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    EOG
    Earnings call· Dec 2024(Q4 FY24)

    EOG RESOURCES INC EOG

    Feb 28, 2025 Source

    Executive summary

    EOG Resources Q4 FY24 — Strong Performance and Strategic Investments Drive Future Value

    EOG Resources delivered a strong Q4 and full-year 2024, exceeding production targets and returning significant free cash flow to shareholders, underpinned by a growing regular dividend. The company is strategically investing in its multi-basin portfolio, including increased activity in emerging plays like the Utica and Dorado, and expanding internationally in Trinidad and Bahrain, to build a foundation for future high-return free cash flow generation. While 2025 free cash flow is impacted by higher taxes and operating costs, management remains focused on capital discipline and operational excellence.

    Highlights

    5

    • Achieved 25% return on capital employed in FY24, with a 28% average over the last four years.

    • Returned 98% of FY24 free cash flow to shareholders, totaling $5.3 billion.

    • Increased regular dividend by 7% in FY24, reaching an indicated annual rate of $3.90 per share.

    • Reduced share count by 5% since 2023 through $3.2 billion in share repurchases in FY24.

    • Increased proved reserves by 6% to 4.7 billion BOE in FY24, with a 201% reserve replacement ratio (excluding price revisions).

    Concerns

    3

    • Forecasted 2025 free cash flow is softer due to increased cash taxes from expiring AMTs ($212 million in 2024) and higher operating expenses.

    • Natural gas differential guidance for 2025 is wider than expected, with Houston Ship Channel basis weakening from $0.30 back to $0.55 back.

    • International projects in Trinidad and Bahrain are not expected to contribute volumes until 2026, despite increased capital allocation in 2025.

    Guidance & targets

    21
    CategoryTargetConfidence
    Capital Expenditures
    $6.2 billion
    high materiality
    High
    Oil Volume Growth
    3%
    high materiality
    High
    Total Production Growth
    6%
    high materiality
    High
    Well Cost Reduction
    low single digits
    medium materiality
    Medium
    Average Lateral Length Increase (Delaware Basin)
    at least 20%
    medium materiality
    High
    Activity Level Increase (Utica & Dorado)
    20%
    medium materiality
    High
    Utica Rigs
    2 full-time rigs
    low materiality
    High
    Utica Frac Fleets
    1 full-time frac fleet
    low materiality
    High
    Dorado Rigs
    1 full-time drilling rig
    low materiality
    High
    Waha Natural Gas Sales Exposure
    5% to 7%
    medium materiality
    High
    Trinidad Wells (Mento platform)
    4 net wells
    low materiality
    High
    Coconut Platform Construction (Trinidad)
    commence construction
    medium materiality
    High
    Bahrain Drilling Start
    sometime in the second half of the year
    medium materiality
    High
    Corpus Christi Stage 3 Train 1 Start-up
    start up in 2025
    medium materiality
    High
    Cash Flow Breakeven Price (Oil)
    low 50s
    high materiality
    High
    Return on Capital Employed (ROCE)
    20% or greater
    high materiality
    High
    Debt Level Target
    $5 billion to $6 billion
    high materiality
    High
    Cash Level Target
    $5 billion to $6 billion
    high materiality
    High
    Minimum Free Cash Flow Return to Shareholders
    minimum of 70%
    high materiality
    High
    Utica Finding and Development Cost
    $6 to $8 per BOE
    medium materiality
    Medium
    Utica Well Cost Target
    less than $650 per foot
    medium materiality
    Medium

    Operational metrics

    23
    Adjusted Net Income
    $6.6 billion
    FY24

    Earned for the full year.

    Return on Capital Employed
    25%
    FY24

    Outpacing peer average.

    Total Shareholder Returns
    $5.3 billion
    FY24

    Record amount.

    Shares Repurchased
    $3.2 billion
    FY24

    Record amount.

    Share Count Reduction
    5%
    Since 2023

    Cumulative reduction since buying back shares in 2023.

    Remaining Buyback Authorization
    $5.8 billion
    Entering 2025

    For opportunistic share repurchases.

    Cash Balance
    $7.1 billion
    End of 2024

    Includes estimated tax payments postponed to 2025 under IRS storm-related tax relief.

    Proved Reserves
    4.7 billion BOEincreased 6%
    End of 2024

    Increased by 6% year-over-year.

    Reserve Replacement Ratio
    201%
    FY24

    Excluding price revisions.

    Finding and Development Costs
    $6.68lowered 7%
    FY24

    Excluding price revisions.

    Workforce Total Recordable Incident Rate
    10%reduced
    FY24

    Improved safety.

    Average Well Cost Reduction
    6%
    FY24

    Primarily through extended laterals and in-house drilling motor program.

    Delaware Basin Drill Feet Per Day Increase
    10%
    FY24

    Helped by longer laterals and in-house drilling motor program.

    Delaware Basin Completed Feet Per Day Increase
    20%
    FY24

    Helped by longer laterals and in-house drilling motor program.

    Utica Drilled Feet Per Day Increase
    50%
    FY24

    Achieved in the emerging play.

