EOG Resources, Inc. (EOG) Q4 2022 Earnings Call Transcript

EOG Resources, Inc. (NYSE:EOG) Q4 2022 Results Conference Call February 24, 2023 10:00 AM ET

Company Participants

Tim Driggers - Chief Financial Officer

Ezra Yacob - Chairman and Chief Executive Officer

Billy Helms - President and Chief Operating Officer

Ken Boedeker - EVP, Exploration and Production

Jeff Leitzell - EVP, Exploration for

Lance Terveen - SVP, Marketing

David Streit - VP, Investor Relations

Conference Call Participants

Paul Cheng - Scotiabank

Arun Jayaram - JPMorgan

Doug Leggate - Bank of America

Leo Mariani - MKM Partners

Neal Dingmann - Truist

Scott Gruber - Citigroup

Jeanine Wai - Barclays

Derrick Whitfield - Stifel

Charles Meade - Johnson Rice

Operator

Good day, everyone, and invited to EOG Resources Fourth Quarter Full Year 2022 Earnings Results Conference Call. As a reminder, nan telephone is being recorded.

At this time, for opening remarks and introductions, I would for illustration to move nan telephone to nan Chief Financial Officer of EOG Resources, Mr. Tim Driggers. Please spell ahead, sir.

Tim Driggers

Good morning, and acknowledgment for joining us. This convention telephone includes forward-looking statements. Factors that tin origin existent results to disagree materially from those successful our forward-looking statements person been outlined successful nan net merchandise and EOG's SEC filings.

This convention telephone besides contains definite non-GAAP financial measures. Definitions and reconciliation schedules for these GAAP measures tin beryllium recovered connected EOG's website. Some of nan reserve estimates connected this convention telephone whitethorn see estimated imaginable reserves and estimated assets imaginable not needfully calculated successful accordance pinch nan SEC's reserve reporting guidelines.

Participating connected nan telephone this greeting are Ezra Yacob, Chairman and CEO; Billy Helms, President and Chief Operating Officer; Ken Boedeker, EVP, Exploration and Production; Jeff Leitzell, EVP, Exploration and Production; Lance Terveen, Senior VP, Marketing; and David Streit, VP, Investor Relations. Here's Ezra.

Ezra Yacob

Thanks, Tim. Good morning, everyone. EOG's increasing portfolio of high-return assets delivered outstanding results successful 2022. We earned grounds return connected superior employed of 34% and grounds adjusted nett income of $8.1 billion, generated a grounds $7.6 cardinal of free rate travel which funded grounds rate return to shareholders of $5.1 billion.

We accrued our regular dividend complaint 10% and paid 4 typical dividends, paying retired 67% of free rate flow, beating our committedness to return a minimum of 60% of yearly free rate travel to shareholders. And we strengthened what was already 1 of nan champion equilibrium sheets successful nan industry, reducing nett indebtedness by astir $800 million.

We proceed to present connected our free rate travel priorities this twelvemonth by declaring an further typical dividend of $1 per stock yesterday. Outshining our financial results were achievements made by our operating teams moving successful a challenging inflationary environment. Credit goes to nan innovative and entrepreneurial teams moving collaboratively crossed our multi-basin portfolio.

Together, we leveraged nan elasticity provided by our decentralized building to present exceptional operational performance. Production volumes, CapEx and per portion operating costs were wrong guidance group astatine nan commencement of nan year. We offset persistent inflationary pressures that exceeded 20% during nan twelvemonth to limit good costs increases to conscionable 7%.

Our exploration teams uncovered a caller premium play, nan Ohio Utica combo, and precocious 2 emerging plays, nan South Texas Toronto and Southern Powder River Basin. We've progressed respective exploration prospects including nan Northern Powder River Basin. We expanded our LNG agreement, presently estimated to return effect successful 2026 to 720,000 MMBtu per day, which will supply JKM-linked pricing optionality for 420,000 MMBtu per day.

Last year, nan gross uplift from our existent 140,000 MMBtu per time LNG vulnerability was much than $600 cardinal nett to EOG. Preliminary results bespeak that we reduced our GHG strength and methane emissions percentage, achieving our 2025 targets. And we initiated an expanded deployment of our caller continuous methane leak discovery strategy called iSense.

Led by nan tremendous capacity successful our Delaware Basin and Eagle Ford plays, our operating capacity and financial results successful 2022 are a reflection of our plus portfolio and nan unsocial organizational building successful spot to support it.

Seven teams successful North America and 1 world squad operates 16 plays crossed 9 basins. Our decentralized building empowers each operating squad to make decisions successful existent clip astatine nan plus level to maximize value. This differentiates EOG and enables america to consistently execute our strategy and nutrient outstanding results twelvemonth aft year.

Our multi-basin portfolio provides galore high-return finance opportunities and we stay focused connected disciplined finance crossed each of our assets. In summation to our premium good strategy, successful which wells must make a minimum of 30% nonstop after-tax complaint of return astatine a level $40 lipid and $2.50 earthy state value for nan life of nan well, we put astatine a gait that allows each plus to amended year-over-year, lowering nan costs and expanding nan margins generated by each asset.

Disciplined finance intends much than conscionable expanding margins astatine nan apical of nan cycle. It intends delivering worth for nan life of nan assets and done nan commodity value cycle. It's not only processing lower-cost reserves, but besides investing strategically to little nan operating costs of these resources, which positions EOG to make afloat rhythm returns competitory pinch nan wide market.

Looking up to 2023, EOG is successful a amended position than ever to present worth for our shareholders and play a important domiciled successful nan semipermanent early of energy. Our expertise to reinvest successful nan business, present disciplined growth, little our emissions intensity, gain precocious returns, raise nan regular dividend and returned important rate to shareholders, each while maintaining what we judge is nan champion equilibrium expanse successful nan manufacture is owed to our differentiated strategy executed consistently twelvemonth aft year.

Now, here's Tim to reappraisal our financial position.

