EOG Resources, Inc. (NYSE:EOG) Q1 2024 Earnings Call Transcript

EOG Resources, Inc. (NYSE:EOG) Q1 2024 Earnings Call Transcript May 3, 2024

EOG Resources, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone, and welcome to the EOG First Quarter 2024 Earnings 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 the Investor Relations Vice President of EOG Resources, Mr. Pearce Hammond. Please go ahead, sir.

Pearce Hammond: Good morning, and thank you for joining us for the EOG Resources’ First Quarter 2024 Earnings Conference Call. An updated investor presentation has been posted to the Investor Relations section of our website and we will reference certain slides during today’s discussion. A replay of this call will be available on our website beginning later today. As a reminder, this conference call includes forward-looking statements. Factors that could cause our actual results to differ materially from those in our forward-looking statements have been outlined in the earnings release and EOG’s SEC filings. This conference call may also contain certain historical and forward-looking non-GAAP measures. Definitions and reconciliation schedules for these non-GAAP measures and related discussion can be found on the Investor Relations section of EOG’s website.

In addition, some of the reserve estimates on this conference call may include estimated potential reserves as well as estimated resource potential not necessarily calculated in accordance with the SEC’s reserve reporting guidelines. Participating on the call this morning are Ezra Yacob, Chairman and CEO; Billy Helms, President; Jeffrey Leitzell, Chief Operating Officer; Ann Janssen, Chief Financial Officer; Keith Trasko, Senior Vice President, Exploration and Production; and Lance Terveen, Senior Vice President, Marketing. Here’s Ezra.

Ezra Y. Yacob: Thanks, Pearce. Good morning, everyone, and thank you for joining us. EOG is off to a great start in 2024, both delivering value directly to our shareholders and investing in future value creation. Primary drivers of that value are EOG’s commitment to capital discipline, operational excellence and leading sustainability efforts all underpinned by our unique culture. Strong first quarter execution from every operating team across our multi-basin portfolio has positioned the company to deliver exceptional returns. Production and total per unit cash operating costs beat targets driving strong financial performance during the quarter. We earned $1.6 billion of adjusted net income and generated $1.2 billion of free cash flow.

We paid out more than 100% of that free cash flow through our peer leading regular dividend and $750 million of share repurchases. EOG’s operational execution continues to translate into strong returns and cash flow generation. Our robust cash return to shareholders continues to demonstrate our confidence in the outlook and value of our business. Quarter-after-quarter, we have delivered outstanding operational performance on our core assets while also driving forward progress in our emerging plays. We’ve built one of the deepest, highest return and most diverse multi-basin portfolios of inventory in the industry. The most recent addition to our portfolio is the Utica Combo play, a textbook example of our differentiated approach. Capturing highly productive rock through our organic exploration and leasing efforts is the primary way of expanding our premium inventory with a low cost of entry to drive healthy full-cycle returns.

Adding reserves that lower funding and development costs drive down DD&A and lowers the overall cost basis of the company. The result is continuous improvement to EOG’s company-wide capital efficiency. Our track record of successful exploration, strong operational execution and applied technology has positioned the company to create shareholder value through industry cycles. The oil macro environment remains dynamic but is overall constructive and we anticipate that certain drivers will limit oil prices to a relatively narrow band this year. In the first quarter, global demand performed as expected and is on trend to increase throughout the year led by a strong U.S. economy. And while U.S. production surprised to the upside in 2023, several developments have altered the U.S. supply outlook this year.

Rig counts have remained flat over the past eight, nine months and oil drilled but uncompleted or DUC inventory has been drawn down. Current activity levels combined with M&A in the public and private sectors should lead to more moderated U.S. growth this year. Globally, spare capacity has kept inventory levels around the five year average to start the year, and we forecast these barrels returning to the market throughout the second half of the year and aligned with growing demand. Overall, the result is a strong operating environment for a low cost and returns focused producer such as EOG. And while we expect the natural gas market to remain soft through the end of this quarter much like last year, we expect it to strengthen through the second half of the year and are managing our Dorado program to align with demand.

