Executive Summary / Key Takeaways

• Transformative Portfolio Expansion: EOG Resources has significantly enhanced its asset base in 2025 with the $5.6 billion Encino acquisition, establishing the Utica as a third foundational play alongside the Delaware Basin and Eagle Ford, and expanding international exploration in the UAE and Bahrain.
• Unwavering Capital Discipline and Shareholder Returns: Despite a dynamic commodity environment, EOG maintains a rigorous capital discipline, evidenced by its proactive capital optimization and commitment to returning a minimum of 70% of free cash flow to shareholders, often exceeding this through a growing regular dividend and opportunistic share repurchases.
• Technological Edge Drives Cost Leadership: Proprietary technologies, including high-fidelity sensors, advanced drilling motors, and generative AI, are critical differentiators, enabling EOG to consistently lower well costs, improve operational efficiencies, and enhance reservoir performance across its diverse portfolio.
• Robust Financial Health and Strategic Liquidity: EOG boasts a pristine balance sheet with substantial cash and undrawn credit, providing exceptional flexibility for counter-cyclical investments, debt management, and sustained shareholder distributions, even at bottom-cycle commodity prices.
• Bullish Long-Term Gas Outlook: With 2025 marking an inflection point for North American natural gas demand, EOG's strategic investments in Dorado and increasing LNG commitments position it to capitalize on structural bullish drivers, including record LNG feed gas and growing electricity demand.

A Foundation of Discipline and Innovation in a Dynamic Energy Landscape

EOG Resources, Inc. stands as a leading independent crude oil and natural gas exploration and production company, primarily operating across the United States and in the Republic of Trinidad and Tobago. The company's enduring strategy centers on being among the highest return and lowest cost producers, underpinned by a commitment to strong environmental performance and a significant role in meeting global energy needs. This approach, honed over decades since its incorporation in 1985 as Enron Oil & Gas Company, has cultivated a resilient business model capable of generating consistent free cash flow annually since 2016 and maintaining an unbroken record of paying and growing its regular dividend for 27 years.

The energy sector, characterized by inherent commodity price volatility, presents both challenges and opportunities. EOG's strategic responses to these dynamics are deeply informed by its history, including its counter-cyclical investments during the 2020 market downturn. During that period, EOG high-graded its business, acquired pipeline infrastructure for its Dorado gas sales strategy, and executed bolt-on acquisitions in the Permian Basin. Today, the broader industry is witnessing increased demand for natural gas, driven by record LNG feed gas requirements and growing electricity consumption, a trend EOG anticipates will lead to a 4% to 6% compound annual growth rate for U.S. natural gas demand through 2030. Conversely, the oil market faces near-term oversupply as spare capacity re-enters, though EOG maintains a constructive medium-to-long-term outlook, expecting demand growth to absorb this capacity.

In this competitive landscape, EOG distinguishes itself from larger integrated players like ExxonMobil (XOM) and Chevron (CVX), which benefit from diversified revenue streams and global scale. EOG's focused, asset-light approach in key U.S. regions allows for greater operational efficiency in specific plays. Compared to independent E&P peers such as ConocoPhillips (COP) and Occidental Petroleum (OXY), EOG's competitive edge lies in its agility, specialized technical expertise in unconventional resources, and a disciplined capital allocation strategy that prioritizes returns over sheer volume growth. While ConocoPhillips and Occidental also focus on cost discipline, EOG's consistent track record of outperforming peers in return on capital employed (averaging 28% in the four years since COVID) highlights its superior efficiency. EOG's marketing team consistently delivers top-tier price realizations, further differentiating it from competitors. However, EOG's primary vulnerabilities remain its exposure to commodity price volatility and a relatively more concentrated portfolio compared to integrated majors. High capital requirements and stringent regulatory hurdles act as significant barriers to entry in the oil and gas industry, helping EOG defend its established position.

Technological Edge: The Core of EOG's Operational Mastery

EOG's ability to consistently deliver high returns and maintain a low-cost structure is intrinsically linked to its profound technological differentiation and relentless innovation. The company leverages a suite of proprietary technologies and in-house developed software, directly integrated with field operations, to achieve superior performance.

At the heart of EOG's operational mastery are its high-fidelity sensors and downhole drilling motor program. These technologies provide real-time subsurface data, enabling the calculation of geomechanical rock properties, identification of faulting and local stresses, and continuous monitoring of downhole equipment. This granular data minimizes downtime by allowing proactive intervention and significantly improves completion designs through precise fracture identification, maximizing frac efficiency within the zone of interest. The tangible benefits are evident: the EOG motor program has resulted in increased footage drilled per day and reduced drilling times. In the Delaware Basin, the combination of longer laterals and the in-house drilling motor program increased drilled feet per day by 10% and completed feet per day by 20% in 2024. Over 50 wells in 2025 have already benefited from this higher-resolution data, with plans for expanded use across the portfolio.