Tim Driggers

Thanks, Ezra. When we established our premium strategy backmost successful 2016, our extremity is to reset nan costs guidelines of nan business to gain economical returns astatine nan bottommost of nan value cycle. The effect premium has had connected nan costs ground of nan Company and our financial capacity has been dramatic. Since 2014, anterior to establishing our premium strategy, our DD&A complaint has declined 42% and rate operating costs by 23%. Also, successful 2014, and nether akin lipid prices arsenic past year, we earned 15% ROCE. With our little costs structure, ROCE accrued to a grounds 34% successful 2022.

We person besides reduced nett indebtedness past twelvemonth by $800 cardinal to further fortify nan equilibrium sheet. We position a beardown equilibrium expanse arsenic a competitory advantage successful a cyclical industry. Our existent equilibrium expanse is among nan strongest successful nan power manufacture and ranks adjacent nan apical 20th percentile of nan S&P 500 successful position of leverage and liquidity, measured arsenic nett indebtedness to EBITDA and rate arsenic a percent of marketplace cap. We person a $1.25 cardinal enslaved maturing successful March and intend to salary that disconnected pinch rate connected hand.

Our 2023 scheme is positioned to make different twelvemonth of beardown returns. We expect to turn lipid volumes by 3% and full accumulation connected a BOE ground by 9%. At $80 WTI and $3.25 Henry Hub, we expect to make astir $5.5 cardinal of free rate travel for astir 8% output astatine nan existent banal value and nutrient an ROCE approaching 30%. This charismatic financial outlook, on pinch our beardown equilibrium sheet, is what gave america nan assurance to state a $1 per stock typical dividend to commencement nan twelvemonth connected apical of our regular dividend of $0.825 per share.

As a reminder, our committedness to return a minimum of 60% of free rate travel considers nan afloat year, not a azygous 4th successful isolation. The typical dividend reflects nan assurance successful our scheme and our constructive outlook connected lipid and state prices. We will proceed to measure nan magnitude of rate return arsenic we spell done nan twelvemonth pinch an oculus on, erstwhile again, gathering aliases exceeding our afloat twelvemonth minimum rate return committedness of 60% of free rate flow.

Here's Billy to talk operations.

Billy Helms

Thanks, Tim. I would for illustration to first convey each of our labor for their accomplishments and execution past year. 2022 was a challenging year, and nan committedness and dedication of our labor stay patient arsenic they delivered outstanding results.

Last twelvemonth tin beryllium characterized arsenic a twelvemonth of heightened ostentation wherever we witnessed expanding commodity prices, accompanied by higher levels of activity crossed nan industry. The consequence was a overmuch tighter marketplace for services, labour and supplies. We were capable to offset astir of this ostentation done ratio gains and superior guidance crossed our portfolio to limit good costs increases to conscionable 7%.

For nan afloat year, lipid accumulation was supra nan midpoint of guidance, while superior expenditures were $4.6 billion, were only 2% supra nan original guidance midpoint group astatine nan opening of nan year. Our operating teams moving passim nan Company leveraged efficiencies to thief offset inflation. This is astir evident successful our halfway improvement plays, which prolong capable activities to support continued experimentation and innovation.

In nan Delaware Basin, we expanded usage of our Super Zipper completion method to summation treated lateral feet per time by 24%. In our Eagle Ford play, nan completions squad accrued completed lateral feet per time by 14% and nan magnitude of soil pump per time per fleet by 27%. Our decentralized operations teams are continually striving to amended capacity and stock learnings crossed our portfolio to limit good costs increases. These learnings are past deployed successful our emerging opportunity plays.

For instance, successful nan Southern Powder River Basin, Mowry play, nan drilling squad decreased drilling clip by 10% pinch improved bid and drilling centrifugal performance. In our South Texas Dorado state play, nan operations squad reduced drilling clip by 12%. Through method and operational advancements, they committedness to proceed to thrust improvements successful 2023.

Beyond costs reductions, a caller completion creation implemented past twelvemonth successful nan Delaware Basin is realizing affirmative improvements successful good capacity successful definite target reservoirs. This caller creation was tested successful 26 wells past twelvemonth and is yielding arsenic overmuch arsenic an 18% uplift and estimated eventual recovery.

We're besides making awesome advancement towards our semipermanent ESG goals. Our wellhead state seizure complaint exceeded 99.9% of nan gross state produced. And preliminary results bespeak that we lowered GHG strength and methane emissions percentages successful 2022. We now person astir 95% of our Delaware Basin accumulation covered by iSense, our continuous methane monitoring technology.

Now turning to nan 2023 plan. We forecast a $6 cardinal superior programme to present 3% lipid measurement maturation and 9% full accumulation growth. We expect full volumes connected a Boe ground to turn each 4th done nan year. First 4th will show much maturation successful state versus lipid owed to nan good operation and timing of respective Dorado state wells that were completed precocious successful nan 4th fourth of past year. The scheme tin beryllium summarized successful nan pursuing 4 points.

First, drilling rig and frac fleet activity successful our halfway improvement programs, specifically nan Delaware Basin and nan Eagle Ford, will beryllium comparatively accordant pinch nan 4th fourth of past year. The longer-term outlook for nan Eagle Ford is to support nan existent accumulation guidelines wherever we person complete a decade of continued opportunities to make precocious returns and rate flow. After a decade of stellar operational improvements successful nan Eagle Ford, it has go a highly efficient, high-margin play pinch existing infrastructure and entree to favorable markets.

In nan Powder River Basin, nan scheme builds disconnected past year's affirmative good results and infrastructure installation pinch an further 20 Mowry completions. We expect to complete a fewer further wells successful our emerging Utica play successful Ohio arsenic we proceed to delineate our acreage position and drill a fewer wells successful nan Bakken and DJ Basins.

In Dorado, our scheme is to execute an activity level that creates economies of standard and create a continuous programme to let for invention that drives improved good capacity and costs reductions. This results successful a mean summation successful activity, completing astir 10 further wells versus past year.

In Trinidad, a drilling rig is now scheduled to get successful nan 3rd quarter, which is astir a six-month delay. So, world volumes decreased 60 cardinal cubic feet per time aliases 10,000 Boes per time versus our earlier estimates. Overall, we accrued activity successful our emerging plays. The mean EOG rig count for nan twelvemonth is expected to summation by astir 2 rigs and 1 further frac fleet.

