Executive Summary / Key Takeaways

• EOG Resources stands as a leading independent E&P, distinguished by a relentless focus on high-return, low-cost operations across a diverse multi-basin portfolio, underpinned by proprietary technology and a decentralized culture.
• Operational excellence, driven by innovations like in-house drilling motors and artificial lift optimizers, translates directly into quantifiable efficiency gains, lower per-unit costs, and enhanced well productivity, fueling robust free cash flow generation.
• A pristine, peer-leading balance sheet and a strategic move to optimize its capital structure by targeting a $5-$6 billion debt level (<1x Debt/EBITDA at $45 WTI) provide significant financial flexibility to support a growing regular dividend and opportunistic share repurchases, potentially exceeding 100% of free cash flow return in the near term.
• Strategic investments in emerging plays like the Utica and Dorado, coupled with infrastructure projects (Janus plant, Verde pipeline) and expanded market access (TLEP, Brent-linked sales), are designed to drive long-term margin expansion and future free cash flow potential, even as the 2025 capital plan is optimized in response to macro uncertainty.
• EOG's competitive advantages in cost structure, operational efficiency, and diverse market access position it to navigate commodity price volatility and industry competition, offering investors a compelling blend of financial strength, shareholder returns, and growth potential.

Forging Value Through Discipline and Innovation

EOG Resources operates as one of the largest independent, non-integrated crude oil and natural gas companies in the United States, with proved reserves extending to the Republic of Trinidad and Tobago. At its core, EOG's identity is defined by a consistent, through-cycle strategy centered on being a high-return, low-cost producer. This is not merely a slogan but a deeply embedded operational philosophy that permeates its decentralized culture and drives decision-making from the field level up. The company's history, including its evolution over 25 years as an independently traded public entity and over 30 years operating in the Columbus Basin of Trinidad, has forged an organization adept at finding and developing low-cost reserves through internally generated prospects.

This strategic focus is supported by a rigorous investment evaluation process that extends beyond simple rate of return, incorporating net present value, margins, and payback period to maximize long-term shareholder value. This disciplined approach has yielded significant results, including generating free cash flow for eight consecutive years and, since the end of 2020, accumulating over $22 billion in free cash flow and $25 billion in adjusted net income, all while reducing debt by 35%. In the four years since COVID, EOG has earned an impressive average 28% return on capital employed, outpacing the average of its peers.

A critical differentiator for EOG lies in its commitment to in-house technological innovation and operational excellence. The company doesn't just adopt technology; it develops and integrates it across its multi-basin portfolio to achieve tangible, quantifiable benefits. For instance, EOG's proprietary downhole drilling motor program has been instrumental in increasing drilled footage per day, contributing to a 10% increase in drilled feet per day in the Delaware Basin's 3-mile lateral program year-to-date and over 20% more drilled footage per motor run compared to third-party options since the start of 2023. This technology, coupled with enhanced completion techniques, has led to faster pump times and better well performance, increasing maximum pumping rate capacity by approximately 15% per frac fleet on average year-over-year. The strategic adoption of extended laterals, such as testing 4+ mile laterals in the Eagle Ford and planning over 70 3-mile laterals in the Delaware Basin in 2024 (up from four in 2023), further reduces well costs per foot and unlocks new potential from acreage. In the shallower Delaware Basin targets like the Leonard and Bone Spring, the in-house motor program has helped eliminate over one full trip per well, resulting in cost savings of $150,000 or more per trip.

Beyond drilling and completions, EOG's in-house artificial lift optimizers for gas lift, plunger lift, and rod pump operations utilize algorithms to automate set points, maximizing production and reducing third-party downtime. This technology, a cross-functional effort involving production, marketing, and information systems teams, directly contributes to improved base production performance and helps minimize downtime across the portfolio. These technological advantages are not just technical achievements; they are fundamental to EOG's competitive moat, driving down the cost structure, expanding margins, and enhancing capital efficiency, which directly supports the company's financial performance and shareholder return capacity.

