EOG Resources Q3 2024 Earnings Call Summary

1) Historical and Forecast Production Levels for Natural Gas, Oil, and NGLs

• Q3 2024 Production: Average lateral lengths for our domestic drilling program continue to increase. In the Delaware Basin, we now expect to drill more than 70 3-mile laterals this year compared to our original forecast of 50.

  • Crude Oil: 493 MBod (above guidance)

  • NGLs: 254.3 MBbld (above guidance)

  • Natural Gas: 1,970 MMcfd (above guidance)

• Full-Year 2024 Guidance Midpoints:

  • Crude Oil: ~491 MBod (U.S.), 1.2 MBod (Trinidad)

  • NGLs: ~249 MBbld

  • Natural Gas: ~1,954 MMcfd (U.S. & Trinidad)

• 2025 Outlook: Production growth expected to continue, with minor shifts across basins​.

  • Permian: Disciplined co-development strategy, best in class well-costs. Lowering well costs through operational efficiencies

    and longer lateral development.

  • Dorado Play: EOG expects to continue with the single-rig program, emphasizing efficient gas production and market readiness based on natural gas demand.

  • Utica Play: Planned 50% increase in activity, reaching two rigs and one full frac fleet by the end of 2025, to achieve greater economies of scale and operational efficiency​ ends to maintain relatively flat rig activity across its portfolio, adjusting minimally between basins as necessary to optimize production while ensuring capital discipline.

2) Production Curtailments or Shut-Ins

• Oil and Natural Gas:

  • No explicit mention of their curtailments, but mentioned the industry has “some curtailed volumes ….. some gas ducts that will likely come online pretty quickly.”

3) TIL (Turned In Line) or DUC (Drilled but Uncompleted) Wells

• Natural Gas:

  • Continued discipline with DUCs in North American natural gas assets due to slower U.S. liquids growth and optimized drilling in basins like Dorado.

• Oil:

  • The company is actively managing well completions and drilling times to maximize efficiency, including continued high-intensity completions to improve well performance​.

4) Hedging Strategy or Break-Even Production Costs

• 3Q 2024 US Price Realizations: Oil @ $74/bbl, Natural Gas @ $1.84/Mcf , NGLs @ $22/bbl (For Natgas, EOG has Waha exposure reduced to ~5% in 20252, while increasing SE Markets Exposure)

• Hedging:

  • Mark-to-market hedge gains increased GAAP EPS in Q3, while cash settlements decreased EPS compared to Q2​.

• Break-Even Costs: EOG ~25% Lower than Peer Avg.

  • Oil: Premium hurdle rate of 30% ATROR at $40 oil.

  • Natural Gas: Targeted break-even of $2.50 Henry Hub​.

5) Historical and Forward-Looking Rig and Frac Crew Numbers

• Rig counts:

  • Dorado (South Texas): Operating with a one-rig program, which is expected to continue into 2025 due to market considerations and economies of scale.

  • Utica (Ohio): Currently increasing activity, with plans to expand to two rigs and one frac crew by the end of 2025, reflecting a 50% increase in activity to capture operational efficiencies and economies of scale​.

  • Bakken: Operates a steady one-rig program, intended to sustain production and returns over several years​.

  • Delaware Basin (Permian): No specific rig count is mentioned, but there is an ongoing focus on multi-well pad development, longer laterals, and motor efficiencies to improve cost-effectiveness and reduce well time​(EOQ 3Q 2024 Earnings Pr…).

• Current Efficiency Gains:

  • 15% improvement in max pumping rates per frac fleet.

• 2025 Activity:

  • No significant change in rig counts but continued efficiency improvements anticipated with longer lateral lengths and optimized motor designs for drilling​.

6) New Pipelines, LNG Projects, Data Centers, or Other Energy Infrastructure

• Matterhorn Pipeline: EOG has secured capacity on the Matterhorn pipeline to facilitate efficient delivery of natural gas to premium markets. This initiative aligns with EOG's broader strategy to optimize infrastructure utilization and improve market access for its natural gas production.

• Janus Gas Processing Plant: Delaware Basin; Phase 1 expected 1H 2025 with 300 MMcfd capacity.

• Verde Pipeline: Completed in 2023 (Phase 1); provides access to Gulf Coast markets.

• LNG Contracts: Strategic LNG sales agreements linked to Brent and JKM, with Cheniere’s Corpus Christi expansion potentially increasing sales volume​.

7) Market Activity and State of the Market

• Oil Market:

  • U.S. oil inventories below the five-year average with moderate year-over-year growth in supply and demand.

• Natural Gas Market:

  • U.S. natural gas inventories are close to the five-year average, with demand bolstered by power generation and future increases expected from new LNG facilities coming online through 2025​. EOG Resources anticipates a positive outlook for the natural gas market in 2025, with a key focus on increased demand driven by several factors:

    • LNG Demand: The company expects 2025 to mark an inflection point in North American gas demand, largely driven by new LNG capacity coming online. EOG estimates that 10-12 Bcf/d of LNG feed gas demand will begin to impact the market starting in 2025 and continuing through 2027​.

    • Power Generation Growth: Additional demand growth, nearly 10-12 Bcf/d by the end of the decade, is anticipated from increased power generation, partially due to electrification needs for data centers and other infrastructure. EOG also highlights a shift to natural gas from coal-fired power plants, which will support steady demand increases in the coming years​.

    • Export Opportunities: Continued growth in exports to Mexico and broader Gulf Coast access through infrastructure like the Verde Pipeline and Janus Gas Processing Plant, which will connect to the Matterhorn pipeline, further supports EOG’s natural gas positioning.