Okay, we're gonna get started with our next company. Next up, we've got EOG Resources. This has been an industry leader, kind of a bellwether for the group for several decades now. Diversified portfolio, meaningful presence in several U.S. basins as well as an international portfolio as well. Presenting today on behalf of EOG is the COO, Jeff Leitzell. Jeff?
Well, thank you. appreciate the introduction there. As you said, my name's Jeff Leitzell. I'm the Executive Vice President and Chief Operating Officer of EOG, we're gonna run you through a little bit about the company here. We've got our earnings presentation. Obviously, we just had earnings here recently. A lot of great information on the company. Talk a little bit about our plan and talk about our portfolio and some of the information associated with it. This first slide here, really, this is our value proposition as a company. I mean, our main focus is obviously sustainable value creation through the cycles. We don't chase commodity price. We wanna make sure that we've got investments that have great returns through the cycle through multiple commodity prices.
So, um, it really has kind of these four, uh, pillars, I would say, are our main focuses. The first one's capital discipline. We wanna make sure that we're investing in the right project at the right time, and we're maximizing returns. Uh, we wanna make sure that we maintain our pristine balance sheet, uh, that we, uh, keep that healthy, and that we're, uh, generating, uh, plenty of additional cash flow to where we can return that to shareholders. And you can see up there, we actually have a marker right now that's a minimum return to shareholders of seventy percent of our free cash flow. But you'll see throughout the presentation, for the last two years, we've been, uh, right around a hundred percent. And in this current environment, we plan on probably being pretty close to that hundred percent moving forward. Second is operational excellence.
It's basically doing what we say, making sure that we're executing, that we're improving the portfolio in each one of our assets day in and day out, that we have operational excellence, we continue to innovate. On top of that, what makes EOG unique is to make sure that we're exploring, looking for the next organic opportunity for the company to continue to improve the overall portfolio. Next, you can see sustainability. Obviously, we wanna, you know, practice extremely safe operations. We wanna be good stewards to the environment and obviously great partners with our community. Last but not least, is culture. You'll hear culture a lot throughout this talk just because it's really what makes the company special. You know, it's more decentralized culture. You know, we're very non-bureaucratic.
There's not a whole lot of red tape in it. People can get things done very, very quickly. All of our people are businesspeople first. What's very amazing about EOG is, they're interdisciplinary. You might talk to a geologist, and you might think they're an engineer or vice versa. Each one of them on their projects, they understand the decisions they make, not only how it affects just their personal asset, they understand how it flows through to the income statement, really affects the business 'cause each one of them are businesspeople first. You'll see a lot of that throughout the slides. This is why we think EOG is an extremely compelling investment. It's like a tear sheet that we put in there to really kind of talk through EOG as a whole.
You can see up in the top left, the first one, we obviously have an extremely high return, inventory, both domestic and international, and it's got extreme long duration. The way we look at inventories, we've got about 12 billion barrels of total resource plus. If you take that and you look at the economics of it, at $55 oil, it's all greater than 100% direct after-tax rate of return. Extremely strong portfolio. We obviously have a ton of experience in this. We've been operating unconventional for over 25 years, and we can really leverage that experience, both domestically in our operations, you know, and exploration and the same thing with international.
We'll talk a little bit about international as we move, but we see a lot of opportunity unconventional 'cause there really hasn't been a whole lot of exploitation of unconventional on the international front. Obviously from an operations standpoint, we're a low-cost, efficient operator. We really focus on improving operationally every single year and primarily through what I would say is sustainable efficiency gains, efficiency gains that can basically stand the test of time with the asset and be there for improvement the whole time. We also look for places that we can take control of the supply chain. Whether it's sand supply, whether it's water, logistics, it could be cement services. We actually have EOG Cement Services. We have EOG Motor Programs, EOG Mud.
Anywhere that we can take control of the supply chain side of it, we feel like there's added efficiency and quite a bit of cost reduction. You can see the performance we had in 2025. Now moving down to the bottom, obviously, we wanna make sure we've got durable cash flow. You can see over the last 3 years, we've generated $15 billion in free cash flow, and you can see how that affects obviously the return on capital employed of the company, averaging 24% over the last 3 years. We're very, very focused on a sustainable regular dividend. We'll talk about it a little bit more in depth on another slide, but current dividend right now is $2.2 billion. That's $4.08 a share on an annual basis.