Longer term, we expect an additional 10 Bcf to 12 Bcf a day of demand for LNG feed gas and another 10 Bcf to 12 Bcf per day of demand from several areas, including overall electrification, exports to Mexico, coal power plant retirements and other industrial demand growth. So, the outlook for North American natural gas by the end of this decade is bullish both for the industry and in particular for our Dorado dry gas play which has advantaged access to the Gulf Coast and pipeline infrastructure. We look forward to participating in the emerging LNG demand through our diverse sales agreements to grow from 140,000 MMBtu per day today to 900,000 MMBtu per day over the next three years. Through EOG’s differentiated approach to organic exploration, the utilization of technology to improve operational efficiencies, vertical integration of certain parts of the supply chain and our diverse marketing strategy, EOG remains focused on being among the highest return, lowest cost and lowest emissions producers offering sustainable value creation through the cycles.

Ann is up next to provide an update on our forecast and three year scenario. Here’s Ann.

Ann Janssen: Thanks, Ezra. Given the recent strength in commodity prices, we have updated our 2024 forecast to reflect $80 oil and $2.50 natural gas for the remainder of the year and now expect to generate $5.6 billion of free cash flow for the full-year. Considering both share repurchases executed during the first quarter and our annualized regular dividend, we have already committed to return about $2.9 billion this year, which represents more than 50% of that free cash flow, so we are well on our way to return a minimum of 70%. And while cash return exceeded free cash flow during the first quarter, we continue to view our return commitment on an annual basis. During the first quarter, we repurchased 6.4 million shares for $750 million averaging about $118 per share.

Since we began using our buyback authorization at the start of last year, we have bought back more than 15 million shares or nearly 3% of shares outstanding for an average price of about $115 per share. To-date, that totals about $1.7 billion worth of shares. We will continue to monitor the market for opportunities to step-in and repurchase shares throughout the year. Last quarter, we provided a three year scenario to illustrate EOG’s expanded capacity to generate free cash flow and earn a strong double-digit return on capital employed to create future shareholder value. This quarter, we provided an additional price scenario to illustrate our expanded free cash flow potential over the next three years by assuming similar commodity prices as the past three years.

From 2021 through 2023, oil averaged $80 and natural gas averaged $4.25. Over that three year time frame, we generated $18 billion of free cash flow. Applying those same commodity prices to our forecast for the next three years, we would expect to generate $21 billion of free cash flow, that’s 17% more cumulative free cash flow than the prior three years at the same price deck. Robust cash return to shareholders, supported by substantial free cash flow stems from EOG’s strong operational execution. By focusing on well performance, sustainable cost reductions and maximizing full-cycle returns through organic exploration and disciplined growth, EOG has driven a step change in our financial performance and capacity to create significant value for our shareholders.

Now, here’s Jeff to review operating results.

Jeffrey R. Leitzell: Thanks, Ann. I’d like to first thank all the employees for a great start to the year with safe and efficient operational execution. Our first quarter volumes in total per unit cash operating costs beat targets while capital was in-line. For the year, our capital forecast remains $6.2 billion and delivers 3% oil volume growth and 6% total production growth. We continue to expect that capital this year will be slightly more weighted in the first half, driven by the timing of our investments in the two infrastructure projects that we provided details on last quarter. These projects include the Janus Gas Processing Plant in the Delaware Basin and the Verde pipeline that will serve our South Texas Dorado play both highlighted on Slide 10 of our investor presentation.

By the end of the second quarter, we expect to be on pace to have spent about 56% of our $6.2 billion capital plan. While our oil production and capital plan for the full-year remains unchanged, we are actively managing activity in our Dorado asset, which is reflected in our second quarter natural gas production guidance published yesterday. As discussed last quarter, we moderated activity in Dorado this year in response to a weaker natural gas market and are now leveraging additional flexibility to delay well completions and manage volumes through the summer. However, we will continue to pursue a balanced development approach for this asset, which includes operating a full rig program throughout the year. This will help maintain operational momentum, capture corresponding efficiencies and continue to advance and improve the play, while we continue to monitor the natural gas market.

We remain constructive on the long-term gas outlook for the U.S. supported by LNG, power generation demand and the growing petrochemical complex on the Gulf Coast. We are especially pleased with Dorado’s place in the market as one of the lowest cost supplies of natural gas in the U.S. with an advantaged location and emissions profile. With regards to service cost market, bids for standard spot services have been trending lower, which is consistent with our expectations of seeing some deflation this year. For high-spec rigs and frac fleets, we are still observing stable pricing. However, their availability is improving, especially in markets with less activity. As a reminder, we have secured 50% to 60% of our service cost in 2024, primarily with our high-spec, high-demand services to ensure consistent performance throughout our program.

