EOG 1Q15 Earnings Call Notes

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Not going to accelerate production at bottom of the cycle

“We have also stated that we have no interest in accelerating oil production at the bottom of the commodity price cycle. Instead, we are drilling but deferring completions on a significant number of wells known as DUCs until oil prices improve.”

Double digit growth at $65 WTI

“If oil prices recover and stabilize around $65 WTI, EOG can resume strong double-digit growth for the balance CapEx to discretionary cash flow program.”

Slowdown giving more time to focus on efficiency

“the slowdown in activity is giving us more time to focus on efficiency improvements. While much has been made of service cost reductions, we expect, we will gain the most long-term benefits from efficiency gains.”

Going to take advantage of down cycle to add acreage

“Objective number four, take advantage of opportunities during the down cycle to add acreage. We are using our exploration skills to define high quality acreage and are having good success capturing leasehold interest in emerging plays. Competition is down, acreage is available, and leasing costs are low compared to previous years, and we are optimistic more opportunities will materialize as the year progresses. We are also evaluating tactical acquisition candidates.”

If forward oil curve continues to improve then will increase completions in 3Q

“As we described on our February call, our production profile will be U-shaped this year. If the current forward oil curve continues to improve, our plan is to increase well completions in the third quarter. Therefore, we expect our oil productions to return to growth in the fourth quarter, building momentum as we head into 2016. We are right on track with this plan.”

U Shaped production

“And so the ramp up will be, as we talked about, the production shape is going to be U-shaped this year and the second and third quarters will be the low point, but the fourth quarter, with the current plan, is to ramp up production growth and the heading into 2016 on a very strong note.”

A big spread between bid and ask on acquisition front

“There’s still a pretty good spread between the bid and ask on the acquisition front. I think we’ll be very selective. We continue to be very selective in our approach, and what we’re looking for, and I think we’ll see some opportunities as we go forward, but there will be smaller, more tactical acquisitions, as well as just continuing to be able to accrete leasehold in some of our key plays and emerging place.”

This has been the plan since February

“We made the call to defer drilling, because we thought this would be or could be a short-term cycle, and we’re hopeful and certainly we’re encouraged by the current firming of the products. So we’re hopeful that’s what will turn out.

But we still, as I said earlier, we’re more optimistic in the forward curve than what it is right now. So we believe being patient and waiting on that products to continue to come up, while also continuing to take advantages of the cost reductions in the wells and the well productivity improvement. Those will all make a very significant difference in the returns we get on the wells when we begin to complete them.”

Not tried any refracts

“we’ve not tried any refracts. Our outlook on that is that it really — technically, we believe that just drilling a new well and kind of starting fresh and making sure your lateral is in the very best target and making sure that you can redistribute the frac very evenly along the wellbore with the new well is probably the preferred way to go. We just think that the upside on the completion will be much greater than if you try to refract the well.’

We’ll be able to ramp pretty quickly since servicers have kept people in place

“If we were ramping up here in the next month or two, I think you can ramp up pretty rapidly. And that’s why many of those operators are trying to keep as many services in place even if reduced work levels just to maintain that support that service companies.”