It's my pleasure to introduce you to the second session of the second day of the 39th Annual Strategic Decisions Conference. We are not expecting a fire drill, so if the fire alarm rings, take it seriously. Your primary path of exit is straight out the back door, to the right, to the escalators that you came up. You'll go down the escalators, and you will muster the corner of 54th and 6th. If for any reason that path is blocked, you will go straight back. There's an internal staircase halfway down this hall. You'll take that down one flight, and then you'll exit onto 6th Avenue, and wait for further instructions. I'll remind you again of the format of this. This is a fireside chat. However, this is your conversation. You have QR codes in your agenda. Please use those QR codes, with your phone to send questions up to the iPad, that I'll be monitoring. Ultimately, would love to have you drive the conversation with the questions that you want the answers to. In lieu of that, I will start the conversation. Think of it as a pyramid. We're gonna start high level with Ezra's views of macro, move down into thinking about strategy, and then we'll work our way through the various aspects of the portfolio. That's kinda how we'll lay out the conversation. Before we adjourn, however, let me introduce the CEO of EOG Resources, Ezra Yacob. He'll come to the podium and make a very short, number of comments, and then we will adjourn for the fireside chat. Ezra, thank you. Thank you, Bob. Good morning, everyone. First thing, I just wanna thank Bernstein and Bob for hosting us. It turned out to be a great conference, a lot of good energy in the meetings and some fantastic meetings. I'll go through just a couple of slides here to kick things off. This is really the first one, the most important one, and it's really our value proposition. It's become our mission statement. We're focused on really being among the lowest cost, lowest emissions, and highest return producers in the industry. We think that's what our customer base wants, and we're off to a great start this year in 2023. We finished up the first quarter, ahead on CapEx, ahead on operating costs, and ahead on production. We've made great strides, not only in our foundational, our core assets, but what we call our emerging plays, our emerging assets. That's the South Powder River Basin, where we're drilling Mowry Resource Play and Niobrara Resource Play. It's our South Texas Dorado play, which we believe will compete as the lowest cost natural gas play, better positioned than much of the gas out there across the U.S. Our emerging Utica Combo play, which we announced last year. We're still really in the phase of delineation, we're seeing great results there, we've kicked off our drilling program just in the recent months here. When you think about EOG, that's a great place to start. It's with our number one most important thing, that's that we're a multi-basin operator. We've got a deep inventory of high return assets. It begins with a investment on a premium price deck. That's something we use internally. It's $40 oil and $2.50 natural gas for the life of these assets. When we invest on that price deck, we like to see each of our wells be able to clear a 30% direct after-tax rate of return hurdle. More recently, we've increased that hurdle rate to 60% direct after-tax rate of return. What that does is, obviously, in a commodity-based business, investing on that low, that low oil price, basically gives us line of sight to being able to create value through the cycle. We support that really by being a low-cost operator. That's how we're able to do that. We utilize technology to empower our frontline engineers and geologists to really be committed to working to lower costs every day and improve well performance. We also strategically reach out and grab different pieces of the value chain of the supply chain when it's opportunistic for us. Things like drilling mud, motors, things of that nature, sand, water. We're able to do that by leveraging. One of the things we're able to do is leverage our balance sheet for that. We have a pristine balance sheet. It's been a hallmark of our company, really for decades. We also have a very clear cash return policy. Hopefully, it's very transparent and easy for everyone. We announced this last year and committed to returning at least a minimum of 60% of our free cash flow in any given year. The reason we phrase it that way is that we wanna focus it on our regular dividend. We think that's the hallmark of a great company, is to have a continual, continually growing regular dividend and growing it in a sustainable manner. What I mean by that is we grow it in concert with expanding our margins, right, on a flat oil price or flat commodity price deck. We also backstop it again with that pristine balance sheet. Last year, in the first year that we had that commitment, we actually ended up returning 67% of free cash flow to shareholders. Above and beyond that regular dividend, we switch between special dividends or buybacks, depending on where we're at in the