    Utica Completed Lateral Feet Per Day Increase
    5%
    FY24

    Achieved in the emerging play.

    Dorado Drilled Feet Per Day Increase
    15%
    FY24

    Benefiting from efficiencies gained by maintaining a full rig program.

    Dorado Completed Lateral Feet Per Day Increase
    15%
    FY24

    Benefiting from efficiencies gained by maintaining a full rig program.

    Alternative Minimum Tax Credits
    $212 million
    FY24

    Fully exhausted in 2024, leading to increased cash taxes in 2025.

    Current Tax Increase
    15%
    FY25

    Expected increase in current taxes due to expiring AMTs.

    Houston Ship Channel Basis
    $0.55 backweakened from $0.30 back
    Q1 FY25

    Weakening observed in the first quarter.

    Niobrara Well Productivity Increase
    20%
    2024 vs 2023

    Achieved by leveraging gathered data and focused development.

    Niobrara Days to Drill Reduction
    10%
    Year-over-year

    Achieved in the Niobrara play.

    Industry KPIs

    7
    MetricValueDetails
    D c efficiency rig activity10%%
    Pipeline throughput storage1 Bcf per dayBcf/day
    Sanctioned expansion backlog500+ BcfBcf
    Basin level production volume3%%
    Cost of supply unit cash cost$6.68per BOE
    FCF shareholder distributions$5.3 billionUSD
    Take or pay contract structure5% to 7%%

    Orderbook & backlog

    2
    Remaining Share Buyback Authorization$5.8 billionEntering 2025

    For opportunistic share repurchases.

    Cheniere Henry Hub-linked Gas Sales Agreement300,000 MMBtu per dayFY25

    Tied to the completion of Corpus Christi Stage 3 Train 1, expected to start up in 2025.

    Deals & partnerships

    6
    BPDevelopment of Mento and Coconut fields

    EOG is the operating partner for the Mento platform development. Coconut project is a joint venture with BP, with an estimated 500+ Bcf of resource potential.

    Trinidad and Tobago Ministry of EnergyAward of new offshore blocks

    EOG was awarded 2 new offshore blocks in The Shallow Water Bid Round hosted by the Trinidad and Tobago Ministry of Energy.

    Bapco EnergiesExploration and development of onshore unconventional tight gas prospect

    New joint venture in Bahrain, with EOG as the operator. Awaiting a couple of additional government approvals. Drilling expected to start in H2 2025.

    WilliamsNatural gas transportation capacity

    364,000 MMBtu per day capacity on the Williams TLEP project along the Transco pipeline.

    VitolGas sales agreement

    180,000 MMBtu per day gas sales agreement with Vitol that links sales prices to either Brent or U.S. Gulf Coast gas indices.

    CheniereGas sales agreement for LNG market

    Henry Hub-linked 300,000 MMBtu per day sales agreement tied to the completion of Cheniere's Corpus Christi Stage 3 project Train 1, expected to start up in 2025.

    Capital programs

    5
    Mento Platform Developmentunderway

    Benefit: 4 net wells

    Development phase of a discovery made a few years ago in Trinidad, where EOG is the operating partner with BP. Wells come online later in 2025, but volume impact is expected in 2026.

    Coconut Platform Constructionunderway

    Benefit: 500+ Bcf of resource potential

    Newest prospect in Trinidad, a joint venture project with BP. Construction to commence in 2025, with drilling to follow. Volume impact expected in 2026.

    Bahrain Joint Venture (Tight Gas Prospect)underway

    Benefit: onshore unconventional tight gas prospect

    Partnership with Bapco Energies to explore and develop an onshore unconventional tight gas prospect. EOG is the operator. Drilling expected to start in H2 2025, with volumes expected in 2026.

    Verde Pipelinecompleted

    Benefit: 1 Bcf per day (expandable to 1.5 Bcf per day)

    36-inch pipeline running from Dorado natural gas asset in Agua Dulce, providing access to Gulf Coast market centers. Came into service in Q4 2024.

    Janus Natural Gas Processing Plantunderway

    Benefit: 300 million cubic feet per day

    Located in the Delaware Basin, will connect to the Matterhorn pipeline for access to multiple premium Gulf Coast markets. Will come into service in H1 2025.

    Risks & headwinds

    3
    Increased cash taxes in 2025FY25

    $212 million in Alternative Minimum Tax credits were fully exhausted in 2024, leading to an estimated 15% increase in current taxes in 2025.

    Mitigation: Not explicitly stated, but part of the overall financial planning.

    Increase in operating expensesFY25

    Not quantified as a total, but driven by higher fuel and power costs (LOE) and initial costs for new transportation contracts (GP&T).

    Mitigation: Efficiency gains and volume delivery over time for transportation contracts.

    Weaker natural gas differentials in the Gulf CoastQ1 FY25, expected to improve as new agreements feather in.

    Houston Ship Channel basis weakened from $0.30 back to $0.55 back in Q1 FY25.

