EOG Resources, Inc.

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 risk 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 include or 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 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, Billy Helms, Chief Operating Officer, Ken Bedecker, EVP Exploration and Production, Ezra Yacob, EVP Exploration and Production, Lance Turveen, 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 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 a 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 by using $30 oil instead of $40 to calculate our 30% rate of return. Our second focus point this year is to exercise operational flexibility to quickly reduce costs. With capital 26 below target, and cash operating costs 10% below target, our second quarter results demonstrate our ability to move quickly in a volatile environment. Our third focus point is to accelerate our technical innovation across the company. This is an area we're most excited about. While we anticipated some additional opportunity for innovation because of the slowdown in our pace of development, our employees' ability to accelerate innovation even while working remotely has exceeded our expectations. We recently completed our yearly technical conferences across each discipline, all via video conferencing. We are amazed at the volume of new innovative ideas presented, from creative ways to cut costs to new tools to identify and evaluate prospects. I am confident that the tremendous progress we've made this year will accelerate EOG's lead as these sustainable improvements start paying dividends in the future by driving down the price of oil required to generate double-digit returns and extend EOG's industry leadership and return on capital employed. Our fourth focus point is to exit 2020 with momentum into next year by increasing production into the price recovery. As Billy will cover in a few minutes, we've increased our quarterly and full-year production volume estimates. In addition, with the cost reductions we're making this year, we have improved our maintenance capital outlook for 2021. We now expect we will be able to maintain higher volumes for the same capital and cover both capital and the dividend with cash flow at less than $40 oil. Our improvements in volume coupled with reductions in well and operating costs are setting us up for strong performance next year. Our fifth focal point this year is to remain hypervigilant about maintaining our financial strength. Our goal each year is to spend within cash flow and maintain an impeccable balance sheet to support operations and protect our dividend. This downturn has demonstrated the value of EOG's historically strong balance sheet more than ever. With this goal in mind, we reduced CapEx more than 45% to $3.5 billion. so that full-year cash flow funds CapEx in the low 30s. If oil prices average $40 for the year, full-year cash flow also funds the dividend and generates free cash flow. Sixth, our focus is to continue to invest in the long-term value of the business. In fact, once again, this break in our pace of development has actually accelerated our progress significantly. by creating more time to fine-tune our quality exploration work. We continue to drill on prospects that we believe will further improve company performance. You will hear from Ezra in a moment regarding recent exploration progress. The seventh focus point this year is the most important. Protecting and enhancing EOG's culture is the key to our continued success. We have highly skilled employees who are focused on constantly improving every area of the company. We remain committed to our employees as they are the ones who are making EOG a much better company during this downturn. Armed with extensive data, proprietary apps, and information technology, EOG employees are overcoming the challenging conditions by continuing not only to innovate, but to accelerate innovation. we believe we're in the process of making another significant improvement in EOG's performance, similar to the last downturn when we initiated our premium drilling program in 2016. As a reminder, with premium standards in place from 2017 to 2019, EOG delivered an industry-leading average return on capital employed of 14%, generated $4.6 billion in free cash flow, increased the dividend by 72%, and reduced net debt $2.2 billion, and increased approved reserves by 55%. The EOG culture is rising to the challenge again with innovation that is significantly improving the company's current and future performance. EOG's long-term game plan has not changed. We remain focused on high return reinvestment, disciplined organic growth, and generating substantial free cash flow to fund a sustainable growing dividend and maintain a strong balance sheet. EOG will emerge from the downturn a much better company, and our commitment to creating long-term value for our shareholders has never been stronger. Before I turn it over to Tim and Billy, I want to note how excited we are to continue our progress towards reducing GHG emissions. We are near the startup of our 8-megawatt solar and natural gas hybrid electric power compressor station. In addition, we recently formed a sustainable power group within the company. This group will support our innovative culture to bring return-focused, low-emissions technology and projects forward quickly. EOG is committed to being an innovative leader in sustainability and the long-term energy solution. Next up is Tim.