Friday, February 26, 2021

Free Cash Flow -- EOG Vs CLR -- 4Q20 -- EOG's Focus on "Double-Premium -- Whatever That Is -- February 26, 2021

Free cash flow:

  • EOG: $666 million 4Q20; annualized: $2.7 billion for the full year;
  • CLR: $275 million full year;

Market cap:

  • EOG: $37 billion
  • CLR: $9 billion

EOG's "Double-Premium" strategy: for the life of me, I can't figure out what "they" mean by "double premium." Apparently I'm not the only one. From twitter today:

And then this from Onvintiv CEO over at Twitter. This has to be the funniest thing I've seen since Trump's "covfefe" tweet, link here (this link is worth the cost of the subscription to this blog):

The Cube™, lol: three layers of capital destruction. LOL. 

From NGI, "double the premium (archived):

The 2021 capex plan is designed to maintain oil production at the 4Q2020 rate of 434,000-446,000 b/d.

The budget also is designed to fund a growing exploration inventory. However, even if commodity prices were to improve, don’t look for EOG to boost spending or build volumes, Thomas said. 

The focus instead is centered around “double-premium” oil and gas potential, with wells needing a minimum 60% after tax real rate of return, i.e. ATROR. That would be an average flat $40/bbl West Texas Intermediate oil price and $2.50/Mcf Henry Hub natural gas.

About 500 net wells are scheduled for completion this year, nearly all in the Permian Basin’s Delaware sub-basin, as well as the Eagle Ford and Powder River Basin. In addition EOG is “accelerating leasing and testing of numerous high‐impact exploration projects,” such as Dorado, while funding international efforts and various environmental programs.

“The 2021 capital plan is consistent with the strategy we have followed over the last year of not growing production in an oversupplied market,” Thomas said. “We are focused on increasing returns, generating free cash flow and maintaining our productive capacity while the oil market rebalances.

Again, I have no idea what EOG means by "double premium." It sounds like they hope to generate increased free cash flow without a significant increase in production.

Graphics from EOG

Transcript, EOG.

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