    Mitigation: Strategic marketing agreements and infrastructure projects (Verde pipeline, Janus plant) to diversify takeaway and access premium markets, limiting Waha exposure to 5-7% of sales.

    What to watch in Q1 FY25

    5

    Bahrain JV drilling progress

    H2 FY25
    CurrentAwaiting government approvals, capital allocated for activity.
    TargetCommencement of drilling operations.

    Why it matters

    This new international venture could add significant high-return inventory if successful, competing with domestic assets.

    The one note on both of these, though, is both programs, we won't really see any volumes necessarily come online this year. They'll be probably more into 2026. So I'll hand it over to Keith for a little more detail. But Yes, you're exactly right. We've got about $100 million in their increase in the international capital that really just reflects our continued investment, as you talked about in both Trinidad, which we've got to our Mento program that's going to be performed this year and also we're going to be constructing our coconut platform there. And then also the new entry in Bahrain, which what I'll say is, the goal is to start drilling on that sometime in the second half of the year.

    Q&A highlights

    6

    Why is the 2025 FCF guide softer than expected, and how do investments in emerging plays and infrastructure impact the timing of FCF generation?

    Ezra Yacob explained that the 2025 plan maintains capital discipline with flat CapEx. The softer FCF is primarily due to increased cash taxes from expiring AMTs ($212M in 2024) and a slight increase in operating expenses (fuel, power, initial transportation contracts). Investments in emerging plays (Utica, Dorado) and international projects (Trinidad, Bahrain) are foundational for future FCF, with volumes from international projects not expected until 2026.

    “The 2 drivers there really is increased cash taxes due to some expiring AMTs that we had in 2024 that we won't have in 2025, that's the biggest piece of it. And then we also have a little bit of an increase in operating expense that we're forecasting.”

    asked by Neil Mehta · answered by Ezra Yacob

    3 min read6 chapters

    Detailed Narrative

    01

    2024 Performance Highlights

    EOG delivered an outstanding 2024, exceeding original production forecasts for oil and total company volume while keeping capital expenditures on target at $6.2 billion. The company reported $6.6 billion in adjusted net income, achieving a 25% return on capital employed, and returned 98% of free cash flow to shareholders, totaling $5.3 billion. Proved reserves increased by 6% to 4.7 billion BOE, with a 201% reserve replacement ratio excluding price revisions, and finding and development costs were lowered by 7% to $6.68 per BOE.

    02

    2025 Capital Plan and Growth Strategy

    For 2025, EOG plans a disciplined capital program of $6.2 billion, aiming for 3% oil volume growth and 6% total production growth. The plan emphasizes capital discipline, returns-focused investments, and operational excellence, building on 2024's success. Growth is more oil-weighted due to the Delaware Basin well mix, with capital spend peaking in Q2. The company expects cost reductions from efficiency gains, including longer laterals and in-house drilling motor programs, projecting a low single-digit percentage reduction in well costs.

    03

    Emerging Plays and Operational Efficiencies

    EOG is increasing activity levels by 20% in its emerging Utica and Dorado plays in 2025, aiming to capitalize on economies of scale. In 2024, the Utica saw a 50% increase in drilled feet per day and 5% in completed lateral feet per day, while Dorado achieved 15% increases in both metrics. The company plans to average 2 full-time rigs and 1 frac fleet in the Utica and maintain 1 full-time rig in Dorado to continue driving down costs and grow these assets into North American demand markets.

    04

    International Expansion and Strategic Partnerships

    EOG is increasing international capital expenditures in 2025 to advance projects in Trinidad and Bahrain. In Trinidad, the company plans 4 net wells from the newly constructed Mento platform and will commence construction on the Coconut platform, which has an estimated 500+ Bcf resource potential. A new joint venture with Bapco Energies in Bahrain will explore and develop an onshore unconventional tight gas prospect, with drilling expected to start in H2 2025. These international efforts are designed to compete with domestic portfolio returns.

    05

    Marketing Strategy and Infrastructure Development

    EOG's marketing team continues to deliver strong price realizations, securing new natural gas agreements and progressing strategic infrastructure projects. The 36-inch Verde pipeline, providing access to Gulf Coast markets, came into service in Q4 2024, and the Janus natural gas processing plant in the Delaware Basin will be operational in H1 2025. These initiatives, along with agreements like the Henry Hub-linked Cheniere sales agreement tied to Corpus Christi Stage 3 Train 1, aim to diversify takeaway, maximize netbacks, and limit Waha exposure to 5-7% of total natural gas sales in 2025.

    06

    Financial Strength and Shareholder Returns

    EOG maintains a strong balance sheet, ending 2024 with $7.1 billion in cash (including $700 million in deferred tax payments). The company aims for a debt level of $5-6 billion and a cash balance of $5-6 billion, supporting a growing regular dividend and opportunistic share repurchases. EOG repurchased $3.2 billion of shares in 2024 and has $5.8 billion remaining on its buyback authorization, demonstrating a commitment to returning a minimum of 70% of annual free cash flow to shareholders.

    AI-generated summary of the company’s earnings call. Not investment advice.