Second, we person statement of show to efficiencies that we expect will limit further ostentation unit connected good costs to conscionable 10% versus past year. Year-over-year increases successful tubular costs arsenic good arsenic time rates for drilling rigs and frac fleets are nan main drivers of nan increase. As portion of our contracting strategy, we stagger our agreements to unafraid a guidelines statement of services and unafraid accordant execution.

For this year, we person locked successful astir 55% of our good cost, which is simply a akin level to erstwhile years. Approximately 45% of our drilling rigs and 65% of our frac fleets needed for nan twelvemonth are covered nether word agreements pinch aggregate providers. By maintaining this accordant guidelines of services, we expect to find further opportunities to thrust capacity improvements and destruct downtime, frankincense perchance providing an opportunity to offset immoderate further inflation.

Third, our 2023 superior programme includes further infrastructure investment. Typically, backing for accommodation and different infrastructure projects comprises 15% to 20% of nan CapEx budget. And this year, we expect that number to beryllium person to 20%. In Dorado, we commenced building precocious past twelvemonth connected a caller 36-inch state pipeline from nan section to nan Aqua Dolce income constituent adjacent Corpus Christi, Texas.

This pipeline will thief guarantee a semipermanent takeaway, afloat seizure nan worth concatenation from nan wellhead to nan marketplace center, thief support expanded LNG export value exposures owed to travel online astir 2026 and broaden our nonstop interstate pipeline capacity to scope markets on nan full Gulf Coast corridor. We're besides undertaking smaller infrastructure projects successful different areas, for illustration nan Utica to little nan semipermanent portion operating cost.

Fourth, we scheme -- nan scheme includes superior that represents nan adjacent steps towards our imagination of being among nan lowest emissions producers of lipid and earthy gas. Our first CCS task has begun injection and we will proceed to research opportunities to heighten our activity position successful environmentally prudent operations. These projects connection patient returns while besides providing reductions successful long-life portion operating costs and little emissions.

EOG remains focused connected moving nan business for nan agelong term, generating precocious returns done disciplined growth, improving our assets guidelines done integrated exploration, improving our biology footprint and investing successful projects that will little nan early costs ground of nan Company. I americium excited astir 2023 and nan opportunity it brings for our labor to further amended nan Company.

Now here's Ken to reappraisal year-end reserves and supply an inventory update.

Ken Boedeker

Thanks, Billy. Our 2022 proved reserve replacement was 244% for uncovering and improvement costs of conscionable $5.13 per tube of lipid equivalent, excluding revisions owed to commodity value changes. Our proved reserve guidelines accrued by 490 cardinal barrels of lipid balanced and now totals complete 4.2 cardinal barrels of lipid equivalent. This represents a 13% summation successful reserves year-over-year and was achieved organically.

In 2022, we besides reduced our uncovering and improvement costs by 8% compared to nan erstwhile year. In fact, complete nan past 5 years, we person reduced uncovering and improvement costs by astir 40%. Our imperishable displacement to premium drilling, mixed pinch our civilization of continuous betterment focused connected efficiencies driven by innovation, are why our firm uncovering costs and DD&A complaint proceed to decline.

We proceed to attraction connected maximizing nan semipermanent worth of our acreage. For example, past year, we continued co-development of up to 4 Wolfcamp targets. The pursuit of secondary targets pinch wells developed successful packages alongside accepted improvement benches mostly person minimal accumulation effect connected nan superior zone, however, transportation a favorable finance floor plan because they require nary further leasehold investment, are drilled and completed connected existing pads and produced into existing accommodation and gathering systems. The extremity is to present debased risk, precocious returns that maximize nan rate return imaginable of our assets.

Looking retired beyond our existent proved reserves, we've identified complete 10 billion-barrel equivalents of early assets imaginable successful our existing premium plays pinch an expected uncovering costs -- uncovering and improvement costs little than our existent DD&A rate. When we put successful uncovering and improvement costs little than our DD&A rate, we thrust nan costs ground of nan Company down. When we invested precocious returns, mixed pinch a debased uncovering and improvement cost, it shows up successful nan financials arsenic accrued return connected superior employed.

Thanks to nan benefits of our decentralized building and multi-basin integrated exploration strategy, our assets guidelines is increasing faster than we do it. More importantly, it is getting better. We person complete 10 years of double-premium drilling astatine nan existent pace, and we are focused connected improving nan value of our assets each twelvemonth done operational innovation, method improvements and expiration.

Now fto maine move nan telephone backmost to Ezra.

Ezra Yacob

Thanks, Ken. In conclusion, I'd for illustration to statement nan pursuing important takeaways. EOG Resources offers a unsocial worth proposition.

First, it originates pinch our multi-basin portfolio of high-return finance opportunities anchored by nan industry's astir stringent finance hurdle complaint aliases premium value deck.

Second, our disciplined maturation strategy optimizes finance to support continuous betterment crossed our portfolio. Our labor utilize exertion and invention to summation efficiencies and let EOG to stay a low-cost operator.

Third, we are focused connected generating some near- and semipermanent free rate travel to money a sustainably increasing regular dividend, support our committedness to return further free rate travel to shareholders and support a pristine equilibrium expanse to supply optionality done nan cycles.

Fourth, we are focused connected safe operations and improving our biology footprint crossed each of our assets, utilizing some existing and internally developed technologies.

And finally, it's nan EOG labor that make it happen. Our civilization is astatine nan halfway of our worth proposition and is our eventual competitory advantage.

Thanks for listening. Now we'll spell to Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first mobility coming comes from Paul Cheng from Scotiabank. Your statement is now open.

Paul Cheng

Two questions, please. First, Ezra, pinch Dorado, really is your finance programme changed successful galore of nan changing scenery successful nan earthy state price? I would imagine, astatine this point, there's much economical to drill for nan lipid play than nan state play? How that changed your outlook for nan adjacent respective years connected that play?

Second mobility is connected nan CapEx. Maybe that it seems for illustration you are investing for nan future. So what is nan sustaining CapEx request to support a level accumulation astatine this constituent for your program? And also, if we're looking at, say, for nan remainder of this year, is location immoderate area that you deliberation we will commencement to spot immoderate softening successful nan costs and which whitethorn not beryllium reflected successful your existent budget?