commodity cycle. The next thing that you should think about with EOG, as I started off with, is our commitment to environmental, and safety performance. We wanna be a leader. We have a net zero ambition that starts with reducing our own Scope 1 and Scope 2 operation, emissions. We plan on being able to capture some, and we've kicked off a small CCS pilot project to really educate ourselves on what it takes to make that process more fit for purpose. The second thing that we've done is we've actually achieved our near-term targets set for 2025 of our GHG emissions and methane emissions percentage. We've deployed some new technology called iSense, that allows us to do continuous methane monitoring. Lastly, all of these things I'm talking about really comes from the people. It's the culture of the company. Just about 30 years now that we've been focused on really providing a decentralized organization that empowers the frontline employees to really take ownership of value creation for the shareholders. When you think about EOG, those are kinda the 5 characteristics that I want you to keep in mind as we go through the Q&A here for the next 45 minutes. Thank you. Great. Thank you, Ezra. One of the things, general investors always want is a sense from a CEO that watches oil price every day, where the price of oil is going, where are we in the cycle? What is oil price gonna be at the end of the year? Yeah, that's an easy question. I'll take the cliché answer, that it's either going to be higher or lower than it is today, right? We'll go with a little bit of background there. I think everyone knows, this is public data, it's not going to be, you know, secret for anyone, you know, inventories were coming down. We entered the year with relatively high inventory levels as a result of much of the result of the SPR release last year. Inventory levels were coming down throughout the year as the US continued to recover, as China started to open up. We find ourselves now with a small SPR release. You've got OPEC having taken some barrels offline. All things tend to forecast, you know, barring a massive recession or anything like that as you go into the back half of the year and really exit the year, that we should be undersupplied, globally, is what we're seeing. China's demand has obviously come back, I think, a little bit different than most people anticipated. Stronger on the services side, weaker on the manufacturing side, but nevertheless, when you put it all together, they've turned in basically record oil demand months for the last two months, back-to-back months. That bodes very, very well for the industry. I think on the U.S., North American growth, what we're seeing is relatively muted growth as we anticipated. You know, last year coming in at about 600,000 barrels a day, liquids growth this year may be forecasted to be about the same, but much of that was gonna be a year-on-year growth, not necessarily entry to exit. I think we're seeing that with really relatively little activity, little growth going from February until now. You're starting to see the rig numbers kind of soften. Dominated on the gas side, for sure, but a little bit in the oilier basins as well. All those things add up, I think, to basically where we're at today, with front-month pricing really being fairly reflective, maybe a little bit soft on current inventory levels. Looking forward, you can see inventory levels potentially have the... At this point, I would say, look like they're gonna continue to decline as we enter the back half of the year with a undersupplied market. Yeah, it's been funny, the thesis on being an oil bull, which I have subscribed to, has been, well, Russia volumes are gonna roll over, China is gonna come back, and the SPR will end. I've been able to use that same report, just keep dusting it off. Right now, it's got good shelf life, 'cause someday it'll be true. I think the one thing I, in hindsight, was just the impact, the inertial impact of the SPR release. Like, we all tend to look at commercial stocks, U.S. commercial stocks, and correlate them to oil price, not total stocks. We're, we're just trying to absorb a bunch of SPR, which again, should be benefiting oil price. The other, to your point, is the fall in rig count. Did that surprise you? For the last three-plus weeks now. I'd say, on the gas side, not so much. I think everyone recognizes the volatility in the gas markets and the reaction, sometimes, that's needed for that. On the oil side, you know, a little bit. I think what's happened on the oil side that we haven't talked about, you just briefly mentioned, too, was the impact of Russia, right? The Russia-Ukraine war. I think a year ago, at this point, everyone was anticipating a lot of those Russian barrels being off the market, right? I think that's one of the big reasons for the SPR being released. What has happened is we find ourselves today with, you know, plus or minus, maybe half a million barrels of Russian oil not making it to market. Significantly less than the 2 and a half million, maybe, that was forecasted a year ago. On