Financial Strength and Strategic Capital Allocation

EOG's financial performance reflects its operational prowess and disciplined strategy. In the first quarter of 2025, operating revenues and other totaled $5,669 million, a decrease from $6,123 million in the same period of 2024, primarily due to lower composite crude oil prices ($72.87/bbl in Q1 2025 vs $78.45/bbl in Q1 2024) and net losses on mark-to-market derivative contracts ($191 million loss in Q1 2025 vs $237 million gain in Q1 2024). However, total revenues from sales of EOG's production increased by 3% to $4,502 million, driven by significantly higher natural gas prices ($3.41/Mcf in Q1 2025 vs $2.26/Mcf in Q1 2024, a 51% increase) and increased volumes across all products (crude oil/condensate up 3%, NGLs up 4%, natural gas up 12%).

Operating expenses saw a slight decrease, totaling $3,810 million in Q1 2025 compared to $3,852 million in Q1 2024. While Lease and Well expenses and GPT costs saw modest increases driven by higher activity and production in key basins like the Permian and Utica, DDA expenses decreased, partly due to a prior-year adjustment and increased production. General and Administrative expenses also saw a slight uptick. Despite these cost movements and lower overall revenues, EOG generated $1,463 million in net income in Q1 2025. The income tax provision decreased in line with lower pretax income, maintaining a consistent net effective tax rate of 22%.

The company's balance sheet remains a cornerstone of its strategy, described by management as pristine and peer-leading. As of March 31, 2025, EOG held $6,599 million in cash and cash equivalents and had $1,900 million available under its revolving credit facility. The debt-to-total capitalization ratio stood at a low 14.0%. A key strategic initiative is underway to optimize this capital structure. EOG intends to increase its debt balance to a $5-$6 billion range over the next 12 to 18 months, targeting a total debt-to-EBITDA ratio of less than one times at $45 WTI bottom cycle prices. This move is designed to make the balance sheet more efficient and increase the capacity to return cash to shareholders. The recent repayment of $500 million in senior notes in April 2025 using cash on hand demonstrates this financial flexibility.

EOG's commitment to returning cash to shareholders is robust, anchored by a sustainable, growing regular dividend. The company recently declared a quarterly cash dividend of $0.97 per share for Q1 and Q2 2025. Since 2019, EOG has grown its regular dividend rate twice as fast as the peer average. Complementing the dividend, EOG has a significant share repurchase authorization, increased to $10 billion effective November 2024. In Q1 2025, the company repurchased 6.20 million shares for approximately $788 million. EOG's cash return framework commits to returning a minimum of 70% of annual net cash provided by operating activities (less CapEx) to stockholders. Given its strong financial position and free cash flow generation, EOG expects to exceed this minimum in 2024 (exceeding 85% in 2023) and is well-positioned to return greater than 100% of annual free cash flow in the near term, potentially over the next 12-15 months, supported by the balance sheet optimization strategy.

Strategic Portfolio Development and Outlook

EOG's multi-basin portfolio is a significant competitive advantage, providing diverse, high-return investment opportunities and operational flexibility. The company's 2025 capital expenditure budget is estimated to range from $5.80 billion to $6.20 billion, with a midpoint of $6.0 billion. This represents a $200 million reduction from previous guidance, a proactive optimization in response to potential near-term impacts on global demand due to ongoing tariff discussions. This adjustment is expected to enhance 2025 free cash flow while still delivering approximately 2% year-over-year oil production growth and 5% total production growth at the midpoint of guidance. The plan holds oil production flat compared to Q1 levels for the remainder of the year.

A substantial portion of the 2025 capital is allocated to EOG's major U.S. producing areas, particularly the high-return plays in the Delaware Basin, Eagle Ford, Utica, and Rocky Mountain area. Activity is modestly reduced in the Delaware Basin, Eagle Ford, and Powder River Basin, while remaining unchanged in the emerging Utica and Dorado plays. This strategic allocation allows EOG to continue driving efficiency gains and improving well performance across its foundational assets while progressing the delineation and development of emerging opportunities.

In the Eagle Ford, a recent bolt-on acquisition of approximately 30,000 net acres for $275 million adds over a full year of drilling inventory that is immediately competitive with the existing program. This acreage, the largest remaining undeveloped core Eagle Ford tract, benefits from long lateral potential in adjacent EOG leases and existing infrastructure, enhancing returns and lowering finding costs. EOG plans to test 4+ mile laterals in the Eagle Ford in 2025, targeting a direct total well cost of $515 per foot.

