EOG Resources Inc.'s commitment to efficiency and shareholder returns paid off in the first half of 2019, CEO William Thomas said during the company's second-quarter earnings call Aug. 2.
Thomas said the company generated more than $350 million of free cash flow, lowered its debt by $900 million, increased its dividend and grew U.S. production by 20% in the second quarter of the year.
"The EOG culture of consistently making improvements throughout the company year after year has propelled EOG to compete financially with the very best in the S&P 500, all with oil prices averaging below $60 per barrel," he said. "We are now capable [of] delivering double-digit return on capital employed and double-digit growth on generating substantial free cash flow through the commodity price cycles."
Thomas said the company has set an objective to lower its costs to the point where it can generate a return of 10% on capital employed at West Texas Intermediate crude oil prices of $50 per barrel by 2022.
"With efficiency gains and new technology, we are achieving strong capital and operating cost reductions, while at the same time, delivering excellent well performance," he said.
COO Lloyd Helms said EOG has increased its full-year U.S. oil production guidance slightly as a result of the company's improved well performance, but would not adjust its activity level. The company, he said, will keep expenditures in its previously announced range of $6.1 billion to $6.5 billion.
During his comments, Helms said EOG's improved efficiency was due at least in part to its willingness to embrace new technology. More than one-quarter of the company's frack fleet, he said, now consists of electric frack units. That total, he said, represents about one-third of the total electric frack fleet currently in the market.
"Our experience with this new technology has been very positive. We estimate electric fleets save up to $200,000 per well and reduce combustion admissions for completion operations by 35% to 40%," Helms said.
The most tangible progress for EOG appears to be coming in the Permian Basin, where Vice President of Exploration and Production Ezra Yacob said the company has reduced completion costs by 10% year over year.
"Year-to-date, drilling days were down over 20% compared to 2018, and we continue to utilize proprietary software to balance our drilling speed ... to stay within our precision targets," he said. "Completions costs are also down 10% compared to 2018 due to ongoing improvement to execution, application of new completion techniques as well as lower sand and water costs."
EOG reported adjusted net income for the second quarter of $762.3 million or $1.31 per share. That was slightly lower than the S&P Global Market Intelligence consensus estimate of $1.32 per share.