the gas side, it's not unlike the same thing. It just takes one or two things to really throw the market out of balance, and I think you're seeing U.S. producers and operators kinda respond to that. On the gas side, obviously, you know, there's a bit of a warm winter, there's always a risk of seasonality. Really, last year, it was the outage of LNG demand associated with Freeport LNG going down for some repairs. You're talking about 2 BCF a day going offline for, you know, roughly 8 months. That's back online right now, but it had the same effect as an SPR, really, is it drove those inventory levels considerably higher. Yeah, if you think about the way you allocate capital is against a rate of return, 60% at $40 oil, $2.50 gas. Those are close to shut-in economics, not for you all, but for the industry. When oil gets to 30 or 40, folks, marginal folks shut in. That's a decent floor. Nat gas, a little below $2, maybe, but we could quibble on that. Sitting here today, we're still at a wonderfully reasonable oil price. Not as high as I'd like, not as high as investors might like, but certainly a reasonable oil price. We're awfully close to that floor on gas. How do you think about longer-term gas, and are those levels correct, or are you sticking to them, or how do you think? Yeah, we're sticking to them. I'll start with that last part first. You know, we're sticking to them because we don't run the business, right, based on $40 and $2.50. We run our investment case on the investments that we make. The reason we do that is we want to run the business so that we can provide value to the shareholders through the cycle. Right? We don't anticipate oil ever being at $40. Well, look, we tested it in 2020, right? Oil was at about $38, and look at what happened. Oil whipsawed back after, you know, about 12 months, 14 months. We don't really anticipate oil ever sitting at $40 for the life of these assets, say, 20 or 30 years, right? What that does, by investing on that, is it continually lowers the break-even. We're able to do it because we have the depth of inventory and the quality of inventory to do it. It helps focus our staff on really bringing forth the lowest-cost reserves as quick as possible, and that's what allows us to be confident that we can provide value through the cycle. When I look back on the last 5 years, you know, the average oil price, average Henry Hub gas price is about $65 and $3.50, even with all the volatility and the ups and downs. When you look at the previous 5 years, unadjusted, low oil price was about $64.50, and the gas price was about $3.60. Yeah, the $42.50 is seems very, very conservative, but that's right in line with where we want it, for where we're trying to drive the company. Now, as I sit here today, you're right, gas is floating with, you know, is basically beneath that. We have taken a few moderate steps. We have deferred, or we're trying, we're working through options to defer a couple of pads at Dorado, without upsetting the operational efficiencies that we're trying to get that play up to try and push off some of the gas to when we think the market will be a little bit more in balance. Ultimately, again, our capital allocation is based on each of those assets I described when I started the opening comments, and how much can each of those assets absorb from investment on that $42.50 price tag, while still getting better year-over-year? It's that simple, honestly. The way we measure getting better, it's as easy as: did your finding and development cost, your cost reserves, did they decrease by $0.01 year-over-year? If it did, you're getting better, right? That's all we're really looking for, and that's the best measure of whether or not you're overcapitalizing or potentially even undercapitalizing any of these assets. The depth of the inventory, the quality of the inventory, and really focusing on that $40 and $2.50 for decades, for the entire lifespan of these assets, that's what gives us a little bit of confidence in being able to move forward, progress with an asset, even though you're looking at front-month spot prices a little bit underneath that. Decades. For shale, like, 5 years is forever for a shale well, right? The last years, 6 through decades, does it... Yep really matter? Well, on your operations cost, it definitely does. You're right, on a direct rate of return, you know, you're right. It's, you know, 2 to 5 years, 3 to 5 years is what's gonna dominate. That's when you need to start to think about being strategic. Years 5 through 20, yes, it's all about those costs that you've put in at the front. It's all about what have you done to keep your costs low when those wells have started to decline? It's what steps have you taken. Look, everybody has Tier 1 acreage, and everybody has Tier 4 acreage, right? It's what steps have you taken early in these plays to make sure that your Tier 4 acreage is actually gonna provide economics when you end up drilling that stuff. Whether it's talking about an individual well or an actual, you know, asset position, you need to be thinking clearly