As I talked about before there, returning 100% of free cash flow back to shareholders. Last but not least, just make sure that we're maintaining an industry-leading pristine balance sheet. You can see, currently Net Debt to EBITDA, so extremely strong balance sheet, and we'll kind of walk through what we're focused on with the balance sheet here in a little bit. For 2025, I mean, really the summary of this slide is, in 2025, we basically met or exceeded all of our operational or financial goals. You can see impressive financial results on the left-hand side, $5.5 billion of adjusted income.
you know, outstanding return on capital employed there, it flows over obviously to the free cash flow with $4.7 billion of free cash flow and 100% of that returned to shareholders. Really what I'd point you to is down on the bottom right, strengthening the portfolio. 2025, I would say, was truly a transformational year for EOG. We really had 3 things take place. We had the acquisition of Encino, as you guys know, for $5.6 billion. That expanded our Utica footprint by 1.1 million acres, and it immediately moved that play to a foundational play where it's free cash flow positive. We're gonna have quite a bit of additional activity there. We were awarded the first ever onshore concession in the UAE for unconventional oil.
This is an area that has penetration points and a lot of data, really we just got to get in and operationally execute. We also executed on a JV partnership with Bapco in Bahrain on an onshore unconventional gas play that's very similar. Plenty of penetration points and data, a very exciting opportunity that we think we can bring our technology and knowledge and really extract a lot of value out of. Taking a look quickly at our plan. How we look at plans is, as I talked about in the first slide, we really start with capital discipline. We wanna look and see where every one of our assets is in the portfolio in the life cycle and make sure they're improving and they're generating the target returns that we're looking for.
After that, we'll take the macro environment into considerations and make sure that the market needs the commodity based off where we're at in the cycle. What we ended up doing with this plan is based off current environment right now, we're actually holding volumes flat to Q4 of 2025. What that rolls up to is, as you can see here, $6.5 billion capital budget. It's 5% increase year-over-year in oil, and what that takes into account is obviously an Encino acquisition, which closed in August of last year, so we have 5 months in last year of Encino and then a full year this year. In total volume-wise, that's 13% YoY on a BOE basis. There's substantial free cash flow generation, as you can see with that.
some of the plan highlights I'd say is extremely capital efficient plan. Our breakevens on it, if you look for the CapEx, is about $40 WTI. If you take the CapEx and regular dividend into consideration, it's $50. really what we're doing with this year's program is the first thing is we're balancing the activity between our three foundational oil assets, which is the Delaware Basin, the Eagle Ford, and the Utica now, our new foundational asset. We have some additional investment to continue to grow our very prolific Dorado gas play down in South Texas. We have additional investment obviously in our international assets, which would be Trinidad and our new entries into the GCC. We did update our three-year scenario.
We came out with this, 3 years ago, and obviously it's been 3 years. Also with the Encino acquisition, we wanted to kinda dust this off for you. This is not guidance by any means. This is not our plan. This just kinda gives you an idea of the resiliency of the cash flow of the company moving forward. You can see over on the left-hand side, outstanding ROCE and free cash flow, free cash flow growth, at varying commodity prices there. When you look at it, basically this is gonna be kind of a low single-digit oil growth, mid single-digit BOE growth. It's got a reinvestment rate of less than 60%, and we have no improvement in the company here. There's no improvement in overall cost, efficiency, production whatsoever.
It's basically maintaining the status quo. You can see we've got a couple different scenarios there at 55 and $70, I really wanna turn your attention to the right-hand side where you see the last three years at the actual price was about $15 billion. With this scenario, if you move forward that exact same price for the next three years, we have about a 20% increase in free cash flow to $18 million. Very substantial and continued growth of free cash flow for the company. This is a quick look at our multi-basin portfolio, which, you know, we think is a huge benefit. You'll hear me say this multiple times, but we have seven different divisions domestically, multiple divisions internationally. Really what each one is they're a separate business unit.
