EOG Resources, Inc. (NYSE:EOG) Q2 2020 Earnings Conference Call - Final Transcript
Aug 07, 2020 • 10:00 am ET
Good day, everyone, and welcome to the EOG Resources Second Quarter 2020 Earnings Results Conference Call. As a reminder, this call is being recorded.
At this time, for opening remarks and introductions, I would like to turn the call over to Chief Financial Officer of EOG Resources, Mr. Tim Driggers. Please go ahead, sir.
Thank you, and good morning. We hope everyone has seen the press release announcing second quarter 2020 earnings and operational results. This conference call includes forward-looking statements. The risks associated with forward-looking statements have been outlined in the earnings release, in EOG's SEC filings, and we incorporate those by reference for this call.
This conference call also contains certain non-GAAP financial measures. Definitions, as well as reconciliation schedules for these non-GAAP measures to comparable GAAP measures, can be found on our website at www.eogresources.com.
Some of the reserve estimates on this conference call are in the accompanying investor presentation slides, may include estimated potential reserves and estimated resource potential not necessarily calculated in accordance with the SEC's reserve reporting guidelines. We incorporate by reference the cautionary note to US investors that appears at the bottom of our earnings release issued yesterday. Participating on the call this morning are Bill Thomas, Chairman and CEO; Billy Helms, Chief Operating Officer; Ken Boedeker, EVP, Exploration and Production; Ezra Yacob, EVP, Exploration and Production; Lance Terveen, Senior VP, Marketing, and David Streit, VP, Investor and Public Relations.
Here's Bill Thomas.
Thank you, Tim, and good morning, everyone. EOG's second quarter results demonstrate the Company's ability to quickly adapt to an unprecedented drop in commodity prices. We exceeded our own expectations by delivering more oil for less capital and lower operating costs, allowing the Company to generate significant free cash flow during the quarter.
In May, we published our revised plan, which aggressively reduced our full year of capital, more than 45%; and LOE, more than 20%. EOG employees rose to the challenge, not only achieving the incredible reduction targets we set but beating them. Compared to our aggressive plan and guidance for the second quarter, we produced 7% more oil, spent a whopping 26% less capital and our cash operating costs, which includes LOE, transportation and gathering and processing were 10% lower. With the rapid reduction in capital and operating costs, the Company generated nearly $200 million of free cash flow, while oil prices averaged less than $28 a barrel.
Our second quarter results are a testament to the return-focused culture of EOG employees and our ability to pivot quickly in response to the unprecedented level of market volatility and industry conditions. Last quarter, we laid out seven strategic focus points for the remainder of 2020. Here's a quick progress report. Our first strategic point is only to invest capital if it generates a premium rate of return. Premium return is defined as a 30% or higher direct after-tax rate of return using a price deck of $40 flat oil. In this downturn, we have raised the return bar even higher