about. When you're committed to being a low-cost operator, you need to be thinking about that on day one. You can't just think about, Well, yeah, we're leaning in on a higher cost today, but we'll make up for it later. No, no. You need to have the discipline from day one, when you're moving forward and thinking through these plays. The other thing you mentioned is moderating completions of some pads. I remember early in the shale era, people were, "Well, I'm gonna do my big, long cycle projects, and then I'm just gonna use shale up and down to fill in the cycles and the edges." It's actually terrible to bring a shale operation. I mean, the cycles are disruptive to logistics, they're disruptive to cadence. You've talked about moderating that cadence. How do you make sure that you don't disturb sort of the inertia of getting those logistics? Yeah, it's perfect. I'll approach it from a little bit of a different area. We've got these three emerging assets, you know, the South Powder River Basin, as I talked about, or the Powder River Basin in general, the Utica Combo, and Dorado. In each of these plays, you know, there is something to be said for the economies of scale. That's what makes these resource plays work. After you explore for these plays, you identify that you've captured some sort of resource, do a little bit of delineation, the next step is really to try and get to a critical point of activity where you can capture those economies of scale. Not only learnings, right, through opportunities, you know, to drill wells and bring them on and see the production and get that feedback, but also being able to actually put in some infrastructure, whether it's local sand, water reuse systems, water lines, gas lines, so on and so forth. That's the key with Dorado. You know, this is the first year that we've actually gotten that play up to a point where we're feeling where we're at that critical point and being able to capture some of the economies of scale. We're running a rig program consistently. We're not gonna move away from that. We're running a frack spread, not consistently throughout the year as far as, you know, 365 days, but we're running it for big blocks of time. The worst thing you can do is either have a rig, you know, come in, drill some wells, then go away, and then come back, and you've got different crews and maybe different rigs, and rig up takes a long time. It's the same on a completion spread. If you have a completion spread, come in, you lay down a bunch of lines, you set up logistics, then you send it away for a month, and then you have it come back for two weeks. It's as you described, it just builds in a tremendous amount of inefficiencies. We've kinda captured that, so we're keeping it for a period of months, a period of pads. Really, what we're trying to do at Dorado, because in addition to capital allocation at the kinda life cycle of each of these plays, the other thing we look at is the macro market. You see gas is at very high storage levels right now. We've basically taken a couple of pads. We're trying to, and operationally, just ship those to the beginning of the next time that a frack spread comes back. Things of that nature allow you to continue to, you know, capture the efficiencies, progress through learnings and seeing wells come on, but at the same time, you have the flexibility to adjust a little bit for what you're seeing in the macro environment. The last thing you wanna see, and we all know that there's a lot of LNG demand coming online, the last thing you wanna have is, you know, six months before all that LNG demand comes on here, the industry ramps up 100 rigs in gas basins to try and meet that demand, right? What a squandering of resources and efficiencies that would be. Slow and steady. Continue to invest in these assets to the best of your ability at the right pace, so that you're learning and pushing them forward, but always with an eye on being low cost, doing everything to the point where you can guarantee that the assets will be able to provide value through the cycle. The challenge with squandering is we're almost predisposed to do it as an industry. Drilling the wells is faster than building the gathering to the coast. Gathering to the coast is faster than building the LNG, so we almost always seem to shove all the molecules up against the biggest capital project. You know, that's it. In any commodity-based business, any cyclical business, it's really easy. It's human nature to get sucked in. When times are good and cash flow is there, you reinvest more and more, right? It makes more sense. Does it really make sense? You're leaning in on probably a higher cost environment. Those costs are gonna stay with you through the cycle. The true discipline comes, I think, we think, when you're investing and holding yourself to the bottom cycle, right? You're holding yourself to an investment at a $40 or $2.50 gas price. That's what should really make the industry, or at least our company, investable for, you know, the generalist investors, the energy investors, and have confidence that