Each one's focused on their operations of their assets, continuing to improve that. They're focused. Each one has an exploration team within their division. They are strategically exploring for a next organic opportunity within their asset there. What that really does is they're almost like separate laboratories. As one of them learns something new, they don't just keep it in-house. They go ahead and share it with each one of the other divisions. Really you have seven different learning areas here domestically that really accelerates, you know, our knowledge, and we're able to share that and move along each asset that much quicker. Especially when we find a new asset or an emerging division or an exploration play, we're able to take all of our best practices from all of these divisions across and apply it directly there.
Looking at the portfolio, we really started as an unconventional operator in the Barnett, in the gas play. From there, we kind of moved up to the Williston Basin and the Bakken and had a large position there and have been active there ever since. Next, we discovered the Eagle Ford down in South Texas. You know, we were able to and very lucky to acquire the majority of the acreage to the core in the Eagle Ford, which has been a very prolific asset for us. Moving to the Delaware and the Powder River Basin, we had nice acreage holds there, in 2016, we went ahead, and we acquired Yates and greatly increased our overall footprint in both of those basins and really pushed them forward.
The last two domestic that I'll touch on here is obviously our Utica play, which I've talked about with the Encino acquisition. We are the largest producer of oil and have the largest footprint up in Ohio. We are focused on the volatile oil window up there. We have our South Texas Dorado gas play, 21 TCF down there, very close to the market center. We feel like it's going to be a huge value to the company as we move forward from a gas aspect. Over on the right-hand side, we have our international assets, Trinidad Tobago, shallow offshore gas play. You know, we've been there for over 30 years, great returns. We're able to sell to premium markets there in Trinidad Tobago.
Our two new entries, we've got Bahrain, which that's that onshore gas unconventional asset, and the UAE, which that's the onshore oil unconventional asset, 900,000 acres. These two are very topical at this point. We started exploration in the fourth quarter of last year, planning on results Q2. Obviously with everything happening, the events over there, you know, I'm happy to say we had procedures and plans in place. You know, activity and everything's secure. All of our people are safe, and we're just monitoring the situation at this point.
Excited about these assets once obviously things calm down over there in the Middle East. Moving on, really on this slide I just wanna hit, you know, we've talked about the multi-basin portfolio of long duration, you know, high return inventory. Really what I wanna hit on here is just how good the returns on that inventory is. On the chart on the right there, you can see at bottom cycle, what we call bottom cycle pricing, $45 oil and $2.50 gas. Our full portfolio averages around 55% or greater direct after-tax rate of return. You can see what happens with that with commodity prices, just continues to improve, you know, exponentially as you improve the commodity price. That's what we like to do with our portfolios.
We like to pressure test it against very severe you know, environments just because we know it's a very cyclic environment, and we want something that's able to, like we said, generate solid returns through those cycles. When you take that and you roll that up from a returns aspect from a company standpoint, return on capital employed, outstanding over the last 5 years. You can see EOG here in the dark blue versus our peer average, averaging close to 20% if not higher for EOG and outpacing the overall peer average. Great results from an ROCE basis from a company. Then you look at that, and you roll it forward into our cash flow priorities as a company.
First and foremost, our number one cash flow priority is our regular dividend, as I talked about, $2.2 billion or $4.08 a share. We really think that a sustainable growing dividend is truly the hallmark and foundation of a really great company. Obviously maintaining the pristine balance sheet as we talked about. Balance sheet's in great shape right now, but we do have a marker out there, and we have that at bottom cycle pricing that we want to maintain less than 1x total Debt to EBITDA, which is obviously an extremely healthy balance sheet. We obviously have the capital investment in the company, both through our activity and opportunistic, you know, entries and bolt-ons and other marketing opportunities that we can have for the company.
Last but not least, we obviously have cash returns to shareholders outside of the regular dividend, which we'll talk about a little bit here in a second. We have done special dividends in the past, but primarily here most recently in the last couple years, we've really focused on buybacks, and I think you can plan on in the current environments, we'll focus primarily on buybacks moving forward and lean in in that direction. For the dividend, this just really shows the history of it. We've got 28 years of a sustainable and growing dividend where we've never cut or suspended it in that whole time period. Pretty impressive growth since 1999.
