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EOG aiming for double-digit growth and returns, COO says

EOG Resources Inc. has developed a business model that allows for double-digit production growth as well as double-digit returns, COO Lloyd Helms said at the Barclays Energy-Power CEO Conference in New York.

Earlier this year, EOG executives said they wanted the company to be compared with the best of the S&P 500 in any sector, and Helms did not back away from that assertion in his comments. He said the company was capable of satisfying investors through both returns and impressive production totals at the same time.

"What we're targeting is to be able to generate double-digit returns, and returns come first, and also generate double-digit growth, and this is organic growth through the company," he said. "EOG's culture … to consistently make improvements year over year is really propelling the company financially to be able to compete with the other companies in the S&P 500."

Helms said EOG's objective is to generate at least a 10% return on capital employed and is working to improve efficiencies and lower break-even costs. Improvements have been made throughout 2019 in two of the company's major plays, the Permian Basin's Wolfcamp Shale and the Eagle Ford Shale.

"[In the Wolfcamp] it's about a 12% increase [in production] over the previous year. We're also completing more lateral feet per day, so the completion efficiency is improving. We're drilling the wells faster and our cost is coming down," he said. "The Eagle Ford has been an active play for the company for a decade, and we're still finding ways to continue to drive down the cost. And as much as we drive down the cost, and as good as we seem to get on drilling these wells, we see things every day that we can continue to get better."

Helms said EOG was focused on "disciplined growth" and would look to continue to increase its dividend to satisfy investors. Additional share buybacks were not high on the company's priority list, he said.

"We still feel like that the returns we're generating from our reinvestment program are generating the most value for the shareholders on a go-forward basis," he said.

When asked if EOG had any concerns about its production growth plateauing or a need to add additional assets, Helms responded in the negative. The COO said EOG's production growth shows that its acreage is not "mature" and that any M&A activity would pick up assets capable of competing for capital with the company's top plays right now. Measured growth, he said, would be best for both the company and its investors.

"We don't want to just maintain the status quo. And we don't see a lack of inventory for us today. So it just makes sense to continue to grow that at a pace that you can do that efficiently and get better every year."