Ezra Yacob

Thank you, Paul. This is Ezra. Those are some awesome questions. So fto maine commencement pinch nan first 1 present connected earthy state and what's it looking for illustration correct now. You're correct, we've been watching nan caller volatility successful earthy gas, precocious 2022 and presently associated pinch nan LNG outages and nan lukewarm wintertime that we're experiencing.

Our state maturation this adjacent twelvemonth connected nan plan, you'll spot is astir -- astatine nan midpoint is astir 240 cardinal cubic feet per day. About 50% of that is coming retired of nan -- arsenic you mentioned, nan associated state from nan Delaware Basin and nan different half of it is fundamentally coming retired of our Dorado play.

Our strategy astatine Dorado, I'd say, hasn't importantly changed yet. And astatine this point, we don't really spot that it would, barring thing dramatic. And nan logic for that is that Dorado ever has been benignant of a longer-term strategy for us. We've ever focused connected having mean finance location to turn into nan increasing request halfway on nan Gulf Coast. It's ne'er really been astir chasing seasonal request aliases aggressively ramping up activities successful that play.

The U.S., conscionable this year, will person astir 2 Bcf a time of LNG export backmost online aft nan disruption's clear. We've sewage an further 5 Bcf a time coming online successful benignant of nan '24, '25 clip framework and past perchance different 8 Bcf a time still moving done financing. And we spot this statement of show request maturation is besides reflected pinch nan portion value wherever you spot currently, it's moved into contango.

So our semipermanent strategy astatine Dorado really remains nan same. It's finance astatine a gait wherever nan plus improves each twelvemonth giving america an expertise to thrust down some upfront good costs and semipermanent operating costs, wherever we tin consistently present nan debased costs of supply. This year, arsenic Billy stated, we'll beryllium moving towards a 1 completion unit programme to really seizure those efficiencies astatine Dorado.

The first portion of your 2nd question, I believe, is connected sustaining CapEx. And what I'd opportunity is nan sustaining CapEx is simply a number that we don't needfully attraction connected present arsenic an integrated maturation company. And nan logic for that is, moreover during 2020, we didn't support a attraction superior type of program.

We're very dynamic, and we'll turn and we spot nan expertise to put successful our business and nan marketplace supports it. And erstwhile we don't request to, we tin propulsion backmost astatine that clip arsenic well. So attraction CapEx is not needfully a number that we look at.

Now arsenic acold arsenic breakevens connected our superior programme this year, it decidedly is up a small spot year-over-year. As Billy mentioned, there's immoderate ostentation successful there. But also, we're evidently seeing nan opportunity to put successful our multi-basin portfolio and summation nan CapEx. So, our CapEx programme this twelvemonth is astatine $44 WTI value pinch a $3.25 state price. And I'll possibly manus it complete to Billy to springiness a small spot of colour connected ostentation and wherever we spot it going this year.

Billy Helms

Yes, certainly. On nan ostentation front, I deliberation it's safe to opportunity that everybody has seen commodity prices falling. We've seen ostentation rates person peaked and travel down. And truthful we're seeing a batch of nan work costs, astatine least, person plateaued going into this year. And so, arsenic I mentioned connected nan call, we've sewage astir 55% of our wealthiness costs secured done existing contracts pinch our event. And that leaves america nan opportunity to seizure immoderate upside that we mightiness spot successful little rates going into nan year.

So we're sitting successful a reasonably bully position. I deliberation we're going to beryllium poised and waiting to spot what happens and return advantage of opportunities arsenic they coming themselves. But I deliberation inflation, astatine least, is showing that we've plateaued. We baked successful astir a 10% ostentation into our plan. And arsenic we spot opportunities, we'll proceed to look for ways to amended that.

Paul Cheng

Billy, do you spot immoderate peculiar area person nan opportunity of softening?

Billy Helms

I deliberation what we've seen is 1 of nan biggest drivers this past twelvemonth connected ostentation was surely tubulars casing cost. And I deliberation we've seen different things and different parts of that make up. I deliberation nan ERW products is mostly nan aboveground and intermediate casings, those person rolled complete and are softening a small spot much than nan accumulation casing, which is your seamless products, which are still mostly exposed to imports. And truthful you're seeing immoderate opportunities connected casing, but I deliberation there's still yet to travel connected astir of that.

On nan work side, I deliberation we haven't really seen thing manifested yet, but I deliberation we've each seen rig counts person mostly been level since September, and they're down disconnected their highest of -- successful November of astir apt 20 to 25 rigs. And pinch nan driblet successful state prices, I deliberation everybody is expecting possibly we'll spot immoderate much softening connected nan rig activity level. So that whitethorn lead to immoderate opportunities to seizure immoderate markets.

The 1 advantage that we have, and I'll spell up and propulsion this out, we whitethorn grow connected it later, but nan use we person is operating successful aggregate basins. And truthful we spot surely much work tightness and labour constraints successful areas pinch nan astir activity, which would beryllium nan Permian. But we person nan opportunity to displacement activity to our different basins to alteration those to return advantage of much disposable equipment, much disposable capacity to adhd services astatine favorable rates. So that's nan advantage that we person arsenic a company.

Operator

Our adjacent mobility coming comes from Arun Jayaram from JPMorgan. Your statement is now open.

Arun Jayaram

Ezra, you person a nett cash, a equilibrium expanse and if we tally through, telephone it, nan $80 case, 55 -- aliases $5.5 cardinal successful free cash, if you return 60% of that, you're looking astatine a equilibrium expanse that would be, telephone it, $3 cardinal of nett rate astatine year-end. So I wanted to get your views connected uses of that rate that you person connected nan equilibrium expanse and wherever your heads astatine successful position of thoughts of expanding rate return to shareholders versus looking astatine inorganic opportunities, including bolt-ons aliases M&A? And really do you prioritize immoderate of those opportunities arsenic we deliberation astir 2023?

Ezra Yacob

It's Ezra. That's a awesome question. I emotion talking astir our equilibrium expanse and nan spot of it. It's thing we return a batch of pridefulness in. And nan logic for that is because it gives america a batch of optionality astatine different times, whether it's to look astatine -- successful 2020, we purchased -- strategically purchased a batch of casing.