Beyond hardware, EOG's enhanced AI capabilities represent a significant technological moat. Building on nearly a decade of utilizing smart technology for centralized gas lift systems and machine learning algorithms for production optimization, EOG has now deployed a proprietary generative AI system. This platform is transforming operations by enabling more efficient collaboration among field and division staff, automating data capture, and providing deeper operational insights. While not yet at "true agentic intelligence," this generative AI is used to organize geologic data, uncover hidden trends, optimize drilling in real-time, improve equipment reliability through predictive maintenance, and enhance process optimization. Crucially, it also contributes to safety by detecting anomalies related to emissions, spills, and overall operational safety. The "so what" for investors is clear: these technological advancements directly translate into lower well costs, improved productivity (e.g., 10% increase in well productivity per foot in Dorado), enhanced margins, and a stronger competitive moat, ensuring EOG's long-term growth strategy is built on a foundation of continuous improvement and efficiency.

Operational Excellence and Strategic Portfolio Evolution

EOG's multi-basin portfolio, now strengthened by strategic acquisitions and continuous operational enhancements, is central to its value proposition. The company's operational excellence is evident across its key segments:

United States Operations: This segment, encompassing major producing areas in New Mexico, Texas, and Ohio, remains the largest area of activity.

• Delaware Basin: EOG's well results are on forecast, driven by innovations like super zipper operations and high-intensity completions. Average lateral lengths increased by over 20% in 2025, contributing to a more than 15% reduction in well costs over the last two years. This efficiency has unlocked additional distinct landing zones with outstanding economics, boasting payback periods of less than one year and direct well-level rates of return exceeding 100% at current prices. The Janus Gas Processing Plant, commissioned in the first half of 2025, further enhances margin expansion by providing access to Gulf Coast markets.
• Eagle Ford: Even after 15-plus years of development, Eagle Ford economics continue to improve. EOG reduced its breakeven price by 10% in 2025 through extended laterals and reduced well and operating costs. The company drilled the longest lateral in Texas history (24,128 feet) in Q2 2025. A strategic bolt-on acquisition of approximately 30,000 net acres, the largest remaining undeveloped core Eagle Ford acreage, was completed in May 2025, adding 123 mile locations and benefiting from existing infrastructure.
• Utica: The acquisition of Encino Acquisition Partners, LLC, closed in early August 2025, adding 675,000 core net acres and cementing the Utica as a foundational asset. EOG anticipates at least $150 million in annual run rate synergies within the first year, primarily from lower well costs, as EOG's average well cost is less than $650 per foot compared to Encino's $750 per foot. Despite maintaining 65 net well completions for 2025, EOG reduced its Utica rig count from five to four due to efficiency gains. The first wells in the Utica gas window achieved an average 30-day initial production of 35 million cubic feet per day.
• Dorado: This South Texas dry gas play is recognized as the lowest cost dry gas asset in North America, with a direct breakeven price of approximately $1.40 per Mcf. High-intensity completion designs and the elimination of a casing string in Austin Chalk targets have increased drilled feet per day by over 20% in the first half of 2025 compared to 2024. The Verde Pipeline, with 1 Bcf per day capacity (expandable to 1.5 Bcf per day), is in service, connecting Dorado to the Agua Dulce hub. EOG's LNG commitments are ramping up from 140 MMBtu per day to over 400 MMBtu per day in 2025, eventually reaching 1 Bcf per day.
• Powder River Basin: EOG is shifting activity to the shallower, more oil-focused Niobrara formation, where well productivity increased 20% year-over-year from 2023 to 2024, and drilling times decreased by 10%.

Trinidad Operations: With over 30 years of presence, EOG leverages its subsurface knowledge and partnerships to unlock additional resource potential. The company completed the first wells of its Mento program in 2025 and plans to commence installation of the Coconut platform in 2026. EOG is also advancing the Beryl oil discovery, which encountered over 125 feet of high-quality oil-bearing net pay, towards a final investment decision.

Other International: EOG is expanding its exploration footprint. In Bahrain, an exploration participation agreement with Bapco Energies was signed in February 2025, with drilling operations commencing in Q3 2025. In the UAE, EOG was awarded an unconventional oil exploration concession in May 2025 and plans to spud its first well in Q4 2025, targeting a carbonate shale play geologically similar to the Eagle Ford.

Financial Strength and Shareholder Returns

EOG's financial performance in 2025 reflects its operational prowess and strategic capital allocation. For the third quarter of 2025, EOG reported $1.5 billion in net income and generated $1.4 billion in free cash flow. Adjusted earnings per share were $2.71, and adjusted cash flow from operations per share was $5.57. Total operating revenues for the three months ended September 30, 2025, were $5,847 million, a slight decrease from $5,965 million in the same period of 2024. However, revenues from sales of EOG's production of crude oil, NGLs, and natural gas increased by 4% to $4,554 million. Natural gas revenues saw a significant 90% increase to $707 million, driven by higher prices and a 39% increase in deliveries. Operating expenses for Q3 2025 increased by $135 million to $4,011 million, primarily due to higher lease and well expenses, GPT costs, and G&A, including Encino acquisition-related costs. The net effective tax rate for Q3 2025 decreased to 19% from 22% in Q3 2024, largely due to the Encino acquisition's impact on state apportionment factors.

