% return on capital employed in the four years since COVID, outpacing the average of its peers, and returned 98% of free cash flow through a combination of regular dividends and share repurchases.

Looking forward to 2025, Yacob outlined the company’s priorities, emphasizing capital discipline, operational excellence, sustainability, and a strong company culture.He asserted that EOG’s diverse portfolio of unconventional resources is unmatched,holding more than 10 billion barrels of oil equivalent in resource potential that earns among the highest returns in the industry.

2025 Strategy: Capital Discipline and International Expansion

During a recent Q&A session, analysts probed EOG’s leadership on their financial outlook and operational strategies for the coming year. The discussions centered on free cash flow guidance, international spending, and natural gas differentials, providing insights into the company’s priorities and expectations.

Free Cash Flow and Capital Allocation

Neil mehta, an analyst with Goldman Sachs, initiated the Q&A by questioning the company’s free cash flow guidance of $4.7 billion at $70 WTI and $4.25 Henry Hub. Mehta suggested this figure appeared “a little softer” than anticipated, possibly due to pre-productive capital investments. He inquired about the timing of returns from emerging plays and infrastructure projects.

Yacob responded by emphasizing capital discipline as a core pillar of the company’s value proposition. He stated that the 2025 plan aligns with previous commentary, focusing on optimal operations in foundational plays and improved activity in emerging plays. Yacob elaborated on specific operational adjustments:

• The Delaware basin will see flat activity with a more capital-efficient program.
• The Eagle Ford will experience a slight moderation in activity, coupled with longer laterals, maintaining strong capital efficiency.
• Emerging assets like the Utica and Dorado will receive increased capital allocation, with 20% more completions planned for each.

Yacob also noted increased cash taxes due to expiring AMTs from 2024 and a slight increase in operating expenses due to higher fuel and power costs, and also initial transportation contract costs. Despite these factors, Yacob expressed excitement about the year ahead, emphasizing the company’s commitment to driving strong results and making strategic investments to support both short- and long-term free cash flow potential.

International Expansion: Trinidad and Bahrain

Mehta also inquired about the increased international spending, specifically in Trinidad and Bahrain. Jeffrey Leitzell, Executive Vice President and Chief Operating Officer, addressed the question, noting an approximate $100 million increase in international capital. This investment reflects continued advancement in Trinidad, including the Mento program and the construction of the Coconut platform, and also a new entry into Bahrain with drilling expected to commence in the second half of the year.Leitzell cautioned that volumes from these programs are unlikely to materialize until 2026.

Keith trasko, Senior Vice President of Exploration and Production, provided further details on the Trinidad projects. He highlighted the Mento platform, with four net wells planned for 2025, and the Coconut project, aimed at accessing an estimated 500-plus Bcf of resource potential. Trasko emphasized the company’s long-standing relationship with BP in Trinidad, valuing their partnership in these joint venture projects. He also noted EOG’s success in securing two new blocks in Trinidad, underscoring their commitment to the region.

We’ve been in Trinidad for 30 years, and we have a really well future there.
Keith Trasko, Senior vice President, Exploration and Production

Natural Gas Differentials and Bahrain Exploration

Ann Janssen, Executive Vice President and Chief Financial Officer, provided details on EOG’s financial performance, noting that the company invested $6.2 billion in capex in 2024, driving annual production growth of 3% in oil and 8% in total company volume. She also highlighted the increase in proved reserves by 6% to 4.7 billion barrels of oil equivalent and the reduction in finding and progress costs by 7% to $6.68 per BOE, excluding price revisions.

Janssen emphasized the company’s commitment to returning cash to shareholders, stating, outstanding financial performance allowed us to return a record $5.3 billion to shareholders. This represented 98% of 2024 free cash flow, well in excess of our commitment to return a minimum of 70% of annual free cash flow to shareholders. She also highlighted the 7% increase in the regular dividend to an indicated annual rate of $3.90 per share and the repurchase of a record $3.2 billion of shares in 2024.

Jeffrey Leitzell reviewed the 2024 operating results and detailed the 2025 plan. He commended employees for their safe and efficient operational execution, delivering strong results across the board. Leitzell noted improvements in safety, productivity, and base production performance, and also a 6% reduction in average well costs. He also highlighted the company’s marketing team’s success in delivering top-tier price realizations and securing new natural gas agreements.