The Dorado dry gas play in South Texas is highlighted as the lowest cost dry gas play in North America, with a direct breakeven price of approximately $1.40 per Mcf. EOG is realizing a 15% increase in drill feet per day and a 10% increase in well productivity per foot in Dorado in Q1 2025, benefiting from consistent activity. Strategic infrastructure investments, such as the Verde Natural Gas Pipeline (in service Q4 2024) connecting Dorado to the Agua Dulce market hub and the Janus Gas Processing Plant in the Delaware Basin (commissioned and online Q1 2025), are expected to significantly lower cash operating costs and expand margins. Access to premium gas markets is further enhanced by capacity on the Williams (WMB) TLEP project (commenced service Q1 2025), providing access to the Southeastern U.S., and a 10-year Brent-linked gas sales agreement commencing in 2027.

Internationally, EOG continues to pursue opportunities. In Trinidad, where EOG has over 30 years of experience, recent activity includes completing the Mento pipeline installation, sanctioning the Coconut platform, and announcing an oil discovery at the Beryl well (125+ ft oil pay). The company is progressing the Beryl project towards a final investment decision with its partner. In Bahrain, EOG is preparing to drill an onshore unconventional tight gas sand prospect in the second half of 2025 through a new joint venture with Bapco Energies, optimistic that its expertise will drive competitive economics. EOG is also evaluating an oil prospect in offshore Western Australia (Beehive) with plans to test in 2025.

Competitive Landscape and Risk Considerations

EOG operates in a highly competitive industry, vying with integrated majors (like Exxon Mobil (XOM) and Chevron (CVX)), other large independent E&Ps (such as ConocoPhillips (COP), Occidental Petroleum (OXY), and Devon Energy (DVN)), and smaller regional players for acreage, resources, and market share. While integrated majors benefit from scale and diversification across the value chain, and some peers pursue aggressive acquisition strategies, EOG differentiates itself through its focused approach on high-return unconventional plays, its low-cost structure, and its proprietary technology. EOG's operational efficiencies, driven by its in-house tech and decentralized model, often translate to lower operating costs per barrel and higher capital efficiency in its core basins compared to some competitors. Its peer-leading balance sheet provides a significant competitive advantage, offering resilience in volatile markets and flexibility for counter-cyclical investments or increased shareholder returns, contrasting with peers carrying higher debt levels. EOG's marketing strategy, focused on diverse takeaway options and control, also contributes to delivering top-tier price realizations, often outpacing peers.

However, EOG faces inherent risks common to the E&P sector, including commodity price volatility, which directly impacts revenues and cash flow. While inflationary pressures on costs have diminished recently, the market remains subject to fluctuations, and future increases could impact profitability. Regulatory and environmental risks, including potential developments related to climate change legislation and initiatives, could impose additional costs or restrictions. Geopolitical factors and trade policies, such as the recent tariff discussions, can also introduce market uncertainty. Counterparty credit risk exists with derivative instruments and sales contracts, although EOG evaluates exposures and may require collateral.

EOG mitigates these risks through its disciplined strategy: maintaining a strong balance sheet provides a buffer against downturns; a low-cost structure enhances resilience at lower commodity prices; a diverse multi-basin portfolio and marketing strategy reduce reliance on any single region, product, or market; and continuous operational improvements and technological advancements help offset cost pressures and maximize resource value. While the natural gas market, tied to weather, exhibits higher volatility than oil, EOG's focus on being a low-cost gas supplier with diverse market access (including new pipeline capacity and international price exposure) positions it to navigate this volatility.

Conclusion

EOG Resources presents a compelling investment thesis grounded in its consistent execution of a disciplined, returns-focused strategy. The company's operational excellence, significantly enhanced by proprietary technologies like advanced drilling motors and artificial lift optimizers, translates directly into a low-cost structure and robust free cash flow generation. This financial strength is further amplified by a peer-leading balance sheet and a strategic initiative to optimize its capital structure, paving the way for potentially increased shareholder returns, including the potential to return over 100% of free cash flow in the near term.

Despite the inherent volatility of commodity markets and potential macro headwinds, EOG's diverse multi-basin portfolio, coupled with strategic investments in emerging plays, infrastructure, and market access, positions the company for sustainable long-term value creation. While the 2025 capital plan reflects a prudent optimization in response to market signals, it continues to support modest production growth and significant operational advancements. EOG's competitive advantages in efficiency, cost control, and financial flexibility, underpinned by its unique culture of innovation, make it a resilient player in the E&P landscape, well-equipped to deliver value through the cycle.