Sign in

    EOG RESOURCES (EOG)

    Q3 2024 Earnings Summary

    Reported on Feb 7, 2025 (After Market Close)
    Pre-Earnings Price$134.12Last close (Nov 8, 2024)
    Post-Earnings Price$134.12Last close (Nov 8, 2024)
    Price Change
    $0.00(0.00%)
    • EOG is optimizing its capital structure by increasing debt to $5-6 billion, targeting less than 1x total debt-to-EBITDA at $45 WTI, enhancing long-term shareholder value and supporting increased cash returns to shareholders .
    • EOG has increased cash returns to shareholders to at or exceeding 85% of free cash flow, and potentially plans to return over 100% in the near term due to their strengthened capital position .
    • EOG focuses on low-cost bolt-on acquisitions with high upside in emerging assets, improving inventory quality and driving operational performance that contributes to higher financial performance and shareholder returns .
    • EOG Resources plans to increase its debt levels to $5-6 billion in the next 12-18 months, which could increase financial risk and impact its balance sheet strength.
    • The shift to a higher debt capital structure may reduce EOG's financial flexibility, making it potentially less capable of managing through cyclical downturns if commodity prices decline.
    • There is uncertainty about maintaining high shareholder returns while increasing debt and potentially moving to a net debt position, which could affect future cash returns to shareholders.
    MetricYoY ChangeReason

    Total Revenue

    -4% YoY

    The decrease was driven by lower realized commodity prices for both crude oil and natural gas, partially offset by modest production gains and higher revenues from select international operations. These pricing headwinds outweighed incremental volume increases.

    Crude Oil & Condensate

    -6% YoY

    A weaker composite average price for crude oil led to reduced wellhead revenues compared to the prior year, only partly offset by stable or slightly higher production in core assets.

    Natural Gas

    -11% YoY

    Lower spot and contract natural gas prices resulted in a significant revenue decline. Although associated gas output continued to increase from U.S. plays, it did not fully compensate for the weaker price environment.

    Gains on Mark-to-Market Commodity Derivatives

    +84% YoY

    This jump reflects favorable changes in the fair value of existing derivative positions. The company benefited from hedging strategies that turned more positive compared to the prior year.

    Revenue from Trinidad

    +75% YoY

    The substantial increase stems from higher natural gas deliveries and a slightly improved price realization in Trinidad, boosting regional revenue performance despite global price volatility.

    Operating Income (EBIT)

    -18% YoY

    Despite some revenue benefits from derivatives and international operations, lower overall commodity prices and higher operating costs (including DD&A) weighed on margins, reducing EBIT year-over-year.

    Net Income

    -17% YoY

    Lower wellhead revenues from crude oil and natural gas due to weaker commodity prices contracted net income, partially offset by profitable international operations and derivative gains.

    EPS (Diluted)

    -16% YoY

    The drop in net income was the primary driver. Although share repurchases and certain efficiency gains provided support, they did not fully offset the impact of lower commodity prices on earnings per share.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Oil Production

    FY 2024

    Increased by 1,800 barrels of oil per day

    Midpoint increased by 800 barrels of oil per day

    raised

    NGL Production

    FY 2024

    Increased by 10,000 barrels per day

    Midpoint increased by 2,800 barrels per day

    raised

    Natural Gas Production

    FY 2024

    no prior guidance

    Midpoint increased by 24 million standard cubic feet per day

    no prior guidance

    Per Unit Cash Operating Costs

    FY 2024

    Reduced by $0.15 per unit

    Expected to be lower than previously forecasted

    lowered

    Capital Expenditures (CapEx)

    FY 2024

    no prior guidance

    $6.2 billion at the midpoint

    no prior guidance

    Shareholder Returns

    FY 2024

    no prior guidance

    At least 70% of annual FCF returned; on track to exceed 85% for 2024

    no prior guidance

    Strategic Infrastructure Spending

    2025

    no prior guidance

    $100 million allocated for the Janus gas plant in 2025

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Operational Efficiencies

    Continued focus on longer laterals (e.g. 3-mile wells), proprietary drilling motors, and artificial lift optimizers to reduce downtime/costs

    Higher pumping rate capacity (+15% per frac fleet), extended laterals, and in-house motor program reducing trips/costs

    Continued emphasis on efficiency gains across multiple basins

    Capital Discipline

    Repeatedly committed to 70%+ FCF return, raised dividends, opportunistic buybacks, and disciplined well investments at $40 oil/$2.50 gas

    Maintains balance sheet strength, invests for long-term free cash flow, returns 92% of FCF to shareholders

    Ongoing priority with consistent shareholder returns

    Low-Cost Dorado

    Highlighted as one-rig program, deferring completions to capture improved market conditions and linking to premium markets

    Remains a prime low-cost gas asset ($1/Mcf operating cost), projected to meet 2025+ LNG-driven demand

