From William R. Thomas, Chairman and Chief Executive Officer, February 27, 2017:
A Premium Year
2016 was a landmark year for EOG. This is the year our company established an enduring new standard for capital allocation: the premium well.
The “premium well” standard is a return hurdle that was initiated as part of our annual capital planning process. The goal for the 2016 capital plan was a simple one driven by EOG’s culture of capital discipline: earn a return on every dollar spent and reset the company to thrive in a low commodity price environment. We weren›t going to bank on a recovering commodity price to drive capital investment returns in 2016.
We didn’t realize at the time that the premium well standard would be an incredible catalyst for creative thinking and innovation that would change our company forever
A premium well is one that earns a minimum 30 percent direct
Since the premium standard was established at the start of 2016, we’ve grown our inventory to a remarkable 6,000 net premium locations representing 5.1 billion barrels of oil equivalent.(2) At our 2016 completions pace of 445 wells, that’s more than 10 years of inventory. Furthermore, we see no shortage of opportunities to replace our inventory through additional efficiencies, well performance improvements, and new exploration ideas.
Public industry production data reveals that EOG’s wells are often the best in the industry. EOG achieved leadership in well performance by identifying better rock, using proprietary precision targeting techniques, and applying industry leading completion technology. In contrast, the U.S. shale industry’s improvement over the last several years is primarily due to drilling longer laterals.
We believe combining longer laterals with our superior technology will allow EOG to maintain its industry leadership and competitive advantage in well performance for years to come.
A Premium Acquisition
Our transaction with Yates Petroleum was truly transformative. Combining Yates Petroleum’s world class acreage with EOG’s technical leadership is the perfect example of one plus one equals three.
EOG is an organic growth and exploration leader. To compel our company to look at an acquisition this size, it must meet a strict set of criteria. The acreage must be high quality — as good as, or better than, EOG’s existing acreage. The deal must come at a fair price, and it must be funded in a prudent manner, allowing EOG to maintain a strong balance sheet. The Yates transaction checks all of these boxes. Truly, a premium match.
A Premium Future
Looking forward to 2020, we are more excited than ever to resume our leadership in
Premium to the Core
Our people and our culture are at the core of EOG’s success. No matter how solid our strategy, it takes premium people to back it up and deliver on our commitments. When we announced our permanent shift to premium this year, every employee embraced the challenge and took ownership of his or her contribution to the cause.
The EOG culture is truly
Every area of operation at EOG, and every employee, has a unique purpose and they all play a critical part in the success of our company. Our employees, like our company, are Premium to the Core.
William R. Thomas
Chairman and Chief Executive Officer
(1) Refer to reconciliation schedules on pages 110 - 112 of annual report.
(2) Net estimated potential reserves, not proved reserves.
Top of Page