(EOG, 16.Mar.2020) — EOG Resources, Inc. updated its full-year 2020 capital plan as a result of the significant decline and increased volatility of commodity prices.
Exploration and development expenditures for 2020 are now expected to range from $4.3 billion to $4.7 billion, including facilities and gathering, processing and other expenditures, and excluding acquisitions and non‐cash exchanges. Net cash from operating activities is expected to fund both capital expenditures and dividend payments assuming mid-$30 oil prices for the remainder of 2020. The revised capital plan supports full-year 2020 crude oil production of 446,000 to 466,000 barrels of oil per day, approximately flat compared to full-year 2019 levels.
Highlights:
— Reduces 2020 Capital Plan 31% to $4.3 to $4.7 Billion and Targets Flat YoY Crude Oil Production Volumes
— Revised Plan Generates Strong Returns at $30 Oil Price
— 2020 Capital Expenditures and Dividend Funded with Net Cash from Operating Activities at Mid-$30 Oil Prices for the Remainder of 2020
— Includes Funding for High-Return Drilling and Targeted Infrastructure, Exploration and Environmental Projects
Given the current commodity price environment, EOG has elected to reduce activity across its operating areas. The company plans to focus its drilling operations in the Delaware Basin and South Texas Eagle Ford and continue funding projects that support the long-term value of the company, including targeted infrastructure, exploration and environmental projects.
“Our first priority is to generate high returns with every dollar we spend even at low oil prices,” said William R. “Bill” Thomas, Chairman and Chief Executive Officer. “EOG’s premium drilling strategy is the most strict reinvestment hurdle rate in the industry. With oil around $30 our 2020 premium drilling program is expected to generate more than 30% direct after-tax rate of return. Our commitment to reinvesting at high returns never wavers.”
EOG’s strategy of maintaining exceptional financial strength leaves it well positioned to sustain its business model through volatile commodity price environments. At December 31, 2019, EOG’s total debt outstanding was $5.2 billion for a debt-to-total capitalization ratio of 19 percent. Considering $2.0 billion of cash on the balance sheet at the end of the fourth quarter, EOG’s net debt-to-total capitalization ratio was 13 percent. For definitions and the reconciliation of non‐GAAP measures to GAAP measures referenced herein, please refer to the attached tables.
“Our business is more resilient today than it has ever been in the company’s history,” said Thomas. “By significantly improving the economics of our premium inventory, maintaining operational flexibility and strengthening our balance sheet, we are well positioned to weather the storms of low commodity prices.”
EOG Resources plans to provide a more comprehensive operational and financial update for the 2020 plan with the release of its first quarter 2020 results.
***