Leitzell outlined the 2025 capital program, forecasting $6.2 billion in capital spending to deliver 3% oil volume growth and 6% total production growth. He noted that the growth in 2025 is more heavily oil-weighted due to the well mix in the Delaware Basin and that the cadence of capital spend will be slightly more than 50% in the first half of the year.

Regarding the Delaware Basin, Leitzell stated, in the Delaware Basin, we are seeing improved year-over-year capital efficiency. The combination of longer laterals and our in-house drilling motor program helped increase drilled feet per day by 10% and completed feet per day by 20% last year. Our 2025 plan includes another increase in average lateral length of at least 20% which will support continued efficiencies.

Ezra Yacob concluded the call by reiterating EOG’s commitment to capital discipline, operational excellence, sustainability, and its company culture. He emphasized that these core values are the foundation of the company’s consistent performance and that EOG is continuing to deliver in 2025.

EOG Resources is strategically positioning itself to capitalize on emerging opportunities in data center development, especially in regions like the Gulf Coast and South Texas. chairman and Chief Executive Officer Ezra Y. Yacob highlighted the company’s focus on leveraging technology and data to explore the potential role of the industry, and EOG specifically, in this evolving landscape. the company also reaffirmed its commitment to sustainable dividend growth, projecting a 15% increase in current taxes for 2025. These initiatives underscore EOG’s commitment to both innovation and shareholder value.

The move towards exploring data center opportunities comes as energy companies seek to diversify their revenue streams and leverage their existing infrastructure in new and innovative ways.The increasing demand for data processing and storage creates a natural synergy with energy production,particularly in regions with abundant natural gas resources.

During a recent discussion, Neal Dingmann, an analyst, inquired about potential opportunities in areas like the Appalachian, Dell, and Eagle Ford regions, asking, I think your opportunities to do something like that would be in the Appalachian, Dell, Eagle Ford as you certainly have a lot of engaging areas where you coudl do something like that?

Ezra Y. Yacob responded affirmatively, stating, Yes. It’s a good question, Neal. This is Ezra. And you’re right. He elaborated on EOG’s strategic approach to data center development, emphasizing the importance of diverse fiber lines, frequently enough located closer to urban areas. Yacob noted that EOG’s diverse marketing strategy already provides exposure to regional pricing uplifts associated with increased electrical demand in these areas, citing the capacity along the Transco pipeline to deliver gas into the southeast market as a prime example.

The Transco pipeline, a major natural gas pipeline system, serves as a critical artery for delivering energy to the southeastern United States. EOG’s access to this infrastructure positions them favorably to capitalize on the growing energy demands of data centers in the region.

The potential for data center development to outpace infrastructure development presents another avenue for EOG to benefit. Yacob explained that while the current model relies on transmitting energy over long distances, a new model is emerging where data centers are constructed closer to power generation and natural gas fields. He emphasized that the Gulf Coast and South Texas hold significant potential for data center buildout, which would greatly benefit Dorado due to increased regional demand.

Locating data centers near natural gas fields offers several advantages, including reduced transmission losses and increased energy efficiency. This co-location strategy aligns with the growing emphasis on sustainable energy practices and can contribute to lower operating costs for data center operators.

Dingmann also inquired about EOG’s Utica acreage, specifically the new 15,000 acres, and how the company is approaching its vast footprint of nearly 500,000 acres.

Utica Acreage and Strategic agreements

EOG Resources is also strategically managing its Utica acreage, encompassing nearly 500,000 acres, to optimize production and efficiency. The company’s approach involves leveraging operational efficiency gains and driving down costs to compete with foundational assets. This includes capturing economies of scale through infrastructure development,such as in-basin sand locations and water infrastructure,and also consistent drilling and fracking operations.

The company’s focus on the Utica shale play reflects its commitment to diversifying its portfolio and capitalizing on emerging opportunities in different geological formations.The Utica shale, located primarily in Ohio, Pennsylvania, and West Virginia, holds significant natural gas reserves and has the potential to become a major production hub.