By securing these resources, we’re able to focus on sustainable efficiency improvements to progress each one of our plays at a measured pace. EOG’s operating performance and capital efficiency continues to improve as our cross functional teams work to drive efficiency gains throughout our multi-basin portfolio. A significant driver of efficiencies this year is longer laterals, which we expect will increase by 10% on average companywide. The charge is being led in our foundational plays, the Delaware Basin and the Eagle Ford. Our operating teams in both plays have achieved consistent execution and success drilling and completing longer laterals leading to increased efficiencies, lower per foot well cost and improved well economics. In the Delaware Basin, we drilled four three-mile laterals in 2023 and have plans to drill more than 50 in 2024.

In the Eagle Ford, our 2024 plan includes increasing the average lateral length by about 20% to continue to unlock new potential across our 535,000 net acre footprint. Moving to the Powder River Basin, our technical teams continue to make good strides with our balanced development approach between the Mowry and the Niobrara formations. In the Niobrara, we have recently transitioned into package development by applying the learnings we captured while drilling the deeper mile reformation first. In our first three Niobrara development packages this year, we’ve been able to increase our drilling footage per day by 25% compared to 2023 averages, while maintaining over 95% in zone targeting. This can be attributed to our refined geologic models and a better understanding of the stratigraphic variation across the play.

With these continued efficiency gains across our diverse portfolio plays along with stable service costs, our expectations for full-year well cost decrease is a low-single-digit percentage. After a strong first quarter, EOG is well-positioned to execute on its full-year plan. Our technical teams continue to drive innovation with a focus on improved recovery, lowering costs and being a leader in sustainability. Now, here’s Keith to provide more color on the Utica.

Keith Trasko: Thanks, Jeff. We’re very happy with the results of our first three packages of development wells in the Utica Combo play. We now have over six months of production data from the first two, the Timberwolf and Xavier, which continue to outperform our expectations. Daily production rates per well have averaged more than 1,000 barrels of oil, 600 barrels of NGLs and 4 million cubic feet of gas over the first six months. On average, these seven wells have produced more than 200,000 barrels of oil per well since being brought online in the second half of 2023. We recently brought on our third package, the White Rhino. This is our first development package in the southern portion of our acreage. The four White Rhino wells drilled at 1,000 foot spacing have been meeting our expectations during their first few weeks of production.

Initial production also indicates a slightly higher liquids mix than our Timberwolf and Xavier wells drilled in the north and central parts of the play. While our Northern and Central acreage benefits from a thicker Utica, the Southern area has better geomechanical properties. The Southern area also benefits from significant economic uplift associated with the mineral rights we secured across 135,000 net acres. The White Rhino wells add to our growing collection of data points, which includes 18 legacy wells, four delineation wells, and now three development packages, which adds another 11 wells. While we expect to see performance vary across our 435,000 net acre position, oil results over the past two years in multiple areas confirm high liquids premium productivity through the 140 mile north-south trend of the Utica’s volatile oil window.

On a per foot basis, the cumulative production in the Utica Combo play compares favorably with some of the best areas of the Permian Basin with respect to both oil and total equivalents. Our large contiguous acreage position in the Utica lends itself to developing a long life repeatable low cost play competitive with the premier unconventional plays across North America. Our operating team continues to leverage consistent activity to increase efficiencies and drive down well costs. We recently drilled a 3.7 mile lateral on our Sable [pad] (ph) in the south, which is an EOG wide record lateral length. This well is scheduled to come online later this year and we’re excited to continue to driving similar efficiencies as we increase our activity across this asset.

For 2024, we are on target to drill and complete 20 net wells in the Utica across our northern, central and southern acreage, which supports a full rig program and enables significant well cost reductions. Now here’s, Ezra to wrap up.