they can still receive value through the entire cycle. You mentioned LNG. LNG is very much viewed as part of the energy transition for an E&P company. You've taken interest on the midstream side of LNG export volumes, but broadly, how do you think about the energy transition? How are you preparing for it, allocating capital against it? We think of it, you know, the transition as more of a solution, really long-term energy solution. We're big believers that, you know, technology will be able to provide a bit of a solution to energy poverty throughout the world, but it's not gonna come from any single source of energy. That's really it, that's why we say solution. That includes oil, natural gas, some coal. It includes renewables. What it's gonna require is each of those getting a little bit cleaner than they've previously been. Each of those need to provide reliability, each of those need to provide a decent amount of low cost. That's really the solution that the world's looking for. That's really how we define the transition, as a bit more of an evolution, that encompasses, you know, a basket full of different energy sources. You mentioned CCS at the start. Two thoughts: One, I'll ask you to talk about what you're doing there, but at a higher level, you've got a $40 oil price, you've got a $2.50 gas price. What price of carbon do you use? What's a double premium carbon price? Yeah. That's interesting. Listen, the IRA has definitely helped. The updated 45Q, I think, is doing what it's supposed to do. It's spurring a lot of investment and driving forth technology and innovation, which is what it should be doing. For us, we don't necessarily look at it that way. We do look at it as, this is a piece of our business, and it needs to generate a returns to be sustainable for the investment community. I don't think part of our value proposition is just to throw money at a solution and increase operating costs long term. Lowering our emissions is what the consumer wants, and that's what they're asking for. It's not unlike, in our mind, SWD or water disposal, right? SWD and water disposal originally was a pretty high cost of operating. What's happened in recent years? We've driven down that cost. We've developed ways to reuse the water. Now that it's actually you're getting some capital benefit from having produced water because you're not having to pay for sourcing. That's the way we think about our emissions projects. You know, our strategy overall for a net zero ambition, it's really a three-pronged approach, and the first one is reduce, right? Just reduce our emissions from our operations at the field level. Some of you know, there are ways to do that through pneumatics, through capture, things of that nature, just electrifying different parts of the business. Really just being more cognizant about reducing your flared volumes, things of that nature. That's step number one, is to actually operationally reduce your emissions. Step number two is to capture. With the CCS, I'll go ahead and lean in on your question about what we're doing. We're looking at CCS as the potential for more of a fit-for-purpose brand, right? We're not a large industrial. We're not a super major company. Our goal is not to capture all the emissions for the city of Houston and store it. Dump it into the Gulf. Yeah, off the door with... You know, that's not- Global That's not our expertise, right? That's not what we do. What we do is we're very mobile, we're agile, we're decentralized, we're in many basins, and we've got a lot of technology. We've got a culture of innovation. We've developed one pilot project we're looking at right now, and we're developing ways to try and utilize that to, again, make it a little more fit for purpose, make it a little more economic, where you can actually chase some of these smaller, and I don't mean, you know, very, very small fugitive emissions, but things that come off of, say, compressor stations, combustibles out in the field, things of that nature. We think that that's where a lot of the industry and the innovation is gonna need to go, is some of these more remote sources of emissions. The last part of our approach is obviously gonna be offsets. I think everyone to get to a net zero ambition will need to utilize some amount of offsets. Our impression, you know, our perspective is that this will be a real minor piece of it. It'll be to clean up the last little bit of really dispersed minor emissions that, again, you really can't economically justify kind of going after and chasing. Some of these emissions are things that are not even required to be reporting. That's kind of the way we view it. In terms of what's in bounds, out of bounds, you've made efforts for solar installation, supporting electricity in the field, but not building solar farms to support Houston. You're certainly working on the pneumatics. What's in bounds and out of bounds for tackling all of that? Anything I think that lines out with our core business strengths, our competitive advantages. A lot of these projects, you know, they don't come from the top. They