Gulf Coast Basis and strategic Agreements

EOG Resources is actively addressing the widening differential in pricing along the Gulf coast. Senior Vice President of marketing and Midstream, Terveen, explained that the widening differential is due to the weakening basis along the Gulf Coast, particularly at the Houston Ship Channel, coupled with the ramp-up of new strategic agreements. Terveen highlighted the company’s efforts to direct more molecules away from areas with basis deducts and towards locations with stronger linkage to Henry Hub and southeast markets.

The Henry Hub, located in Louisiana, serves as the primary pricing point for natural gas futures in the United States. EOG’s strategy to strengthen its linkage to Henry Hub and Southeast markets aims to mitigate the impact of regional price fluctuations and maximize revenue.

Bahrain Project and International Ventures

EOG Resources is also pursuing international ventures, including a partnership with Bapco Energies in Bahrain. Jayaram inquired about the Bahrain project, referencing a reported well control issue. Yacob acknowledged the partnership with Bapco Energies and the ongoing government approvals. He confirmed that EOG is the operator and will be evaluating a tight gas sand exploration prospect. The agreement anticipates selling production into the local market, leveraging existing infrastructure for a potentially rapid path to sales if the project proves accomplished and competitive.Yacob expressed optimism that EOG’s expertise in horizontal drilling and completion technologies will enhance returns and drive competitive economics.

The Bahrain project represents EOG’s commitment to expanding its international presence and leveraging its expertise in unconventional resource development.The company’s experience in horizontal drilling and completion technologies is expected to play a key role in unlocking the potential of the tight gas sand exploration prospect.

Capital Structure and Shareholder Returns

EOG Resources remains committed to maintaining a strong capital structure and delivering value to shareholders. Analyst Josh Silverstein with UBS shifted the focus to EOG’s capital structure, noting the company’s $7 billion in cash at the end of 2024. He inquired about the pace of buybacks, considering the company’s target cash balance of $6 billion or less. Executive Vice President and Chief financial Officer,Ann Janssen,reiterated the commitment to making the capital structure efficient,targeting a debt level of less than one times total debt to EBITDA at $45 WTI,equating to approximately $5 billion to $6 billion in debt. Janssen confirmed the company’s intention to work towards this debt level over the next 12 to 18 months.

The company’s strong cash position provides flexibility to pursue strategic opportunities, including share buybacks and debt reduction. EOG’s commitment to maintaining a conservative debt level underscores its focus on financial stability and long-term value creation.

Regarding cash levels, Janssen affirmed the appropriate level remains at $5 billion to $6 billion, supporting the regular dividend and additional cash returns. She emphasized the commitment to returning a minimum of 70% of free cash flow to shareholders, with the potential to return a higher percentage.Share repurchases will continue to be opportunistic, based on share price movements.

We’re just committed to returning a significant portion of our free cash flow to our investors, and that cash return is anchored by that dividend.
Ann Janssen, Executive Vice President, Chief Financial Officer

EOG’s commitment to returning a significant portion of its free cash flow to shareholders reflects its confidence in its long-term prospects and its dedication to rewarding investors.

dorado Activity Levels

EOG Resources is carefully evaluating activity levels in Dorado, considering the increased price environment and the start-up of new LNG facilities. Silverstein questioned the activity levels in Dorado, noting the increased price environment and the start-up of new LNG facilities. Leitzell responded that the company evaluates activity levels from a long-term outlook,rather than reacting to near-term commodity price volatility. He stated that the 20% increase in activity planned for Dorado in 2025 is considered a really good level.

The company’s long-term viewpoint on Dorado activity reflects its commitment to sustainable development and responsible resource management. EOG’s focus on long-term value creation ensures that its investments are aligned with its overall strategic objectives.

Strong Financial Performance Drives Record returns

EOG Resources showcased remarkable financial results for 2024,achieving $6.6 billion in adjusted net income, representing a 25% return on capital employed. The company demonstrated its commitment to shareholders by increasing the regular dividend by 7% to $3.90 per share. A record $5.3 billion was returned to shareholders,representing 98% of free cash flow. Proved reserves increased by 6% to 4.7 billion barrels of oil equivalent, while finding and progress costs decreased by 7% to $6.68 per BOE. Capital expenditures (CAPEX) totaled $6.2 billion, fueling 3% oil and 8% total company production growth.