Ezra Y. Yacob: Thanks, Keith. I would like to note the following important takeaways. First, our differentiated business model focused on exploration and innovation has built one of the deepest, highest return and most diverse multi-basin portfolios of inventory in the industry. The Utica, our most recent exploration success will be competitive with the premier unconventional plays across North America. Second, consistent execution in our core Delaware Basin and Eagle Ford assets delivers outstanding operational performance quarter-after-quarter while investment in our emerging plays contributes to EOG’s financial performance today and lays the groundwork for years of future high-return investment. Third, our robust cash return to shareholders continues to demonstrate our confidence in the outlook and value of our business.

Finally, one of EOG’s best champions of utilizing innovation to constantly improve the company is our friend and colleague, Billy Helms. Billy recently announced that he will retire at the end of this month. In Billy’s 40-year career with EOG, he demonstrated a distinctive ability to encourage new ideas from our employees across multiple disciplines, innovative ideas to utilize infield technology, information technology, and new processes to drill better wells for lower cost more safely and with lower emissions. He then helped shepherd the very best of those ideas through to execution across the company. Even though well earned, the retirement of a friend and colleague is bittersweet. Best wishes to you, Billy. Thank you for your service to EOG.

Operator: Thank you. The question-and-answer session will be conducted electronically. [Operator Instructions] And, our first question today comes from Steve Richardson with Evercore ISI.

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Q&A Session

Steve Richardson: Hi, good morning. Thanks. Ezra, I was wondering if you could talk a little bit about the gas outlook, particularly as regards to Dorado. Appreciate that you’re moderating activity in the near-term, but maybe you could talk a little bit about if the forward curve it sounds like you all are pretty bullish on demand and the forward curve certainly reflects that, 354 out on the curve. Maybe talk about what could happen in the play in terms of where that one rig program goes? And, maybe also remind us as Verde gets into to Phase 2, do you all need to drill to fill or how do I think about the flexibility up down of that play once the infrastructure is complete?

Ezra Y. Yacob: Yes, Steve, that’s a great question. This is Ezra. So, you’re right, gas obviously it’s stating the obvious, but inventory levels are very high after two consecutive warm winters. But, I will highlight in the last two years, we’ve also seen strong demand on the power side during the last two summers and we expect that to obviously continue into this summer. So, strong summer demand coupled with reduced supply, not only from some operators curtailing, but just from the reduction in rig activity. We see the potential inventory levels could come off quite a bit in the second half of the year. Now that said, overall, we’re maintaining flexibility with investment into those gas plays and dominantly what we’re talking about is Dorado.

I would say, Steve, we really would prefer to keep some rig activity running and really continue to capture the operational efficiencies. It’s always difficult when you actually completely shutter a program. Unfortunately, in some of our plays that happened obviously during COVID in 2020. So, we’d prefer to continue to capture our learnings and continue having a rig operate in the area. But, we do have a lot of flexibility on the completion side. And so, you could look to us to potentially build some DUCs, more so DUCs than necessarily hold back on turn in lines, although we’ve done that before as well, but we prefer to be flexible on our completion schedule side. As far as commitments to filling the infrastructure, no Steve, we don’t have any of that for us.

What’s going to really determine the pace of our investment there and when we bring the gas online, it’s really a returns based question. That’s one reason that we did in fact put the infrastructure in ourselves. It’s really in-line with our longer term marketing strategy which of course is duration, flexibility, diversity of markets and most importantly in a situation like this control. And so, we don’t have any obligations necessarily to deal with.

Steve Richardson: Great, thanks. And so, Ezra would you hesitate to guess appreciate that you’ve got this downside flexibility in a low price environment, but in a $3.50 or $4 price environment, could we see activity go to two to three rigs or don’t want to get ahead of ourselves, but and appreciate that there’s probably efficiencies you want to retain on the upside as well?

Ezra Y. Yacob: Yes, Steve, the last part you touched on is exactly the right way to think about it. It’s the way that we think about it. We don’t want to outrun our pace of learning. Now, we are very constructive on the longer term gas forecast for demand in North America. And, we’ve talked about it before, we think Dorado is advantaged not only with the cost of supply, but really with the geography, it’s located, so we can service all the upcoming demand along the Gulf Coast. But, the thing about a gas play is, we’re very committed to making sure that this is a low cost asset. That’s the most important thing because while we’re constructive on the mid-cycle gas price increasing throughout the rest of this decade, it’s easy to see that gas historically has been very volatile because no matter what you need to layer in weather on top of whatever gas supply demand model you’ve created.