For the first nine months of 2025, net income was $4,279 million, and net cash provided by operating activities was $7,432 million. The latter decreased by $1,948 million compared to the same period in 2024, mainly due to increased cash paid for income taxes and tax credit purchases, higher cash operating expenses, and net cash payments for financial commodity derivative contracts.

EOG maintains a robust financial position, ending Q3 2025 with $3.53 billion in cash and cash equivalents and $1.90 billion in undrawn capacity on its revolving credit facility, totaling nearly $5.5 billion in liquidity.

The company's long-term debt stood at $7.67 billion. EOG's leverage target of less than 1x total debt-to-EBITDA at bottom-cycle prices ($45 WTI, $2.50 Henry Hub) underscores its commitment to a pristine balance sheet. In July 2025, EOG issued $3.5 billion in senior notes with a weighted average maturity of approximately 11 years and a coupon of 5.175%, primarily to fund the Encino acquisition.

Shareholder returns are a cornerstone of EOG's financial strategy. The company is committed to returning a minimum of 70% of annual free cash flow to shareholders. For calendar year 2025, EOG has paid regular dividends of $3.95 per share, an 8% increase over 2024. The quarterly dividend was increased by 5% in May 2025 to $1.02 per share, equating to an annualized rate of $4.08 per share or a 3.9% dividend yield, significantly exceeding the S&P 500 average. EOG has also been active in share repurchases, buying back nearly 50 million shares (approximately 9% of shares outstanding) since 2023, with $4 billion remaining under its current authorization. The company views share repurchases as a compelling avenue for additional cash return, especially given the perceived dislocation in energy sector valuations.

Outlook and Strategic Imperatives

EOG's outlook for 2025 and beyond is shaped by its disciplined capital plan and strategic positioning. Total 2025 capital expenditures are estimated to range from $6.20 billion to $6.40 billion. Full-year oil production for 2025 (inclusive of Encino) is expected to increase by approximately 6% relative to 2024, with total crude oil, NGLs, and natural gas production projected to increase by 15%. The company expects to complete 65 net wells in the Utica play in 2025. EOG's capital plan is designed to deliver approximately 2% year-over-year oil growth and 12% year-over-year natural gas growth, with capital spending peaking in Q2 2025 and tapering in Q3.

Management anticipates flat oilfield service pricing for high-spec rigs and frac equipment in 2025, with cost reductions driven by sustainable efficiency gains. EOG has approximately 45% of its service costs locked in for 2026, providing some stability. The company's price sensitivity for 2025 indicates a $165 million impact on net income for every $1/barrel change in crude oil and condensate price, and a $36 million impact for every $0.10/Mcf change in natural gas price.

Looking to 2026, EOG expects "no to low oil growth" in the market, particularly in the first half of the year, due to anticipated oversupply from returning spare capacity. However, the long-term outlook for natural gas remains bullish, with continued investment in Dorado and international assets like Trinidad and Bahrain. The installation of the Coconut platform in Trinidad and the advancement of the Beryl oil discovery towards FID are key international projects for 2026. EOG has also set new sustainability targets: a 25% reduction in GHG emissions intensity by 2030 (from 2019 levels) and maintaining near-zero methane emissions (0.2% or less) from 2025 through 2030.

Key risks to this outlook include the inherent volatility of commodity prices, potential inflationary pressures on operating costs and capital expenditures, and geopolitical factors. While the Encino acquisition is expected to yield significant synergies, the preliminary nature of its purchase price allocation introduces some integration risk. EOG's forward-looking statements are subject to various factors, including the success of its exploration efforts, the ability to achieve anticipated production levels and returns, and the impact of government policies and regulations.

Conclusion

EOG Resources stands as a compelling investment proposition, firmly rooted in its disciplined capital allocation, operational excellence, and a strategic vision for long-term value creation. The transformative Encino acquisition, coupled with ongoing advancements in its Delaware Basin, Eagle Ford, Dorado, and international plays, has significantly deepened EOG's high-return inventory. The company's proprietary technological differentiators, from high-fidelity sensors to generative AI, are not merely buzzwords but tangible drivers of efficiency, cost reduction, and enhanced reservoir performance, providing a distinct competitive advantage.

EOG's robust financial health, characterized by a pristine balance sheet and consistent free cash flow generation, underpins its commitment to substantial shareholder returns through a growing regular dividend and opportunistic share repurchases. While the near-term commodity environment presents challenges, particularly for oil, EOG's strategic positioning in North American natural gas, with increasing LNG commitments and a bullish long-term demand outlook, provides a powerful growth vector. The company's ability to adapt and thrive through cycles, continuously improving its cost structure and expanding its resource base, reinforces its standing as a blue-chip upstream energy company. Investors seeking a resilient, high-return energy play with a clear path to sustainable value creation should find EOG Resources a compelling consideration.