You can see there really a lot of growth in the last 5 years from a dividend aspect, where we jumped up quite a bit in 2022 after the pandemic, then continued to grow it up to where we're at at the $4.08. I think this just shows you the confidence that we have in the portfolio and really the resiliency that we have. We take for this dividend too, every single year before we increase it, we run it through numerous different scenarios, both market scenarios and portfolio development scenarios, to make sure that it is sustainable and that even if we do go into a downturn, that there's no reason that we have to suspend or cut this dividend. It is pressure tested, and it is very, very resilient.
We've talked about the cash flow returns to shareholders. I mean, you can see what we've done over the last 3 years here as a company, significant returns there. You can see the regular dividend. We did do some special dividends back in 2023, but, like I said, we've been focused more on the share repurchases. $6.7 billion in the last 3 years, and that's reducing our outstanding share count by about 10%. Substantial move there as far as buying back shares. You can see the breakdown down in the bottom as I talked about, year-over-year, how that's been distributed between regular dividend, special dividend, and share buyback.
Then on the right-hand side, you can just see from an actual cash returns as a percentage of market cap how we rank against the peers, you know, obviously being a peer leader there in cash returns. Our pristine balance sheet, you know, I'm proud to say we think we have one of the industry's best balance sheets right now. Net Debt to EBITDA. you can see peer leading from that aspect. I think really the point that I'd like to get across on this slide is the balance sheet's in great shape. We really don't need to put a lot of cash in this current environment on the balance sheet.
We've got very robust cash flows. I think our primary focus moving forward is to be opportunistic for the company, wherever we may, whether that's opportunistic bolt-ons, marketing agreements, you know, other opportunities for the company, obviously additional cash returns to shareholders to really balance out and be able to support that 100% return of cash to shareholders, as we've talked about. You can see the last couple years we've been right around that marker. I'll get into the assets here for a second. I mean, this is really where the rubber meets the road. This is really where our culture comes into play. As I said, that decentralized culture, the sharing, you know, the innovative qualities, being business people first. As I said, each one of these divisions is focused on their own asset.
They've got boots on the ground. They can get to the asset every single day. That helps out see the improvement in the asset, just from an efficiency standpoint, pushing forward innovation, and then also from an overall exploration aspect. Instead of just having one exploration team in headquarters, each one of our divisions has an exploration team and is focused on organically growing. Here first starting in the Delaware, we've made outstanding progress in the Delaware, and I know the Delaware's been very topical for us. It's been in the news for, you know, productivity reduction year-over-year. What I'd say is that was completely strategic, and it was by plan and by design.
What we've done is, you can see here, we've increased our lateral lengths like much of industry a lot over the last 3 years, 30%. What that equates to is we've really lowered the overall cost basis there in the Delaware. The well costs are down 20%, you know, reducing cash costs. What that does is, it's given us the opportunity to where there were certain targets that didn't meet our very stringent bottom cycle hurdle rate, but now it does, and it goes up above that, and it's very additive to it. Not only that, what it does is it balances out our actual payout, improves the payout of it. It's improving the overall margins of it.
Really we're starting to look at the value in an NPV per acre out there and make sure we're extracting the maximum amount of value and improving our re-recovery per acre. Where that puts us now is we're well over 20 unique targets across all of our Delaware acreage with just outstanding improvement there. As far as, you know, the improvement, you can see here 4% improvement year-over-year in capital efficiency on that. We feel very, very confident that now that we've set in this new actual development program, well productivity in the Permian will be consistent moving forward with this development program unless we have to have another step change where we're able to add more value because of cost reduction, which we'll keep you guys apprised and abreast of that.
As far as our inventory, we did come out, and we talked about it on the call that we can go at our current pace right now in the Delaware of over 300 wells, maintain the same economics, the same free cash flow and success for 10 years+ with the inventory we have out there. Very, very robust, and obviously with adding in these additional targets, that just helps the inventory there in the Delaware. This is just quick. I'll breeze over this. This is Rystad data over the last 3 years. You can see how we kinda stack up operationally and from an efficiency aspect, and then how that rolls through versus the peers from a break even. A leader as we've been there in the Permian. Moving up to our Utica asset.
