EOG Resources reported strong Q4 earnings, increased dividend, focused on long-term growth
From NASDAQ MarketSite: 2025-02-28 17:45:21
EOG Resources held its Q4 2024 earnings call on Feb 28, 2025, reporting $6.6 billion in adjusted net income and a 25% return on capital employed. The company also increased its regular dividend by 7% and returned 98% of free cash flow to shareholders. Looking ahead to 2025, EOG is focused on capital discipline, operational excellence, sustainability, and culture to deliver long-term shareholder value. With over 10 billion barrels of oil equivalent in resource potential, EOG remains well-positioned for success.
In addition, EOG Resources continues to see success in its core assets in the Delaware Basin and Eagle Ford, as well as in emerging plays like South Texas Dorado dry natural gas and international projects in Trinidad. The company remains committed to delivering high returns and generating strong free cash flow through its diverse portfolio and strategic investments. EOG Resources is excited to announce a new joint venture with Bapco Energies in Bahrain to explore an unconventional tight gas prospect using horizontal drilling technology. Oil prices are expected to remain rangebound at $65 to $85 per barrel due to increased demand and low global inventories. EOG had an outstanding financial year in 2024, with $6.2 billion invested in capex, 3% growth in oil production, and 98% of free cash flow returned to shareholders. The company also reduced finding and development costs by 7% to $6.68 per BOE. EOG aims to optimize its balance sheet with $5-$6 billion in cash and debt and maintain a disciplined capital plan in 2025. EOG reported exceeding oil production forecasts with lower operating costs and on-target capital spending. They improved productivity through completion design innovations and artificial lift automation, reducing well costs by 6%. Marketing efforts secured premium pricing gas agreements. Strategic infrastructure projects and partnerships aim to drive high realizations. EOG’s 2025 plan includes a $6.2 billion capital program for 3% oil volume growth. Operational efficiency gains are seen in emerging plays like Utica and Dorado. EOG remains focused on long-term growth, operational execution, and sustainability. CEO Ezra Yacob highlighted outstanding results and commitment to generating shareholder value. EOG continues to focus on investment in foundational and emerging assets, international expansion, strategic infrastructure, and marketing agreements to drive free cash flow potential in the short and long term. The company’s disciplined approach and strong balance sheet position it as a high-return, low-cost producer committed to environmental performance. In a recent Q&A session, EOG discussed its ’25 plan, emphasizing capital discipline and portfolio optimization with a focus on foundational plays and emerging assets. Increased international spending in Trinidad and Bahrain is expected to yield results in 2026, with exciting projects like Mento and Coconut in progress. The company has been exploring in Trinidad for years and has commissioned a platform to access over 500 Bcf of resource potential in the Coconut prospect. They have awarded two new blocks in Trinidad and have a successful joint venture with BP. The team continues to unlock opportunities and has a promising future in the country.
Regarding natural gas differentials, the company expects peer-leading realizations to carry forward into 2025. Basis along the Gulf Coast has weakened, while NYMEX has strengthened. Strategic agreements will ramp up throughout the year, leading to an inflection point in cash flows.
In Bahrain, the company is evaluating a tight gas sand exploration prospect with positive production results. They have entered a JV partnership with Bapco Energies and are awaiting government approvals. The company is optimistic about applying horizontal drilling and completion technologies to drive competitive economics.
With $7 billion in cash, the company plans to stay at a cash balance of $6 billion or less. They aim to maintain an efficient capital structure with less than one times total debt-to-EBITDA target and are committed to working towards a debt level of $5 billion to $6 billion. The company plans to maintain a cash level of $5 billion to $6 billion for the next 12 to 18 months. Debt is expected to be less than one times total debt to EBITDA at $45 WTI, approximately $5 billion to $6 billion. Share repurchases will continue to be opportunistic, with a commitment to return a minimum of 70% of free cash flow to shareholders. In Dorado, activity has increased by 20% this year, focusing on long-term growth and operational improvements. Eagle Ford activity has decreased by 25% year over year, with a shift towards other emerging plays for better returns. Eagle Ford remains a core asset for the company, with consistent improvements leading to high returns in the last several years. The company has an active domestic exploration program and plans to drill more wells this year. The Utica is making strides in operational efficiency but still needs to reduce costs to compete with foundational assets. The Niobrara has seen significant upticks in well counts and productivity gains, with a 20% increase in well productivity and a 10% reduction in drilling days year over year. The company is pleased with the progress in the Powder Basin, highlighting the multi-basin portfolio. The focus is on the Delaware program, with productivity trends varying year by year, but confidence remains in development strategies. Significant improvements have been made in shallow targets, enhancing productivity and lowering costs. The Bahrain opportunity is being explored with strong conviction and a good partnership in place. In the Utica, testing continues to determine optimal well spacing as activity increases. Development and testing are both key priorities in the Utica region. EOG Resources does not have a set spacing or completion design in their plays, constantly incorporating new data and learnings to improve wells and packages. They’ve discussed spacing of 600 to 1,000 depending on the area, with tests between 800 and 1,000. Geology plays a significant role in spacing decisions, with thinner pay areas potentially requiring wider spacing. EOG continues to review their inventory for opportunities to bring value forward and has been active in the divestiture market.
EOG Resources has invested in technology and is considering how data center development may progress, with a focus on areas with dense and diverse fiber lines. They see potential benefits from regional pricing uplift and if data center development outpaces infrastructure, constructing data centers closer to power generation. The Gulf Coast in South Texas is seen as having potential for a larger role in data center buildout.
In terms of the Utica, EOG Resources is focused on the volatile oil window and has a huge footprint of almost 500,000 acres. They are targeting the western side of the black oil window and are still focused on the volatile oil window where they did most of their leasing. EOG Resources is strategically focusing on leasing in the volatile oil window for drilling opportunities, with plans to expand after collecting more data. The company emphasizes sustainable and growing dividends as part of its cash return strategy, with a 7% increase last year. They anticipate a 15% increase in cash taxes for 2025 due to the exhaustion of AMT credits. EOG remains optimistic about the future and is committed to improving assets, lowering breakevens, and optimizing cash flow generation. Shareholders and employees are thanked for their support and contribution to another exceptional quarter. 1. EOG Resources saw a 23% increase in oil production in the second quarter, beating analyst expectations.
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Read more at NASDAQ MarketSite: EOG Resources (EOG) Q4 2024 Earnings Call Transcript