And so, the most important thing for us is, even in the early days of investing in this place, making sure that we’re investing at a pace to optimize the returns and optimize the cost of supply and keep our cost basis low, so that we can continue to have a positive cash flow through some of those skinny times. So, I’d say we could look to increase the activity. I think we’ve talked in the past of being prepared to increase it with upcoming LNG and just overall demand. But, as far as assigning a hard level to it, Steve, we’ll have the infrastructure in place, we have the not only the takeaway infrastructure, but in basin, things like sand and water lines and things of that nature. So, we could ramp it up, but you should look at us to ramp it up commensurate with our learning, which should be at a more measured pace.

Operator: Thank you. And, our next question comes from Arun Jayaram with JP Morgan Securities.

Arun Jayaram: Good morning. Ezra, you returned over 100% of your free cash flow this quarter above your 70% target for the year. I was wondering what the signals to the market historically, you haven’t returned this level of cash flow. So, outside of the fact that you thought your stock call below [120%] (ph) was dislocated, any other implications you think to the market from the buyback activity in the quarter?

Ezra Y. Yacob: Yes, Arun. This is, Ezra. I’d say last year we did return to the market through buybacks and specials and our regular dividend about 86% of the cash flow. So, having higher quarters is not out of line. The big difference as you highlighted is that it was all biased towards buybacks rather than specials. And, that’s really been the trend over the last few quarters and I think that trend will probably continue. The reason I’d say that is, our business has really strengthened substantially over the past few years as we’ve highlighted before, not only in our core assets like the Permian and Eagle Ford, but especially in these emerging plays, the Utica, the Dorado, we’re just talking about it, even the Powder River Basin.

And, really it’s the entire energy sector, EOG certainly, we think remains undervalued relative to the broad market. And, those are really the big things that provide us confidence to continue buying back our shares. In general, I’d say our cash flow allocation priorities remain unchanged. It is focused on the regular dividend, but we will continue to be opportunistic on share buybacks and we’ll use market volatility to our advantage. And, we’ve really been doing that now as we’ve been in the market repurchasing shares for the past five quarters. I’d say we’ll continue to evaluate the opportunities as they present themselves on how best to return cash to the shareholders. But, the feedback that we’ve received is the shareholders appreciate our approach.

And as I said, we’ve been biased to buybacks for the last couple of quarters and for the time being you can certainly see that probably proceeding going forward.

Arun Jayaram: Great. My follow-up, Ezra based on the 2Q guide, you’re spending around 56% of your full-year CapEx in the first half. I was wondering how the timing of some of the strategic infrastructure spend you highlighted last quarter, how that’s influencing the first half CapEx and just thoughts and confidence in hitting the $6.2 billion full-year CapEx guide for 2024?

Jeffrey R. Leitzell: Yes, Arun, this is Jeff. Thanks for the question. What I’d first say is our 2024 plan it’s playing out just as we had expected. So, everything’s in-line as far as timing and we still feel really confident with the total CapEx budget of $6.2 billion. You did you hit it on the head when we talked about in our opening statements. CapEx will slightly be higher there in that first half at that 56% of total budget, but that’s really just due to some standard in-directs and really those strategic infrastructure spends that we have talked about with the Delaware Gas Plant and the Verde pipeline there. The nice thing about it is both projects are scheduled to come online. The gas plant, we’ve got planned for the first half of 2025 and the second phase of Verde pipeline is going to come on hopefully the back-end of this year.

And, we’re really excited about it to be able to get to realize that $0.50 plus per Mcf GPT savings that both those projects are going to bring for the life of the asset.

Operator: Thank you. Our next question comes from Neil Mehta with Goldman Sachs.

Neil Mehta: Good morning, team, and thanks for the update here. Just love your perspective on the Eagle Ford and Bakken as those fields entered to more maturity, some of your peers have talked on this earnings season about different things that they’re doing to extend the life and deepen the inventory and just would love your perspective on some of the things you’re doing on the ground to drive as much value as we get into the next phase of these assets?