don't come from me, they don't come from Billy Helms, our President and COO. These are things that are kicked up in the field, on the workstations and the desktops of our engineers. That's where, again, the real value creation comes from. Some of the things that Bob was mentioning, you know, we piloted a solar-assisted natural gas compression unit, right? Makes a lot of sense during daylight hours or when it's cloudy out or a dust storm in West Texas, right? You go ahead and have a natural gas compression system. When it's sunny and times are nice and moderate, you go ahead and build a small solar facility. That thing can run off of solar. Right off the bat, you would think you'd have maybe a 30% reduction in emissions. Well, we didn't really see it work that way. The returns weren't quite there as we forecasted. We ended up using a lot more land use for that solar field than what we'd originally anticipated, and it really just didn't work out very well. We developed some of these things as kind of shareware, so the technology is out there if for the next time somebody wants to take a look at it and try to innovate on it. On the flip side, a project that's worked phenomenally well is something that we call Closed-Loop Gas Capture. This is simply, if there's a downstream interruption, on our marketing, you know, typically at that time, your gas would go to flare until that interruption clears. Our engineers have designed a way where we either reinject that gas downhole to a, you know, a nearby, depleted well, and then we can basically turn around when that downstream interruption clears. For minor amounts of gas, we can kinda just loop that back through the facility system until the downstream interruption clears. Again, the returns on that are infinite, right? Because instead of flaring, your natural gas, you're actually protecting it, being able to sell it, providing that value back to the shareholders. More recently, as I've mentioned at the top of the hour, we've developed in-house continuous methane monitoring called iSense. These are basically methane monitors that are out on our pad locations. The fantastic thing about them is we get real-time data that's tied into the rest of our monitoring on our facility. Not only are we detecting when there's a methane leak, and we can send crews out there to fix it, a little bit more quicker response time than just our voluntary LiDAR program. Even more important is we're combining that methane data with pressures, other data that we're seeing, production data across the facility, and starting to identify what is the root cause of that methane leak as it occurs. Ultimately, this data should lead to really the front-end design of better facilities to begin with. If we pivot a bit to financial strategy, you're sitting at positive cash in an industry that never had cash. How do you think about the balance sheet? What's the right level of cash, and what's the right use of that extra cash once you've... We'll come talk about dividend, buyback, whatnot. Sure. What's the right level of just net cash on the balance sheet? Yeah, we don't have a cash target. We never really have. We do covet a pristine balance sheet. We covet mean low debt. We have a history through the company of having a strong balance sheet. In a cyclical industry, look, we invest on $40 price deck, but we are still subject to ups and downs in the commodity price cycles, right? When oil prices are $100, we're gonna be robust with free cash flow. When oil prices go down to $40, things are gonna get squeezed. We've leaned in on that balance sheet before, during downturns. We did it during the global financial crisis. We did it during COVID. Having that as our shock absorber is what gives us confidence in growing the regular dividend as consistently as we have. You know, we've paid the regular dividend for over 20 years. We've never cut it. We've raised it in each of those years, except for, I think, two. That's one of the reasons that we've been able to do it, is because of the strength of the balance sheet. We find ourselves now with cash on the balance sheet as well. We do have some strategic initiatives for that. The first thing is just to keep some reserve cash to run the business, right? To stay out of the commercial paper markets and things like that. The second piece, though, is really for countercyclical investment. You know, in past years, we've opportunistically pre-purchased casing during 2020 at a relatively very low time- ... in industry. We pre-purchased some line pipe that is actually going in the ground right now to help service Dorado. Last year, we have done some small acquisitions. You know, we prefer small bolt-on, dominantly undrilled acquisitions when we can get them. Last year in the Utica, we purchased acreage, including 130,000 net acre minerals, mineral acres, as opposed to just the lease, which provides tremendous value. Ultimately, we can also use it, as you started to lean in, on an opportunistic share repurchase. We have a reauthorization in place of just under $5 billion right now, and while