EOG Resources Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Arun Jayaram - JPMorgan Securities - Analyst : Yeah, good morning, Ezra. EOG is a bit of a canary in the coal mine, given your decision to pull back a little bit on capital. I guess some of the questions we got from the buy side is on slide 7 you highlight, call it, returns above 100% at [55 and 3] and some investors wondering if maybe higher cost producers that sit at the higher end of the US shale cost curve should be the first ones to cut. And I was wondering if you could just maybe elaborate on this decision, and thoughts on what would cause you to further reduce CapEx as the macro picture evolves.

Question: Arun Jayaram - JPMorgan Securities - Analyst : Great. Makes total sense to us. My follow-up is the company returned 100% of free cash flow in 1Q. I was wondering if you could talk about thoughts on cash return in a tougher macro pictures, looking at the 10-Q, it does appear that EOG is quite active in April. It looks like you bought back maybe up to 5 million shares. Give us your thoughts Ezra and Ann around cash return in a more challenging macro picture?

Question: Douglas Leggate - Wolfe Research - Analyst : Thank you. Good morning, everybody. Ezra, I think you might have just answered the question I had, but I'm going to try and ask it anyway. On slide 19, you -- long-standing slide you've had -- you showed that $12 billion to $22 billion, three-year cumulative free cash flow. And this -- the comments you made earlier, $4 billion is the number for this year by cutting the capital back. And what I'm trying to figure out is, you never gave us a capital number along with slide 19. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, EOG.N - Q1 2025 EOG Resources Inc Earnings Call So is this how we should think about it that you're ultimately flexing your capital to protect that $12 billion to $22 billion target? Or is it not as formulaic as that?

Question: Douglas Leggate - Wolfe Research - Analyst : Keeps you right in line with that target. That's -- I guess, my follow-up is -- I'll be candid, some of the feedback we got after results last night as well, if EOG is now not growing oil production, and they're spending $6 billion. How does that jive with the $4.5 billion, $4.7 billion sustaining capital number. And I guess my question is there's obviously a lot of other things in that $6 billion. Where would the next area of capital flexibility come? Would it be drilling activity? Or would it be some of the peripheral issues like infrastructure and exploration and so on.

Question: Paul Cheng - Scotiabank GBM - Analyst : Thank you. Good morning, guys. Two questions. First, in the commodity business, particularly like oil and gas, what we have seen in the past that at the downturn of the cycle, typically that for the well-positioned company such as you guys with a very strong balance sheet, that's the way that you can make the differences. And drastically widen your competitive edge, either that by buying a huge amount of their stock or that doing some transformative acquisition. And so I guess my question is that for you guys, when you're looking out, it looks like a lot of the easy market, good quality asset is already being picked up. Do you still see a lot of opportunity from an acquisition target standpoint out there that from a quality standpoint, that can well fit into your portfolio or that you say the -- most of the best asset is already being picked, so at this point, we are really better off for us to continue to buy back. So that's the first question. So I want to see how the management is thinking on those areas. The second question is on your -- the international asset or particular in Trinidad. I think after being pretty steady, you are doing a lot of activity over there. So how should we look at that business in, say, five years' time? What is the size of the business you can grow to? And does the management from a regional diversification standpoint, have any desire saying that international become a much bigger portion of your overall portfolio if you do? Any kind of power as you have in mind?

Question: Scott Hanold - RBC Capital Markets Wealth Management - Analyst : Ezra, you've given a pretty good overview on why you look to optimize your activity levels in light of the macro environment. But if there is some -- if there's a persistent weak oil market, but gas remains firm, how do you think about like capital allocation changing to more gassy areas like Dorado and maybe even targeting more of the gassy intervals in the Permian Basin?

Question: Scott Hanold - RBC Capital Markets Wealth Management - Analyst : Okay. Appreciate that. And yeah, the $1.40 number is definitely a pleasant surprise to see that it's pretty impressive. As my follow-up then, too, is you did highlight cost improvements across your asset base. You talked about like Eagle Ford dollar per foot, the Utica dropped now below what you've previously seen in light of, I'd say, kind of some pushes and pulls with tariff risk on some cost but obviously -- potentially some softer [OFS costs] and continued efficiencies. What do you think about 2026, and maybe any kind of thoughts on '27 in terms of like where do well cost trends go for EOG?