In 2021, we were capable to acquisition a decent magnitude of statement pipe. And conscionable past year, we were capable to make a mini acquisition successful nan Utica play, including purchasing immoderate minerals there. So we're still not looking for immoderate large, expensive, firm M&As. We do proceed to activity retired opportunities wherever it makes consciousness to do bolt-ons, things that would beryllium accretive, things that could move correct into our existing infrastructure and widen immoderate of our lateral lengths.

In general, for our nett rate position, I would opportunity we don't person a circumstantial target. We do for illustration to person nan optionality. The 1 point you didn't mention is that we will beryllium retiring a enslaved present successful this first 4th astatine $1.2 billion. And then, successful summation to that, I'd constituent retired that past year, we did move beyond our minimum committedness of that 60% return of free rate travel to our shareholders. Last year, we returned astir 67%.

And truthful I deliberation you tin spot -- you tin return that arsenic a information constituent that erstwhile due and astatine nan correct clip and obviously, it's evaluated astatine nan Board level, depending connected wherever we're astatine wrong nan cycle, wherever we're astatine wrong nan twelvemonth and what our rate position looks like, we person proved that we're consenting to move supra and beyond nan 60% minimum threshold.

Arun Jayaram

Great. My follow-up is Ezra, conscionable fixed nan size of nan Company, you're approaching 1 cardinal Boes per time successful position of wide output, and astir of your activity is short rhythm oriented. And I wanted to get your thoughts connected exploring longer rhythm opportunities. You've seen immoderate of your peers put successful areas specified arsenic Alaska and LNG. And I wanted to get your thoughts connected EOG looking astatine nan agelong rhythm and possibly an update connected wherever we guidelines for -- to drill Beehive successful Australia?

Ezra Yacob

Yes, Arun, we tin commencement -- yes, possibly pinch immoderate of our longer rhythm stuff. We tin commencement pinch Trinidad. As Billy mentioned, location has been a spot of a rig hold connected our Trinidad drilling program. So that will commencement astir midyear this year. We did group a level location based -- this past twelvemonth based connected 1 of nan discoveries that we made successful 2020. We should commencement building connected different level location named Momento later this year, besides based connected immoderate of nan activity that we did successful that drilling run that ended successful 2020. So that's connected nan Trinidad side.

In Beehive successful Australia, it's our imaginable connected nan Northwest shelf. That imaginable has really slid a small bit. It's now clip to beryllium spud successful 2024. And past pinch immoderate of nan different projects that you had mentioned, arsenic you tin see, and it goes successful statement pinch what we were conscionable talking astir pinch nan expertise of our equilibrium expanse to beryllium strategical and opportunistic. And typically, we do these things counter-cyclically for illustration our statement connected nan LNG side, aliases nan expertise to put successful immoderate infrastructure for illustration we are presently successful Dorado to spell up and little our operating costs and grow our margins.

Those are nan type of opportunities that we really look for, things that are successful performance pinch our halfway business, which is drilling and processing premium lipid and earthy state wells.

Operator

Our adjacent mobility coming comes from Doug Leggate from Bank of America. Your statement is now open.

Doug Leggate

So Tim, I don't cognize if this one's for you aliases for Ezra, but your comments astir being capable to offset immoderate of nan ostentation person been a reasonably accordant portion of your connection complete nan past year. So, I deliberation folks were a small amazed by nan CapEx number. So I wonderment if you could locomotion america done nan moving parts of whether it beryllium activity led aliases much specifically, infrastructure related to immoderate of nan newer places? There are disproportionate magnitude of takeaway spending has possibly lifting nan CapEx issue. I'm conscionable funny connected nan breakdown.

Billy Helms

Yes, Doug, this is Billy Helms. Let maine return a stab astatine that. So first, there's astir apt 3 buckets you tin astir apt put nan summation in. First of all, is ostentation successful our good cost. That's astir apt a bully portion of it, 1/3 of it. It's astir -- we're anticipating astir a 10% good costs ostentation successful our programme versus past year.

And yes, that's possibly 10% complete and supra past year. But still past year, we achieved only a 7% good costs summation successful spite of probably, arguably, 15% aliases 20% inflation. So I deliberation our teams person done a awesome occupation connected offsetting ostentation pinch ratio gains. We're expecting much of that this year, but we've baked successful astir a 10% costs increase.

The 2nd portion of that is going to beryllium infrastructure. We've talked astir already our Dorado state pipeline. That's been initiated. And we're besides building retired immoderate infrastructure successful immoderate of our emerging plays, for illustration nan Utica to commencement nan testing of those plays. And past we've besides included immoderate superior for our ESG projects that we're advancing. So those are benignant of nan buckets that we look at.

And past obviously, we person immoderate further wells connected apical of that successful these various plays. So arsenic we prime up nan 2 further rigs and 1 other frac fleet, of course, that's going to travel immoderate further good count. So those are nan 3 main buckets that I would qualify nan summation successful nan superior versus past year.

Doug Leggate

Okay. I admit nan color, Billy. Thanks for picking that 1 up. My follow-up is astir apt for Ezra. And Ezra, forgive maine for this one, but I want to return you backmost to pre-COVID erstwhile EOG was increasing quickly and frankly, a marketplace didn't request nan oil. But you could make nan lawsuit that today. We've sewage a marketplace that doesn't request nan gas. And I understand your constituent astir possibly trying to return markets, immoderate others are cutting back. But nan truth is we still person a mostly stranded marketplace successful nan U.S. Why is this nan correct clip to accelerate your state accumulation fixed what is simply a perchance very constructive outlook longer term?

Ezra Yacob

Yes, Doug, that's a bully question. Yes, I deliberation nan quality is betwixt 2019 aliases pre-COVID pinch nan lipid versus what we're doing successful Dorado correct now. So for illustration I said, nan Dorado volumes are anticipated to support. It's fundamentally nan output of a azygous completion dispersed programme this year.

And nan benefits that we spot of moving a accordant programme location to study astir this asset, proceed to thrust down costs, support putting successful immoderate infrastructure, things for illustration h2o takeaway and in-basin gathering, that outweighs nan near-term volatility successful nan state value because what we spot is successful a very not-too-distant future, we spot a beautiful melodramatic summation successful nan offtake and nan request coming connected on nan Gulf Coast.