we prefer not to use that as a programmatic buyback, we prefer an opportunistic buyback. We recognize the challenge with doing that in a cyclical industry is typically, when times get tight, you're not gonna lean in and do an opportunistic buyback because you don't have the cash, and you're worried about what the outlook looks like. The opportunity there, though, will be there. You'll be able to have the backbone to exercise on it if you actually have some of that cash on hand. That doesn't mean we want to leave cash on hand just, you know, forever until we're waiting for another COVID or anything like that. We're cognizant of the opportunity cost associated with it. Having the flexibility and the strength of the balance sheet is what allows you to be more strategic and opportunistic, not just in buybacks, but in countercyclical investments, to really provide value for the shareholders. I've got a long-term financial model for you all. It's probably wrong. One thing I never had in that model was much of a zeroed out buybacks, because historically, You've had the authorization. We were kind of waiting, never saw it, so that line was all zero. That line is not zero anymore, as of last quarter. Talk to that, and what does that change mean, and how should we think about your propensity for buybacks? What we saw in March was what we considered a dislocation. You know, we saw a lot of panic associated with the SVB, the financial banking crisis, mini crisis there. In late March, we saw oil sell off pretty dramatically, and our equity position followed even more dramatically. What I mean by that is industry's multiple really compressed even more so than just the oil price falling. We really didn't see any change in the macro environment. As we started the conversation off with, inventory levels were still going down, demand was still going up, supply was not out of balance. So we figured that that was a great time. It was one of the opportunities that we were looking at as we saw a dislocation there. I will say, dislocation is kind of a moving target, and I know that that's what makes your model difficult. But the strength of the company is part of what determines how we consider a dislocation. The company, since we first came out with the repurchase authorization 18 months ago, has already gotten much, much stronger than where we were coming out of the pandemic. We're reallocating across many more basins than we were during the pandemic time. We've strengthened the balance sheet, as we've just talked about. We've lowered our break evens to the point where this year, you know, we're growing production about 10%, 9% on a BOE basis. We've got a roughly midpoint of a $6 billion capital budget, and we've got a break even on that capital budget plan of $42 oil. We've also been able to kick off some of these exploration plays and invest in and move forward some of these emerging assets that we already have. Again, as the company continues to strengthen, the idea of that dislocation continues to evolve and how we measure it as well. If we go back, 2016, and now we'll talk about the dividend, and the base dividend, which has clearly differentiated EOG versus others. It's 2 little historic asides. One is, a bunch of your peers that pay variable dividends had fought with the Bloombergs of the world, the Capital IQs, to get those variable dividends shoved in as dividends when you pull it up. Suddenly, that measured the top of the cycle, and the cycle drops, and variable dividends follow. There is a differentiation on a base dividend. If you go back, 2015, The Big Short comes out. A great movie. The villain in The Big Short's the rating agencies. 2016 starts, and the rating agencies slash the price of oil they use in their models, and that effectively kind of closed debt markets. You saw a bunch of large, high dividend-paying E&Ps cut them or get stuck with them and forced to do other things strategically down the road. How do you think about what's the maximum base dividend where you can kind of, through that cycle, support it, not worry about it, not worry about funding it? Yeah, that's fantastic. We look at it from the break evens. We definitely don't want that regular dividend to get ahead of ourselves. The way we discuss it as a management team, when we discuss it with the board, we look at many different things. We look at where our current break even is. We look at less about the macro forecast, because, again, we know that prices are gonna go up and prices are gonna go down, and that's not gonna determine what we do with the regular dividend. That will be reserved for, you know, a special dividend. When we think about that regular dividend, it all comes down to where are we at with our inventory, where are we at with our exploration or emerging assets, what's the line of sight on continuing to lower our break evens? We've raised that regular dividend right now to a spot that's, you know, very competitive, very compelling, I think, with the broad market. It sits at, you know, well, unfortunately, with the pullback here, we're probably