Obviously this is one that's a premier asset for us now, a new foundational one. We had the Encino acquisition last year, as we talked about. When we did announce that acquisition, we had put a target out there of about $150 million of synergies in the first year. I'm happy to say we've reached that target early in about five or six months. The majority of that, I would say, is obviously just in the well cost side and the efficiency side. You can see where Encino was at at $750 a foot. EOG was at $650 or below a foot. Combined now after six months into the actual acquisition, we're pro forma under $600 a foot there. Just outstanding results across the board.
You see on the bottom just some of the efficiencies from an overall operational aspect that we've been able to enjoy, you know, through the acquisition and improving the overall asset over the last three years. This has really become one of those foundational assets for us with a lot of running room. You're gonna see we're shifting, almost doubling the activity there. We'll be running three rigs and three frack fleets, and this will really be one of the big growth arms for the company as we move forward. Extremely excited about the Utica, and I think we still have a lot more upside even just with the acquisition and synergies as we move forward. Next, we've got our Eagle Ford play. This is just one of those amazing assets that just keeps on giving.
After 15+ years of development, where we've moved from, the majority of our development was in the east where it's much more prolific, I would say, rock to the west. Through operational advancements, through technology, through longer laterals, 15+ years later, we're actually getting better economic results now than we did back at the beginning of the play. You can see still improving our overall efficiencies, our capital efficiency there. We've got great operational performance, even after the 15+ years, so we continue to improve there, and you can see how that flows through to the break even price versus our peers there in the Eagle Ford being a leader, and plan on continuing being a leader there. Moving down to South Texas to our Dorado Dry Gas play in Webb County.
This is a 21 TCF resource. Yeah, that is 21 TCF, so it's massive. You know, it's very, very prolific wells. We keep 'em choked back. We bring 'em on over 20 million a day. We've just made outstanding progress down there. Like a lot of the other plays that I've showed you in the portfolio, you can see we've rapidly dropped our costs there. We've optimized our operational efficiencies, and on top of that, we've actually just last year alone, through, you know, unique designs within our wellbore and our completions, we increased the overall productivity per foot, which is a recovery basis in this play, 13%. Continuing to improve it there, and we still got a lot of upside. It's very early in its days.
We exited last year at $750 million a day, the plan for 2026 is to exit at 1 BCF a day. You know, it is, we think, the lowest cost gas in the U.S. We've got it currently with a break even price per MCF of $1.40. We're so excited in the play. We actually have installed a 100 mile 36 inch pipeline that goes from the center of the field, completely EOG owned over to Agua Dulce. It has a capacity of 1 BCF currently, and it's easily expandable up to 1.5+ BCF just by adding on some booster compression along the line for minimum capital, and that's completely controlled by EOG.
That allows us to get access over into the market center on the Gulf Coast and also take advantage of our LNG contracts, which we'll be able to talk about here in a minute. How does that all roll up? I mean, not just even in Dorado, but from a full portfolio's perspective, we're looking at, you know, to make sure we've got an extremely diverse, flexible, marketing strategy, and we're really not worried anymore about flow assurance. It's not about getting the molecules to market. It's about having numerous markets to be able to select it and maximize our overall netbacks of each one of the molecules. You can see that on this price realization chart versus our peers.
We've always prided ourselves of outpacing what the average is to our peers in the market, that is a huge Priority to us to continue to make sure that we optimize our markets and that we're maximizing our netbacks on every single molecule. The great thing about this is it really has become a big part of, you know, technology and, you know, we have control rooms in each one of our assets to where we're able to control where each molecule goes, move it from market to market as those markets move, and make sure, like I said, we are maximizing that netback. Quickly, these are the gas sales agreements that we have over on the coast from an LNG aspect.
What I'd say about these is they're not tied to any specific, you know, play by any means. We can move any kind of gas to them. You can see over on the right-hand side, we currently right now of that 420,000 MMBtu wedge, we're producing 280,000 MMBtu, and that is linked to either JKM or Henry Hub on a monthly basis. We're able to elect that. You can obviously imagine, in recent years we've been obviously electing to JKM. That was really a sweetheart deal. The additional 140,000 of that agreement comes on here later this year, so we'll be at full capacity there.