Now we are backstopped and supported, obviously, pinch investing connected nan return broadside successful these premium wells. So we measurement nan finance connected present astatine a $2.50 earthy state price. And while astatine today's prices, that's below, we tally that $2.50 each nan measurement done nan life of nan asset.

The remainder of nan state that we're increasing this twelvemonth is, honestly, arsenic we -- arsenic I said astatine nan apical of nan Q&A is really associated state coming retired of nan Delaware Basin, wherever nan returns location are dominantly driven evidently connected nan lipid and liquids side. And we're really moving a attraction programme aliases a level activity level programme to Q4 crossed nan Delaware Basin.

Operator

Our adjacent mobility coming comes from Leo Mariani from MKM Partners. Your statement is now open.

Leo Mariani

I was hoping you could update america a small spot connected possibly immoderate caller good results, if location are immoderate from immoderate of nan emerging plays. Most willing successful proceeding astir immoderate caller Utica good capacity aliases immoderate Utica wells that whitethorn person travel on? And past similar, conscionable successful nan PRB, did get a consciousness if you've seen improving wells location arsenic well. You've talked a batch astir cutting costs successful PRB, but conscionable funny arsenic to whether aliases not immoderate of those wells person seen improvements arsenic you guys person gotten much experience?

Ken Boedeker

Yes, Leo, this is Ken. I'll return nan Utica information of that. The 4 wells we drilled and completed successful '22, really proceed to present our expected performance. And conscionable to springiness you a spirit connected that, we expect starting our drilling programme for '23 astatine nan extremity of nan first 4th here.

One different thing, I would statement successful nan Utica, not connected nan good side, but connected nan acreage broadside is we person added astir 10,000 acres of low-cost acreage shop position, and we'll proceed to look for further opportunities to adhd to that position. So we're really excited astir nan Utica scheme for 2023. I'm going to spell up and springiness it complete to Jeff now for nan Powder.

Jeff Leitzell

Yes, Leo, this is Jeff. Yes, conscionable a speedy update. In 2022, we proceed to delineate our acreage location successful nan Southern Powder River Basin. We completed astir 31 nett wells crossed nan 4 superior targets. And each of those, we had fantabulous results. And we've been shifting our superior attraction there, arsenic we've talked astir antecedently to nan Mowry.

So successful 2023, we're going to ramp up nan activity a small spot there. We're going to tally benignant of a accordant two- to three-rig programme pinch 1 frac fleet. So that will beryllium astir 55 nett wells. And nan mostly of those, arsenic we talked about, will beryllium successful nan Mowry. It's astir a 75% summation year-over-year location successful nan Mowry.

And past we'll proceed to attraction connected optimizing that Mowry programme location successful our Southern Powder River Basin halfway area. We'll cod a batch of valuable data, and past we'll look to utilize it successful nan early connected our overlying Niobrara statement and past nan North Powder River Basin position that we announced earlier on.

Leo Mariani

Okay. That's helpful. And past conscionable wanted to jump complete to nan Eagle Ford. If I look astatine nan Eagle Ford, accumulation has benignant of been steadily dropping successful nan past fewer years. You guys person picked up activity beautiful importantly successful '23. It looks for illustration astir 50% much nett completions this twelvemonth versus last. In your prepared comments, you signaled fundamentally trying to benignant of support Eagle Ford flattish for a number of years benignant of going forward. Just wanted to get immoderate further colour astir that? Eagle Ford had benignant of been successful diminution successful favour of different plays, chiefly Delaware. And now nan scheme is to benignant of flatten it out. Are you benignant of seeing caller things location successful position of good productivity aliases little costs that person sewage much encouraged astir nan play? Just wanted to get a consciousness because it seems for illustration possibly it's risen somewhat successful nan pecking bid here.

Ezra Yacob

Yes, Leo, this is Ezra. That's a awesome pickup. It's a bully mobility because that's precisely what's happened is that it is raising up pinch respect to nan returns and nan measurement they compete for capital. Over nan past mates of years, benignant of coming retired of nan pandemic, we've reduced our -- there. And nan consequence of that, we've been trying to right-size nan investment. The consequence has been really backmost to backmost years of nan highest drilling -- complaint of return drilling programs that we've seen successful nan history of processing that asset.

As everybody knows, it's a very high-margin lipid play wherever we've sewage a batch of infrastructure and a tremendous magnitude of manufacture knowledge there. Simply, nan plus now is commanding a batch much superior finance this year. We are looking to put to support level production, arsenic you said. The accumulation has decreased a spot complete nan past mates of years. And 1 advantage that we are seeing successful nan Eagle Ford, and Billy touched connected this, and possibly I'll fto him adhd a small much colour connected it, is really really nan ostentation and work readiness has manifested itself crossed these different basins and why nan Eagle Ford's a spot much attractive.

Billy Helms

Sure. As I mentioned earlier successful immoderate of nan questions, obviously, you spot much levels of ostentation and much constraints connected services successful definite fields versus nan other, nan Permian being nan astir progressive play. Certainly, there's a much constraints location connected services and labour and those benignant of things. So it allows america nan opportunity to prime up activity successful basins that are seeing little stress, you mightiness say, and Eagle Ford surely being 1 of those.

On apical of that, our squad location successful Eagle Ford has done conscionable a tremendous occupation continuing to push invention and striving for efficiencies specified that we proceed to make amended and amended returns successful that play pinch time. And we've benignant of reached a point, arsenic Ezra mentioned there, that we want to support nan changeless level of accumulation going guardant successful that play because we do spot much than a decade of moving room of continuing to support that accumulation level pinch nan opportunities we person successful beforehand of us. So we deliberation it's conscionable a bully level of accumulation to support going forward.

Operator

Our adjacent mobility coming comes from Neal Dingmann from Truist. Your statement is now open.

Neal Dingmann

My first mobility is connected your play detail, specifically, was looking astatine immoderate different side. I spot a mates of years ago, you each suggested you had astir about 11,000 premium undrilled locations pinch about, I think, it was astir 55% of these successful nan Delaware. Of that Del, astir 40% of these will beryllium successful Wolfcamp plays. I'm conscionable wondering if that really, number one, full premium locations is still -- I hide what nan past number you threw astir nan premium locations? And wonderment if you'd still see nan mostly of these successful nan Wolfcamp information of nan Del?