Jeffrey R. Leitzell: Yes, Neil, this is Jeff again. With the Eagle Ford, we’ve got a really good consistent program this year. We’re going to be completing about 150 net wells there. And, as far as looking at the well performance, everything’s been in-line and right with our expectations. With any mature asset, you’re going to see some productivity degradation. I mean, we started out in the East where we had a little bit more prolific geology and then more recently we’ve moved out to the West where it’s slightly lower quality pay. But, the key takeaway is we’ve been able to continue to improve the economics in that play year-over-year. And, we’ve really done that just through as you talked about increasing operational efficiencies, focusing on drilling faster, completing faster with super zippers, longer laterals and cost reductions that have continued to improve the capital efficiency of the play.

And, what I’d say is also one of the big movements that we’ve had is we’re actually increasing the lateral length there in the Eagle Ford about 20% this year. So, and you can see the activity might be down just a here year-over-year, but we’ve completed the same amount of lateral length as we did in 2023 with those longer laterals. So, that’s just one of the ways we’re really able to drive efficiency there. And, you can see it in the returns. I mean really it’s got some of the highest rate of returns over the last three years and we’ve been drilling in the Eagle Ford for 15 years. And then, looking over to the Bakken, we are very mature in that resource. Right now we kind of run a program of about 10 net wells there. Primarily they’re just Three Forks targets and Bakken targets and really we’re just going in and offsetting infilling around some of our existing development.

We’re staying ahead of depletion. And then, also we’ve had some areas with limited markets, but we’ve got some new available capacity. So, we’re able to bring some additional wells online there. So, obviously with a really oily play, the well productivity looks great on there and everything that’s coming online is in-line with our forecast and we’re excited about those wells this year.

Neil Mehta: Thanks, team. And then Billy, I just want to extend my congratulations to you on your retirement and thanks for the insight over the years. My follow-up is just on the macro, on the oil macro specifically, we’ve got OPEC meeting coming up here in the next couple of weeks and a lot of uncertainty on both the demand and supply side. So, just how is this year from a commodity perspective, oil commodity perspective trended relative to your expectations? And, I know you have big in-house operation looking at the macro. What’s the crystal ball telling you, Ezra?

Ezra Y. Yacob: Yes, Neil. Well, I’d start with the fact that Q1, I think has really played out as most people expected. There is a bit of a pullback in demand there and that’s one thing that it prompted I think it prompted some of the spare capacity being brought offline. But, ultimately that demand was about 102 million barrels a day. It looks to us and others out there, other models, it looks like demand should strengthen throughout the year. So, we have not only seasonal demand picking up here, but also we’re seeing underlying strength in the U.S. economy, also in the China, Chinese economy just a little bit, namely on the manufacturing side. So ultimately, we see demand reaching a bit above $104 million a day in the back half of the year.

And, so that’s on the demand side. When you think about inventory levels, obviously, first quarters with spare capacity offline, inventory levels have stayed just below that five year average, but products really are a bit lower. And so, that shapes up for a good some good inventory draws potentially in the back half of the year. And then, really on the supply side, as I spoke about in the opening comments, we think U.S. supply should be pretty moderate. We’re in agreement with other estimates of kind of that 300,000 to 400,000 barrel per day growth year-over-year. And, that’s where we arrive at a model that would indicate we see much of the spare capacity reentering the market throughout the rest of this year. But, we’ll see how that really plays out as you said at the next upcoming OPEC meeting.

Operator: Thank you. Our next question comes from Neal Dingmann with Truist Securities.

Neal Dingmann: Good morning. I want to show back congrats to, Billy. Billy, thanks for all the help in the past. As my first question today is on your Utica play, specifically looking at the map on Slide 12, it appears you all continue to target more so the eastern side of the volatile window. I’m just wondering, could you talk about your thoughts maybe on the prospectivity of the black oil window? And, if there’s just anything that you might see this year that might cause you to change activity in the play for the remainder of the year?

Keith Trasko: Yes, this is Keith. You’re right. We have been delineating mainly north-south through the volatile oil trend. It’s a 140 mile area. The first thing we need to do kind of on the west is we need to acquire seismic data. We’re in the process of doing that. We need to see the degree of structural complexity kind of before we don’t, before we start developing. But geologically, in general, we don’t see significant changes in thickness or pay from east to west. On the west, you’re going to have a little bit lower maturity, which would equate to less pressure. But, in our other plays such as the Eagle Ford, less pressure reduces the well-productivity maybe a little bit, but it also reduces costs. So, your economics are still really comparable to all the other portions of the play.