Question: Leo Mariani - Roth Capital Partners - Analyst : Hi, why don't you just ask a little about more about the Dorado play here. So, just kind of wanted to just ask a little about -- more about the Dorado play here. So I just kind of wanted to get a sense of kind of what the returns are on that asset, say, at kind of $4 gas, which is -- I guess, fairly close to what strip prices are in 2026. And what are the kind of the similar returns on some of the core oil plays, Delaware, Eagle Ford is, say, $55 oil. I was hoping you could just kind of do a little bit of a compare and contrast on the returns of those two assets here

Question: Leo Mariani - Roth Capital Partners - Analyst : Okay. I appreciate that. And then just, obviously, you guys made the decision to cut some capital out of the program here this year. Basically, you're kind of flattening out oil for the rest of the year here. But just with respect to kind of some of the timing, is that $200 million of CapEx and activity reductions kind of more in the second half of the year? And then I guess, presumably, could there be a bit more production impact in 2026? And you also mentioned tariffs don't impact 2025, but would you guys have exposure there in '26?

Question: Derrick Whitfield - TCBI Securities, Inc - Analyst : Good morning all, and thanks for your capital disband leadership. From a CapEx perspective, you highlighted flat service prices for high-spec equipment in your prepared remarks and an earlier question. If we would experience a more protracted period of depressed prices in low-50s, could you broadly speak to your views on service prices in that environment and the structure of your service contracts as they stand today?

Question: Derrick Whitfield - TCBI Securities, Inc - Analyst : Great. Regarding gas marketing, we're continuing to see demand outlooks along the Gulf Coast with Woodside being the latest LNG project to reach -- as you look out beyond 2027 on slide 10 of your 1Q earnings deck, how are you broadly thinking about the amount of exposure you'd like to have in the LNG markets versus domestic markets?

Question: Scott Gruber - Citi Investment Research (US) - Analyst : Yeah. Good morning. We've always thought of Trinidad as primarily a gas play that you discovered oil at Barrel. What's your view of additional or opportunities around Trinidad and either any other oil targets in the exploration plan?

Question: Scott Gruber - Citi Investment Research (US) - Analyst : I appreciate that. And then turning to OpEx. Cash costs be here in 1Q, you flexed down your full-year guide. Can you provide some color on what drove the beat in 1Q and just given the lower oil prices, is there more to go on potentially reducing OpEx even further?

Question: Neil Mehta - Goldman Sachs - Analyst : Morning, Ezra and team. Just two quick ones here. The South Texas Eagle Ford bolt-on, just building out, it looks like an incremental 30,000 acres here. So just talk a little bit about it, what brings to the table and how you're thinking about that?

Question: Neil Mehta - Goldman Sachs - Analyst : Thank you. That's helpful. And then are you -- we've been through down cycles before, most notably 2020, although that was a stream. But if you look back to that experience and the oil sell-off that we had five years ago, and if in a scenario where things get materially worse on front month oil, which is not our base case, but it's certainly in the realm of possibility here over the next couple of days. What are the lessons that you learned from your 2020 experience that you would carry forward here, things like maybe having a little bit more capacity to buy back stock countercyclically than you did back then? Or be more aggressive on them from an M&A perspective. Just your own perspective of how that experience could inform the future experience if things go wrong way. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, EOG.N - Q1 2025 EOG Resources Inc Earnings Call

Question: Charles Mead - Johnson Rice & Company LLC - Analyst : Good morning to you and your whole team there. I wanted to pick up the discussion thread on barrel a bit more. You guys -- I think it was Jeff who mentioned that you weren't sure whether you're going to get oil or gas there. But I wonder if you could talk more about how this 125 feet that you saw came in versus predrill and whether that's 1 zone or 2 zones or anything you could care share along those lines? And then also -- can you give us a sense what the major steps towards FID are or will be? And should we be thinking 2,000 barrels a day net or 20, just order of magnitude?

Question: Charles Mead - Johnson Rice & Company LLC - Analyst : Okay. That makes sense. And then my follow-up on the Eagle Ford bolt-on, that looks like a great deal for you guys, and it kind of seems like it's maybe the unicorn left in the play with that big undeveloped position. Also -- but it looks different from a lot of the other deals we've seen in the Eagle Ford lately, which have been more PDP focused. Obviously, you guys paid a good amount for the locations, but they're fabulous location. So my question is, are there other deals like this out there? And is this the kind of thing that we should be expecting more from EOG either in the next year or in the next 18 or 24 months?