From William R. Thomas, Chairman and Chief Executive Officer, February 25, 2016:
EOG’s unique position as a leader in the crude oil and natural gas exploration and production sector led to record-setting operational performance in 2015 of a magnitude not previously seen at EOG. From technological advances and well productivity improvements to sustainable reductions in operating costs and a growing, high-graded drilling inventory, the organization retooled for the future.
Notably, EOG has locked in four distinct competitive advantages that enable the kind of long-term success that drives shareholder value. They are (1) high-quality assets, (2) a unique culture, (3) an ability to drive innovation and technology, and (4) a strong balance sheet.
EOG’s sizable positions in the heart of the world’s leading tight oil plays – the South Texas Eagle Ford, the North Dakota Bakken and the Texas/New Mexico Delaware Basin – demonstrate the value created by identifying and capturing high-quality acreage before a play’s full potential is more broadly realized. This find-the-best-and-get-there-first approach produces scale and, thus, operating and cost advantages not available to most producers.
From the bottom up, all employees understand that EOG is, and always has been, a returns-focused, organic-growth-driven organization. New prospects compete for investment dollars alongside our top-tier drilling inventory, resulting in a disciplined, accountable approach to capital allocation.
EOG’s unique, decentralized organizational structure is comprised of regional, cross-functional teams of scientists and engineers who maximize resource potential while maintaining a commitment to safety and environmental stewardship. These teams collaborate across the organization to share knowledge and find cost efficiencies.
Unique Technological Capabilities
Precision targeting of well laterals and advanced, high-density completions enable EOG to drill some of the industry’s most prolific horizontal wells. EOG leads the industry in the number of wells with peak production rates greater than 1,000 barrels of oil equivalent per day. Multiple large plays serve as individual laboratories for experimentation and technological breakthrough, and the innovation extends far beyond drilling and completions. For example, a field-based engineering effort developed special-use tools to enhance long-term well production performance, and in-house developers created proprietary software for better expense management and analysis.
Unique Financial Strength
Returns-focused capital discipline is in EOG’s DNA and drives a commitment to cost efficiency and a strong balance sheet. This financial strength provides the flexibility to adjust activity levels based on changing commodity market conditions and fund new opportunities as they emerge.
The Year in Review
In 2015, EOG continued its long-term emphasis on maximizing return on capital by directing investment to its best plays.
The company expanded its inventory of high-quality drilling prospects, adding 1.6 billion barrels of oil equivalent reserve potential(1) and more than 3,000 new net drilling locations in the West Texas/New Mexico Delaware Basin and the North Dakota Bakken. Facilitated by technology advancements on existing acreage and select acquisitions in its top-tier plays, EOG extended its streak of adding at least two times the amount of inventory as it drilled. This systematic, organic growth expanded a robust, decades-long drilling portfolio.
A laser-like focus on efficiency led to significant capital and operating cost reductions. The $4.7 billion capital program (excluding acquisitions) was down 44 percent compared to 2014, reflecting our plan to slow investment spending in a low-commodity-price environment. Per-unit lease operating expense reductions of 13 percent were especially noteworthy, since much of this cost improvement involved sustainable internal efficiency gains rather than cyclical vendor cost cutting. We also lowered total general and administrative expenses by 9 percent and per-unit transportation costs by 9 percent.
What’s to Come
As the company shifts into a new
premium drilling mode in 2016, EOG
will extend its 2015 accomplishments
with a returns-driven, highly disciplined
financial strategy. We concur with the
experts who believe that the recent
lower-for-longer oil price scenario is
not sustainable. Regardless of price
cycle fluctuations, EOG is uniquely
positioned for sustained long-term
growth with the best assets, culture,
technology and financial flexibility to
deliver industry-leading performance
for years to come.
William R. Thomas
Chairman and Chief Executive Officer
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(1) Net estimated potential reserves, not proved reserves.