And then overall, just on activity level, you asked, we have ramped up to one full rig this year. We want to be able to grow at a pace where we can leverage our learnings, continue to get better and also drive costs down. We need to keep getting infrastructure in place in the basin like in basin sand and water reuse. So, we are sticking to our 2024 plan laid out last quarter of 20 net wells. And, it’s a little too early to disclose anything for 2025. But overall, this play really competes with our best plays for capital. The other great thing is with the multi-basin portfolio we don’t necessarily need to ramp it up aggressively. We’re just going to let returns drive that.

Neal Dingmann: Very good details, Keith. And then, just a second quickly on, look at the Supplement Slides 12, I like that slide you talked about just your marketing opportunities. So, clearly I’m looking at sort of around the oil side, the U.S. oil. Is there opportunities to increase around the export side if opportunities present or maybe just talk about the optionality or flexibility you might have around those markets?

Lance Terveen: Yes, Neal, good morning. This is Lance. Yes, I think what we like best is just we are advantaged when you think about just from the supply that we have out of the Delaware Basin, the capacity, the firm capacity that we have that can come into the Gulf Coast. And then, the facility where that we’re at down in Ingleside, it’s just, it’s an outstanding facility. They recently just increased the dredging that’s there. So, we’re actually been loading VLCCs there. So, the capability that we have there and our tank position, we’ve actually been pushing more across the dock into the export markets in the most recent quarter.

Operator: Thank you. Our next question comes from Scott Hanold with RBC Capital Markets.

Scott Hanold: Yes, thanks. A little bit more on Utica. I appreciate the fact that you guys do not want to outrun your learning curve, but given that you’re demonstrating some pretty good competitive economics with places like the Permian, just big picture like what needs to happen and what do you need to see for this to be become a more meaningful part of your capital allocation and production going forward?

Ezra Y. Yacob: Hey, Scott, this is Ezra. Yes, I think we’re very happy with where we’re at. It’s over a 400,000 acre position. As Keith highlighted, it’s 140 miles north to south. And, let’s be honest, we’ve got two packages on right now. Now, the two packages are fantastic. They’re exceeding what we initially had in our type curves and they’re more than confirming some of our early thoughts on the spacing test. So at this point, everything is going in the right direction. As Keith highlighted to help delineate some of the other acreage that we have, really the first step is having some of the well log identification. So, really maybe the second step now is to go ahead and get that seismic and see what the level of complexity is.

As Keith talked about in his opening comments, we have brought on just brought on a package down in the south, which will prove it’s a bit of a different geologic environment down there. It’s also an area where we own the minerals, which is very exciting. You guys know the economic uplift that that can have. So overall, I would say that everything’s right on pace. We’d like to continue to get some in basin just infrastructure and be able to start to leverage the size and scale that we have. Maybe one way to think about it, Scott, is in all these early resource plays, think about where the Utica is and maybe it’s around where the Permian was in kind of 2012, 2013 timeframe. And so, that’s why when we all talk about not outrunning our ability to learn, the cost that you’re putting in the ground today, we think about it as full-cycle economics.

So, they’re going to stay with you on the life of this asset. We’re not at a point where we’re in need of increasing the activity here. We’ve got a very deep high-return inventory across multiple basins. And, that’s really the big difference. I think our business model has changed as the company’s matured and we’ve built out that inventory where we don’t need to lean in aggressively on any single one asset anymore. We’ve got the ability with this multi-basin portfolio that we can invest in each of these at a pace that really allows them to improve year-over-year. Now, we definitely want to bring some of these capital efficiency learnings from the Eagle Ford, the Bakken, the Permian into the Utica, But, we want to do it at a place where we’re not, we don’t have the misses on spacing or higher well costs or things that have plagued some of the early learnings in these other resource plays.

So, I wouldn’t say we’re looking for any major sign or any silver bullet that we’re going to turn on a 15 rig program or anything like that, Scott. It’s really the, where our company is at, where we’re at in the cycle and it ultimately comes down to returns based decision not at the asset level, but really at the company level as to how to capital allocate across the portfolio to maximize shareholder value.