Ken Boedeker

Yes, Neal, this is Ken. I'll return a changeable astatine that. We -- what we talked astir earlier, and nan measurement we really look astatine it, is we person 10 years of double-premium inventory astatine our existent activity level. So locations really aren't a interest for us. What we're really trying to talk astir and show is nan worth proposition of our 10-plus cardinal Boe assets guidelines that has a uncovering costs little than our existent DD&A rate.

Investing successful this inventory will usage to DD&A and amended net and return connected superior employed. Our good counts are really perpetually changing arsenic our improvement plans evolve, acreages swapped and laterals are extended. And each those changes amended our uncovering costs and returns and modify our location count. So what we're really focused connected now is lowering our costs ground arsenic we put astatine precocious returns.

Neal Dingmann

No, that makes sense. Then possibly Ken conscionable travel up connected that. I conjecture my follow-up is connected play details, possibly specifically nan Bakken. You each suggested, I deliberation moreover a mates of years ago, it wasn't a ton of locations, arsenic you said, possibly I don't cognize if you'd see a ton of worth there. So I'm conscionable wondering really galore -- really you'd benignant of look astatine that play today? And would you each see -- you surely don't request it financially, but would you see monetizing it fixed it appears to beryllium 1 of your much mature areas?

Ken Boedeker

Sure, Neal. The Bakken creates important returns, and it is 1 of our highest percent plays that we person successful nan Company. So wherever it's due and erstwhile it's due for development, which is we're going to beryllium putting immoderate money into it this year, we'll effort to tally astir a one-rig programme location nan foreseeable future.

Operator

Our adjacent mobility comes from Scott Gruber from Citigroup. Your statement is now open.

Scott Gruber

So I saw successful your supplemental indebtedness that you mentioned that continuous pumping operations are helping to thrust completion ratio successful nan Delaware. I judge that's 1 of nan benefits you're seeing for moving your frac fleet. Is that accurate? And conscionable a spot much item connected really continuous fracking is having completion ratio supra and beyond doing zippers?

Billy Helms

Yes, Scott, this is Billy. Yes, we're thrilled pinch nan -- our efficiencies driven done our completion teams. The continuous pumping operation, you're right, is tied to mostly our electrical frac fleets. Just a reminder, we've -- we're astir apt moving 60% aliases 70% of our frac fleets coming are electric. And we've been successful that business really since astir 2015. So, we've been operating much electrical frac fleets astir apt than astir of our peers aliases astir of nan manufacture for a agelong play of time. And done that, we've gained a tremendous magnitude of knowledge of really to proceed to thrust efficiencies successful that operation.

It really has started much successful our San Antonio group successful nan Eagle Ford play, and that's why we're truthful excited astir continuing our finance there. And certainly, we're transferring that accusation and that those techniques crossed nan Company, including nan Delaware Basin. But basically, nan continuous pumping cognition allows america to minimize immoderate magnitude of downtime, truthful we tin summation nan magnitude of footage we complete each day, which drives nan good costs down complete clip and allows america to attack immoderate really highly businesslike completion strategies. And so, portion of that is besides starring to improved completion designs, which is allowing america to make amended good performance.

So overall, it's conscionable 1 point that builds connected another, and we're excited astir nan early and wherever that takes us.

Scott Gruber

Got it. And past you besides mentioned taking advantage of immoderate softening successful -- frac rates if they do manifest this year. How is your statement sum for some presently pursuing nan play of tightness? Would you beryllium capable to seizure immoderate deflation earlier year-end? Or would that really use much astatine '24 conscionable fixed statement coverage?

Billy Helms

Our contracts are really staggered, and they don't each rotation disconnected astatine immoderate 1 fixed time. Certainly, our good costs is up this twelvemonth arsenic I mentioned earlier, because immoderate of those contracts person rolled disconnected past twelvemonth and renewed connected those higher time rates and pumping charges this year. But successful general, we person astir 45% of our drilling rigs secured nether word agreements and astir 65% of our frac fleets. So that leaves america ample opportunity to seizure opportunities if they do coming themselves arsenic clip moves on.

Operator

Our adjacent mobility comes from Jeanine Wai from Barclays. Please spell ahead.

Jeanine Wai

My first question, possibly pursuing up connected Leo's question, connected nan Eagle Ford. In position of nan step-up successful activity successful nan Eagle Ford this year, tin you talk astir really superior ratio compared betwixt nan wide Delaware and South Texas Eagle Ford? I conjecture erstwhile you propulsion nan good data, nan quality successful nan good capacity looks for illustration nan Eagle Ford is astir 30% little connected a cumulative lipid per ft ground complete nan past mates of years, but that's only 1 broadside of nan equation, and we recognize that. And I deliberation your 3Q disclosure indicated that nan Eagle Ford good costs is almost 30% little connected a per ft ground than successful nan Delaware. So I conjecture conscionable putting it each together for us, tin you conscionable supply immoderate colour connected really superior ratio and returns comparison betwixt nan Eagle Ford and nan Delaware?

Billy Helms

Yes. Jeanine, this is Billy. Happy to springiness you immoderate colour connected that. The Delaware Basin is surely 1 of our astir capital-efficient plays, quickly followed by nan Eagle Ford. The advantage we person successful nan Eagle Ford is, arsenic I mentioned earlier, nan tremendous efficiencies that person been driven successful that play. You're correct nan cum per ft is astir apt a small spot little successful nan Eagle Ford but nan good costs is besides importantly less. And truthful we tin put a batch much wells to income successful a batch shorter clip framework than we tin successful nan Delaware Basin.

And past going backmost to that also, we didn't really consciousness that we wanted to ramp up activity anymore successful nan Delaware Basin, but alternatively leverage connected our multi-basin portfolio to summation activity successful areas wherever instrumentality and crews are much disposable to leverage into our operation. And truthful that's what we've chosen to do. But I deliberation nan Eagle Ford is still 1 of our astir capital-efficient plays we person successful nan Company, and we're excited astir that opportunity to support sustaining measurement going forward.

