EOG Resources Inc Q3 2024 Earnings Call Transcript

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

Question: Steve Richardson - Evercore ISI - Analyst : I was wondering if we could start as with the optimization of the balance sheet. This is a new wrinkle from the company. And I wonder if you could just talk about this incremental gross debt that you're looking at adding the time frame? Should we think about that $2 billion coming concurrent when you would look to refi the existing maturities? And then also the knock-on of that is -- how do you look at redeploying that cash, assuming into the buyback? And does this mean that you'll be taking shareholder returns above sustainably above that minimum commitment for the next couple of quarters. Maybe just talk about time frame around that, please?

Question: Steve Richardson - Evercore ISI - Analyst : That's great. Really strong choice capital allocation. If I could maybe just a follow-up on natural gas. You have arguably the lowest cost dry gas asset in the market and with the Verde pipeline finishing, you've got some real opportunities here. I appreciate the comments on a one-rig program for 25, but you mentioned off the top as how optimistic the natural gas demand outlook looks. So how should we think about the contango of the gas curve and what signal you're looking for to apply more capital there, arguably that you are at the low end of the cost curve in North America?

Question: Arun Jayaram - JPMorgan - Analyst : Ezra, I was wondering if we could talk about puts and takes in terms of 2025 capital. Jeff mentioned that you expect to run relatively flattish activity but with the movements between some basins. So I was wondering if you could characterize how capital would move. You're going to be a little bit more active at Dorado, we think, in the Utica I think your strategic infrastructure spend is going to go down on a

Question: Arun Jayaram - JPMorgan - Analyst : Got it. That's helpful. Maybe just a follow-up to Steve's question on the optimization of the balance sheet. You mentioned Azure that this could maybe drive higher cash returns to investors. How much does the potential to do A&D or bolt-ons, countercyclical A&D? How did that progress in terms of your thinking in terms of going to $5 billion to $6 billion of gross debt? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 3:00PM, EOG.N - Q3 2024 EOG Resources Inc Earnings Call

Question: Scott Hanold - RBC Capital Markets - Analyst : And I'm going to hit on the balance sheet optimization. And Ezra, you just answered part of my question there with regards to like the why now. It's definitely unique to the sector. And just curious, was this a decision you've been contemplating for some time. Kind of what was the catalyst to move on it now? And also with respect to that, how much value creation from shifting to a lower cost capital structure like moving from equity to debt, some of that value. How much of a value improvement do you expect to see from that?

Question: Scott Hanold - RBC Capital Markets - Analyst : Understood. My follow-up is a little bit on the election. The outcomes certainly have created a lot of volatility in the markets. And as you look at what this means to the energy industry and specifically for EOG. What are some of your initial takeaways and the potential tailwinds at play?

Question: Leo Mariani - Roth MKM - Analyst : Wanted to just touch base a little bit here on the Utica again. So just curious, you guys talked about $6 to $8 a BOE. I think that was exclusive to the volatile oil window. Do you think there's room to continue to get costs down over time? I know you guys have talked about a long-term goal of BOE finding cost, but I think that may have included some of the gassier windows as well. So where are you at in the cost cycle in the Utica? And do you think there's still significant room to take that down?

Question: Leo Mariani - Roth MKM - Analyst : Okay. Appreciate that. wanted to see if there was any update on the PRB. I feel like it's been a little time since we've heard on that. How are you viewing that play in terms of how it stacks up against others? And I think you're doing a little bit less on the well side this year than you did last year. You talked about adding a little bit of activity in the Utica for 2025. Just any update in terms of how the PRB is performing and how you're thinking about future activity levels there?

Question: Kaleinoheaokealaula Akamine - BofA Global Research - Analyst : My first question is on the gas guide. So we've seen it go up every single quarter this year, and we think that, that's the Permian. I appreciate that the Janus plant is coming online. But I'm wondering if that gas outperformance pulls forward any of your additional midstream development time lines?

Question: Kaleinoheaokealaula Akamine - BofA Global Research - Analyst : Got it. For my follow-up, I'd like to go back to Dorado. I appreciate that it's got very low cash costs. I think in the past, we've talked about $1, and that falling by $0.50 to $0.60 because of Verde. And given its position on the coast, I imagine that it's going to be quite a resilient play. My question is, are you going to optimize production around that cash cost figure? Or do you think that there is a return threshold to consider that would cause you to maybe curtail production or maybe decelerate?

Question: Neal Dingmann - Truist - Analyst : I'm hoping I can ask another one on the Utica specifically. I'd love to hear your latest thoughts on how you're thinking about the prospectivity more on the west side of the play, either in that black oil or volatile oil in the play? And then just one other question on this play. What's the latest on just the decline? I know it's still early, but I'm just wondering are these wells declining more like typical oil wells or like a Marcellus gas well?

Question: Neal Dingmann - Truist - Analyst : Got it. Okay. Okay. And then maybe just a second one, a follow-up just on overall inventory. I'm just wondering, I understand no longer put out the well count in your slides like you previously had in the appendix. I'm just wondering -- I was hoping you could give a sense or maybe a ballpark of how many years you're thinking about of running room specifically in the Del, Eagle Ford and Bakken at the current rig paces.

Question: Charles Meade - Johnson Rice & Company - Analyst : I wanted to go back to your prepared comments, you spoke a bit about the commodity macro. And you gave a thought on the US supply picture. But I wonder if you could share with us your point of view on what the range of possible outcomes is for '25? And not that we're looking for specific prediction, but more of just trying to get an understanding of your thinking that's informing your approach to '25?

Question: Charles Meade - Johnson Rice & Company - Analyst : Got it. Got it. And then could you give us a quick rundown of how or how or went (inaudible) our 2025 program?

Question: Charles Meade - Johnson Rice & Company - Analyst : Beehive, the Australia well.

Question: Scott Gruber - Citi - Analyst : You guys have mentioned keeping activity largely consistent for '25. Your oil volumes will be up about 2% year-on-year at the exit this year. Is that a number we should be expecting a similar figure for '25? And then obviously, there's some concerns on the macro side. Just curious, just wonder what conditions would you look to dial back activity to ensure more of a flattish trend on your oil production? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 3:00PM, EOG.N - Q3 2024 EOG Resources Inc Earnings Call

Question: Scott Gruber - Citi - Analyst : I appreciate all that color. I had a follow-up on your carbon capture initiative. With the pilot project up and running, can you speak to your interest in doing additional projects and would these be confined to internal projects? Or would you consider third-party projects?

Question: Kevin MacCurdy - Pickering Energy Partners - Analyst : I think the market is appreciating the reconsideration of your capital structure. My question is on how dynamic do you plan to be on managing that capital structure? As EBITDA grows with higher production and better margins over time, it seems like you should have a more of a safety net on the downside leverage target. Would you keep would you plan to keep returning a higher percentage of your free cash flow in the future, even if that moves you to a net debt position?

Question: Kevin MacCurdy - Pickering Energy Partners - Analyst : Yes. I mean it seems like you highlighted the near-term shareholder return benefit, but this structure could set you up for potentially even higher percentage of returns in the future. I guess my follow-up here is, you mentioned low cost property bolt-ons as part of your balance sheet plans. Do you have any color on where you see the most opportunities for that? And what is the dollar threshold between a low-cost bolt-on and significant M&A, which you've avoided in the past?