    Key growth avenue; stable rig activity and strong margin profile

    LNG Growth Prospects (2025+)

    Emphasized long-term gas demand from LNG, noting strong 2025-2027 expansions and additional 10-12 Bcf/day by decade-end

    Views 2025 as inflection point; 10-12 Bcf/day of LNG capacity under construction

    Bullish sentiment continues, expecting demand surge

    Utica Development

    Showed strong IP rates and efficiency gains (29% fewer drilling days on 3-mile laterals), with promising returns in the volatile oil window

    Transitioned 225k acres to development; well costs <$650/ft, 50% activity increase in 2025

    Accelerating activity, driven by lower costs and strong well results

    Modest Oil Production

    Historically targeted 3% oil growth, stressing disciplined capital allocation and value creation over high growth

    Growth of 10k BOPD over 12 months; prioritizes returns over aggressive volumes

    Steady, lower-risk growth approach remains intact

    Debt Levels

    No new debt initiatives mentioned in Q2/Q1/Q4 calls; previously highlighted strong balance sheet and debt reduction

    Plans to increase debt to $5-6B, keeping total debt-to-EBITDA <1x at $45 WTI

    Newly introduced leverage strategy, still maintaining financial strength

    Maturing Eagle Ford & Bakken

    Eagle Ford laterals extended (20% longer) with improved returns, Bakken described as mature but still oily

    Eagle Ford slowed to 120 wells/year; Bakken at 1-rig pace, each generating consistent returns

    Stable, more selective investment in mature zones

    Technological Advancements

    Consistent enhancements in drilling motors, artificial lift, super zipper completions to boost efficiency

    Frac rate improvements, fewer trips per well, extended laterals (record Eagle Ford 22k ft)

    Ongoing innovations driving cost and time savings

    Emerging Plays Impact

    Previously framed as high-return additions to core assets, supporting balanced growth amid commodity cycles

    Dorado, PRB, and Utica poised for significant long-term contribution; disciplined ramp-up

    Expanded activity as these plays mature and show strong economics

    1. Balance Sheet Optimization
      Q: Why are you adding $2 billion of debt?
      A: To make our capital structure more efficient, we're increasing debt to a level more appropriate for our size, targeting total debt of $5–6 billion with a leverage ratio less than 1x at $45 WTI prices. This move allows us to shift equity into debt, aligning with our consistent approach that absolute zero debt isn't our goal.

    2. Increased Shareholder Returns
      Q: Will you exceed the 70% free cash flow return commitment?
      A: Yes, the additional cash from optimizing our balance sheet positions us to exceed the 70% commitment, potentially reaching 100% or more return of free cash flow to shareholders over the next 12–15 months.

    3. 2025 Capital Spending
      Q: How will 2025 capital spending change?
      A: We plan to maintain relatively flat activity levels, with modest shifts between basins. We'll slightly increase activity in the Utica, reaching 2 rigs and 1 frac fleet by year-end, while strategic infrastructure spend will decrease from $400 million in 2024 to about $100 million in 2025.

    4. Dorado Gas Investment
      Q: What are your plans for the Dorado gas play?
      A: We'll maintain a 1-rig program in Dorado, given its position as one of the lowest-cost dry gas assets with cash operating costs around $1 per Mcf. We see significant demand growth from LNG starting in 2025, and Dorado is well-positioned to supply this market.

    5. Utica Cost Improvements
      Q: Can Utica costs decrease further?
      A: Yes, in the volatile oil window, we're achieving finding costs in the $6–8 per BOE range. We expect to drive costs down further with economies of scale as we increase activity.

    6. Potential M&A and Bolt-ons
      Q: Will you consider acquisitions or bolt-ons?
      A: Our strong balance sheet enables us to pursue low-cost property bolt-ons that offer high upside on undrilled acreage, focusing on opportunities that enhance long-term shareholder value.

    7. Impact of Election Outcomes
      Q: How does the election affect EOG?
      A: We prepare for potential regulatory changes during administration transitions, but we believe the industry is well-positioned with strong relationships at all government levels. Oil and natural gas remain essential for long-term energy solutions.

    8. 2025 Oil Production Outlook
      Q: What oil growth do you expect in 2025?
      A: With similar activity levels, oil production growth will be modest, consistent with our focus on balancing returns, NPV, and free cash flow generation rather than targeting a specific growth rate.

    9. Carbon Capture Initiatives
      Q: Any updates on carbon capture projects?
      A: Our pilot project is successful, and we're looking to deploy the technology across our operations, focusing on internal projects rather than third-party ventures.

    10. Inventory Levels in Plays
      Q: How much inventory do you have in key plays?
      A: We have about 10 billion BOE of premium resource across multiple basins, including the Bakken, Eagle Ford, and Delaware Basin. Inventory levels are strong, and we continue to improve quality through organic exploration.

    Research analysts covering EOG RESOURCES.