EOG Resources, Inc.

Good day, everyone, and welcome to EOG Resources' fourth quarter and full year 2018 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 the Chief Financial Officer of EOG Resources, Mr. Tim Driggers. Please go ahead, sir.

Thank you, and good morning. Thanks for joining us. We hope everyone has seen the press release announcing fourth quarter and full year 2018 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 and 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 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 U.S. investors that appears at the bottom of our earnings release issued yesterday. Participating on the call this morning are Bill Thomas, Chairman and CEO of Billy Helms, Chief Operating Officer, Ken Bedecker, EVP, Exploration and Production, Ezra Jacob, EVP, Exploration and Production, and David Streit, VP, Investor and Public Relations. Here's Bill Thomas.

Thanks, Tim, and good morning, everyone. Our long-term game plan is simple. Be one of the best-performing companies across all sectors in the S&P 500. Our goal is to deliver double-digit returns and double-digit growth throughout commodity price cycles. In addition to high returns and disciplined organic growth, our goal is to generate free cash flow that supports a growing dividend, an impeccable balance sheet, and allows the company to take advantage of other opportunities such as bolt-on property additions that meet our strict premium reinvestment standard or potential opportunities to repurchase shares when value accretive. In 2018, EOG accomplished our goal by delivering 15% return on capital employed, organically growing oil production 19%, and generating $1.7 billion in free cash flow. Our 2018 performance places EOG among the very best in line with top performers in any sector of the market. Last year, we earned a company record adjusted net income of $3.2 billion. Our 2018 performance 15% return on capital employed at $65 oil surpassed our 2014 return on capital employed when oil prices averaged significantly higher at $95. It's clear our permanent shift to premium strategy three years ago has had a dramatic effect on the profitability of the company. EOG's premium standard requires investments to earn at least 30% direct after-tax rate of return at $40 oil and $2.50 natural gas. Consistently applying this standard to our capital allocation decisions has reset the company to be successful throughout commodity price cycles. In addition to double-digit returns and growth in 2018, we also generated a company record $1.7 billion in free cash flow, increased the dividend rate 31%, and reduced our net debt to capitalization ratio from 25 to 19%. Delivering high return organic growth, producing free cash flow, returning cash to shareholders by increasing the dividend, and reducing our debt is a significant achievement. This combination is rare, not only in our industry, but in the broader market. Our ambition is to make this level of performance the norm for EOG Resources. Consistent With our long-term game plan, our 2019 $6.3 billion capital program is forecasted to deliver 12% to 16% U.S. oil production growth. We're excited about 2019 because we're building on our cost reduction momentum from last year. Per barrel cash operating costs are expected to go down again this year. We continue to both improve well productivity and lower well costs. and estimate that the average 2019 well will generate $6 million net present value at $55 oil. These improvements are expected to increase our capital efficiency by more than 10%. As a result, the price of oil needed to fund our 2019 capital and the dividend with discretionary cash flow is less than 50%. With oil at 55, we expect to generate significant free cash flow. Our 2019 Discipline Growth and Capital Program will allow the company to increase returns by discovering and applying new technological breakthroughs, improving operating efficiencies, and continuously reducing costs in every area of our business. Accordingly, we are spending a bit less this year on growing oil and a bit more on opportunistic proprietary new horizontal potential. Applying our proprietary knowledge, we believe the new prospects have the potential to meaningfully improve the quality of our drilling inventory and improve our future returns. Today, it takes oil prices in the mid 50s for EOG to generate double digit return on capital employed. And in the foreseeable future, we see that price dropping into the 40s. It would be incorrect to assume that EOG is permanently shifting into a lower growth mode. Our goal is to continue to lower our breakeven costs, improve margins, and reset the company to sustainably deliver double-digit returns and double-digit growth throughout commodity price cycles. EOG continues to be the peer leader in return on capital employed and distant growth. We are rapidly becoming one of the low-cost producers in the global energy market, and we embrace a strong commitment to sustainability. Our goal of double-digit returns, double-digit growth, and free cash flow puts COG in line with the best companies across all sectors in the market. We are truly excited about 2019 and our ability to continue to improve and to deliver significant long-term shareholder value. Next up is Billy to review our operational performance in 2018 and provide details on our 2019 plan.