Disciplined 2025 Plan focuses on Oil Volume Growth

For 2025, EOG Resources has outlined a disciplined capital plan of $6.2 billion,targeting 3% oil volume growth and 6% total production growth. The company anticipates that this growth will be more heavily weighted towards oil due to the well mix in the Delaware Basin. Capital spending will be slightly more than 50% in the first half of the year. EOG expects to see improved capital efficiency in the Delaware Basin through longer laterals and an in-house drilling motor program.

International Expansion Continues with New Ventures

EOG Resources is actively expanding its international presence, continuing operations in Trinidad with projects like Mento and Coconut.The company is also entering a new joint venture with Bapco Energies in Bahrain. These international projects are expected to contribute to future growth and diversify EOG’s portfolio.

Operational Efficiency and Cost Reduction initiatives

EOG Resources reported improvements in several key operational areas, including safety, productivity, and base production performance.The company also achieved a 6% reduction in average well costs. The marketing team secured top-tier price realizations and new natural gas agreements, further enhancing profitability.

Commitment to Shareholder Returns Remains a Priority

EOG Resources remains committed to returning a minimum of 70% of free cash flow to shareholders, primarily through dividends and opportunistic share repurchases. The company aims for a debt level of less than one times total debt to EBITDA at $45 WTI, demonstrating a commitment to financial stability and shareholder value.

Free Cash Flow Outlook and Strategic Investments

While the projected 2025 free cash flow is slightly lower than some analysts anticipated ($4.7 billion at $70 WTI and $4.25 Henry Hub),this is partially attributed to pre-productive capital investments and increased cash taxes and operating expenses. The company remains committed to driving strong results and strategic investments to support both short- and long-term free cash flow potential.

Analyst Q&A Highlights Capital Allocation and Strategy

During a Q&A session, analysts focused on free cash flow guidance, international spending, natural gas differentials, and capital allocation. EOG leadership addressed these concerns, emphasizing their commitment to capital discipline, operational excellence, and shareholder returns. Despite some challenges, such as wider-than-expected natural gas differentials and initial well control issues in Bahrain, EOG remains optimistic about its future prospects.

Ezra Y.Yacob clarified EOG’s focus on the volatile oil window for leasing and drilling activities. Again, where we did most of our leasing, we’re still focused in on the volatile oil window, Yacob stated. We’re kind of leasing and picking up leases out in front of our drilling opportunities at this point. He added that strategic leasing is now focused on coring up our areas within the volatile oil window, where the company will concentrate its drilling efforts for the next few years.

Addressing the company’s approach to expanding beyond the volatile oil window, Yacob noted that further seismic data is needed.He drew parallels to the early days of other basins like the Barnett, haynesville, Eagle Ford, Permian, and Bakken, emphasizing the importance of starting in areas with the most data. EOG is currently focused on collecting data and understanding the reservoir to inform future expansion decisions.

John Abbott, an analyst with Wolfe Research, raised a question regarding EOG’s dividend strategy, given the company’s extensive inventory of approximately 27 years. Abbott asked, So our question is how do you think about the evolution of the dividend, the dividend growing rate, and the dividend breakeven?

Yacob responded by underscoring the importance of a sustainable and growing regular dividend as a marker of a blue-chip company. We think the best marker for a blue-chip stock or a company of our scale and size should be reflected in a sustainable and growing regular dividend, and that’s really what we focus on and we feel is the foundation of our cash return strategy, Yacob affirmed. He highlighted that EOG raised its regular dividend by 7% last year and has doubled the peer average in compound annual growth rate as 2019. Yacob emphasized that dividend growth is tied to expanding margins, including top-line revenue and cash flow growth, as well as lowering the company’s cost basis. A strong balance sheet serves as a backstop for the regular dividend.

Ann Janssen,Executive Vice President and Chief Financial Officer,addressed a question from Abbott regarding cash taxes and the Choice Minimum Tax (AMT). Janssen clarified that the $212 million in AMT credits included in the 2024 tax revision were fully weary by the end of the year. The way that we look at — the way we’re modeling it out, our current tax revision in 2024 included $212 million in alternative minimum tax credits, and those were fully exhausted when we exited 2024, Janssen explained. As an inevitable result, the company anticipates a 15% increase in current taxes in 2025. Janssen also noted that the current guidance for 2025 does not contemplate any material or unusual items, making it a reliable proxy for future tax outlook.