We're also, the other stack bar on top of that, we're currently producing 300,000 MMBtu that's directly linked to Henry Hub there on the offshore. As we move into 2027, we have a Vitol agreement that's gonna be coming online for 140,000 MMBtu, which is Brent-linked to take some of the volatility out of gas price. There's additional 40,000 that's either Brent-linked or linked to U.S. Gulf Coast. Moving on to the last couple slides here. As we talked about sustainability, it's really core to our DNA. What I'd say about this is we've had a lot of success over the last handful of years. We did have targets set in 2020 with a five-year goal.
We achieved that goal 2 years early. We did come out and set new targets. You can see on the left-hand side, obviously reduced GHG emission intensity, maintain near zero methane emissions there, then obviously maintain our World Bank Zero Routine Flaring across the company to make sure we're good stewards. You can kind of see our strategy on the right-hand side. The big thing I'll point out there, and the easiest thing, is reduce. You know, don't flare. Make sure you get engineering controls in. Engineer out any kind of venting or any kind of emissions from that aspect. How we look at this is, you know, it's not only just being good stewards of the environment, but each one of these molecules, I mean, it's revenue.
Why would we not wanna capture that and go ahead and put it downstream to markets? Because a lot of the projects from an engineering aspect that you're able to apply here actually have returns to it. This is a big piece of who we are as a company. Lastly, as we finish up here, this is the last slide. As I said, everything kind of really all rolls up to the culture of the company. It really has to do with, as I said, each one of our people, they're business people first. They understand how they're affecting the business and how each decision is affecting the business. They're focused on the actual financials, the returns. They really utilize our decentralized culture, which is unique within the industry.
We're one of the only companies that actually has, you know, divisions in each one of our assets, so we're close and proximal to it, and we can be hands-on. Every one of our people is multidisciplinary. We really promote them, you know, not just focusing on their discipline, but understanding the full cycle of, you know, of jobs and technology we have in our industry, making sure they continue to innovate and that they're extremely responsible from a sustainability aspect. With that, go ahead and hand it back over to John. See if we have any questions?
Any questions?
Yeah. Hi. thanks.
What's your view of gas versus oil, and where would you prefer to invest in that market?
We prefer to invest in returns. That's what I would say. We're not really, we don't lean one way or the other. That's why we've got very stringent markers where, you know, at bottom cycle pricing, $45 oil, $2.50 gas, you know, the minimum return that we look for is 30% direct after-tax rate of return at that bottom cycle pricing. No matter if you're gas, no matter if you're oil, we're pretty agnostic to it. We're just about returns, and that's how we look at it. Obviously, as you look at, you know, where we stand right now with oil and gas, I mean, oil, we're obviously getting a little bit of a bump here with the, you know, unfortunate activities over in the Middle East.
We think it's gonna be probably short-lived. Really what we need to do is we need to see how spare capacity flows through OPEC+ and where that actually sits. Once that actually flows through the market at the end of the year, and our personal view is we think that demand is gonna be very strong and that spare capacity is probably not quite as high as what is thought of out there. We think we'll have pretty robust pricing as we move into the end of the year and into 2027. On natural gas, obviously, we're pretty positive on natural gas for the foreseeable future. With all the additional demand, we see about a 3%-5% compounded annual growth rate in demand over the next, you know, handful of years to 2030.
Obviously with all the LNG coming on, we think that there's, you know, gonna be a quite a bit of a support there, both domestically and international for the molecules.
Yeah. Go ahead.
With your 100% return of free cash flow shareholders policy, how do you avoid your buyback being, you know, not procyclical, right? Like when you generate a lot of cash flow, your stock price is higher, you buy more stock.
Mm-hmm.
How do you avoid kind of that, you know, that process?
As far as, you know, I mean, when do we buy back and when do we not to make sure we're maximizing value of the buybacks?
I mean, generally you wanna, you know, buy back, you know, increase your buyback when the stock price is low.
Mm-hmm.
Right? As far as. You're kind of doing the opposite.
Yeah. I think. Well, the one thing is I'd say is what's the value of the company and where do we think the intrinsic value of it in stock price is? I will say this wholeheartedly, we think we're undervalued. We've been undervalued for a while, extremely undervalued, I'd say, for the last couple years. We see so much value in the company right now based off how strong the portfolio and the inventory is. With some of the new opportunities that we've, you know, entered into, we see what the potential runway on those are and what they can mean to the company. At this point right now, I mean, even with a little bit of surge in pricing, I'd say we still think we're undervalued.