Jeanine Wai

Okay. Great. Maybe moving to guidelines declines. Can you supply an update connected your existent guidelines declines fixed nan 3% lipid and nan 9% Boe maturation this year? Do you expect that your lipid and firm declines will stay level aliases astatine slightest -- aliases possibly moreover alteration this year?

Billy Helms

Yes, Jeanine, this is Billy again. The guidelines declines person been reasonably consistent, I would say, year-to-year. And we don't spot a measurable alteration really successful our guidelines declines going forward. I deliberation past twelvemonth was a beautiful bully twelvemonth arsenic compared to this year, and I expect nan declines would beryllium similar.

Operator

Our adjacent mobility comes from Derrick Whitfield from Stifel. Your statement is now open.

Derrick Whitfield

With my first question, I'd for illustration to thin into nan caller completion creation you've implemented successful Delaware that achieved an 18% AUR uplift. Could you possibly elaborate connected nan quality of nan enhancement and if it would to beryllium crossed and extracurricular of nan basin?

Billy Helms

Yes, Derrick, this is Billy Helms again. On nan caller completion design, certainly, we're ever experimenting pinch caller ideas and trying to innovate arsenic to ways we tin amended good capacity complete time. And we're excited astir immoderate of nan caller advancements and techniques we're experimenting pinch nan Delaware Basin. And to beryllium honest, that's conscionable much colour connected why we for illustration to get to a accordant programme and wherever we tin innovate and research and make these improvements.

So I'm not going to spell into item astir what this caller completion creation looks like. But certainly, arsenic we proceed to beforehand it, we will construe it to -- import that exertion to different basins, and we're already doing so. We were excited astir nan 18% uplift we've seen, but it's only been done connected 26 wells truthful acold successful nan Delaware Basin. So you tin spot it's still early on. The magnitude of nan betterment is tremendous though, and we afloat expect to beryllium capable to transportation that knowledge to different plays.

Derrick Whitfield

Perfect. And arsenic my follow-up, possibly shifting complete to nan Eagle Ford. We noticed nan bequest bedewed state position was seemingly reengaged successful your supplement update. If I recall, that first position was successful nan bid of 26,000 acres. Could you possibly remark connected what has brought it backmost to life and nan magnitude of activity you're expecting complete nan adjacent mates of years?

Ken Boedeker

Yes, Derrick, this is Ken. Yes. Really, what's brought backmost to life is our group successful our San Antonio division, person reviewed it and realized that they could put astatine precocious returns successful that area. So we've really looked astatine 3 different zones wrong that area and drilled 3 wells past twelvemonth that had important returns, and we'll spot further activity this year. I don't cognize that we've fixed an nonstop good count, but it will decidedly beryllium stepped up. And really, it's conscionable a matter of having bequest acreage and our group knowing wherever we deliberation we tin make those benignant of returns.

Operator

Our adjacent mobility comes from Charles Meade from Johnson Rice. Your statement is now open.

Charles Meade

I want to travel up connected Derrick's question, which was a awesome question. I'd conscionable for illustration to push a small spot further connected that Delaware Basin completion design. I understand you don't want to talk astir what it is. But arsenic I mentioned, immoderate of nan possibilities, I'm curious, is this thing that you use to immoderate your possibly fringier intervals that's thing that's bringing that -- bringing benignant of a lesser interval up to nan -- your double-premium threshold? Or alternatively, is this thing that you're doing already connected -- aliases is this a caller creation benignant of a nutrient and potatoes interval that could possibly herald a broader displacement prosecute successful your full Delaware Basin superior efficiency?

Billy Helms

Yes. Charles, this is Billy Helms. Yes. The caller creation is -- really starts pinch an knowing of nan stone we're applying it to. I deliberation we've talked successful nan past astir really each of our designs are tailor made to each wellbore and immoderate nan earth science is telling america is nan correct exertion for that.

So is it thing that we could use to each zones? I would opportunity astir apt not, but it's surely much charismatic than different zones. But it is besides being done successful nan halfway of nan play. It's not conscionable applying to nan fringe intervals aliases nan fringe of nan plays, but immoderate of our halfway plays aliases target intervals and we're seeing melodramatic improvements.

Now it's going to beryllium -- proceed to beryllium tailored based connected what nan earth science tells america is nan correct application, and we'll tweak it and beryllium capable to transportation that knowledge arsenic we spot it develop.

Charles Meade

That's adjuvant color. And for my follow-up, and I admit this is simply a simplification for a institution for illustration you guys and your number of rigs and nan number of plays. But overall, you indicated that you're going to summation your -- you're going to adhd 3 caller rig lines successful '23. Can you springiness america a consciousness wherever you are successful that process? Or erstwhile we should expect those successful aggregate, nan rig count to tick up complete nan people of '23?

Billy Helms

Sure, Charles. The rigs are beautiful overmuch successful cognition today. We started benignant of picking up rigs astatine nan extremity of nan 4th fourth going into this year. And arsenic we mentioned, nan 4th fourth tally rates successful nan Delaware Basin and nan Eagle Ford will beryllium beautiful accordant passim nan year. And so, we've besides started drilling successful immoderate of nan different plays, immoderate of nan caller emerging plays, specified arsenic nan Powder River Basin and Dorado. So those are benignant of ongoing.

We'll beryllium picking up rigs astatine different times and immoderate of nan different plays, for illustration nan Bakken aliases nan DJ aliases nan Utica. And those will benignant of travel and go. Those aren't going to beryllium really, yet afloat rig lines. They'll benignant of ebb and travel based connected nan timing of each individual play. But nan guidelines programme is beautiful overmuch going to beryllium set, and I'd opportunity nan rig count is not going to up and down overmuch beyond wherever it is today.

Operator

There are nary further questions astatine this time. I will now manus backmost complete to Mr. Yacob for closing remarks.

Ezra Yacob

I'd conscionable for illustration to convey everyone for participating successful nan telephone this greeting and particularly convey our labor for nan outstanding results delivered successful 2022. Thank you.

Operator

That concludes today's EOG Resources Fourth Quarter and Full Year 2022 results. You whitethorn now disconnect your lines.