at, you know, 3.25% yield or something like that. It's very manageable right now. Again, it's the strength of the balance sheet that we think we could lean on if we ever needed to support it for a short period of time. It all starts again with investing and having an investment criteria based on what we think the bottom of the cycle could be. If we think about inorganic growth, you've committed forever to not be interested at all in expensive M&A. The word expensive is pulling a lot of weight in that sentence. Talk about what expensive M&A means to you and what it doesn't mean to you. Yeah, we continue to evaluate, you know, the market. We look at a lot of different deals out there, not because we're active, but we want to make sure we're not missing anything. Again, the strength of the business continues to improve, and so we want to be knowledgeable about what's happening in our industry. We usually arrive, we always arrive, at basically the same criteria. What we see is, you know, I just eloquently spoke up here about our investment criteria on a $40 price deck, and that we're investing in wells, a return of 60% direct after-tax rate of return. Well, you can't really get that when you're buying something. You really can't. If it comes with production, typically production is gonna require, you know, a bid ask somewhere in the range of a 10%, maybe 8%-12%. Any capital you're putting towards that right off the bat, you're diluting the return profile of the company from just investing in what we believe is already a pretty robust inventory. What it would need to carry that return, obviously, is a significant amount of undrilled acreage that's higher quality than what you already have. What I mean by that is, I don't know, when you've got a robust inventory, I'm not sure if you need to buy undrilled acreage unless you're willing to put rigs on it. You know, if you're buying a whole bunch of acreage and reducing the rig count, that kinda signals to me that you don't think it's as good as what you're already drilling. It doesn't make a whole lot of sense to us to be able to drill that. Our exploration program is focused on not just adding more inventory, it's really focused on adding better inventory, things that we want to drill, things that are gonna be additive to the front end of our existing inventory. You should be seeing activity, capital allocations, and rig activity, entering on these exploration plays. That's the same thing that we consider with M&A. When you do go back into our history, we did do one large deal in 2016 timeframe with the Yates merger and acquisition. For those of you that aren't familiar, when you look back on that deal, it basically came with very, very low PDP, very low production, and a significant amount of undrilled acreage upside that was contiguous, not only in our Delaware Basin with our existing acreage position, but also in one of our emerging plays, the Powder River Basin. Those are the types of deals that, you know, when we look at how to be value accretive, those are the types of things that end up happening, are something with low production, something that's got a lot of upside, Tier 1 undrilled acreage. Importantly, it was a merger that was not a competitive auction where you raise the paddle last and pay the most. That's the other part of that formula. That's right. A big piece of it was they were interested in having EOG shares, and the biggest reason was because of the strength of our balance sheet. We're in the Permian now, 'cause we're talking about Yates, and if we switch to more of the production side, a lot of time on the most recent earnings call around development strategy, and there's been a bit of a journey, a bad one, a learning journey in the industry from putting a single well in a zone, depleting that badly, and then coming back and drilling poor child wells in that zone. Now, the industry's kind of learning, well, wait a minute, drilling a zone and then drilling that zone badly, and then coming back and drilling the zones around it, was suboptimal, and people are pivoting. You all sort of highlighted a co-development strategy. You know, generally, people talk about single zone versus cube development. You're somewhere in between. Give a little more color of what you're doing there. I'm not sure I left that earnings call kind of figuring out your secret sauce. Maybe that was deliberate. Yeah. I don't know if it was deliberate. You know, we look at it starts with a geologic model for us. You know, we look at, developing all of the zones that are gonna be in communication with one another. That doesn't contemplate an entire top to bottom on the Delaware side, from the Avalon or Leonard Shale, all the way down to your deepest Wolfcamp target, because you've got mechanical units in there, that are basically frac barriers, you know? What we end up looking at is co-development. Sometimes it's two zones, sometimes it's four zones, sometimes it's six zones. We try to develop all the zones that are gonna be, let's call it, in the same flow unit, if you will, portion of the reservoir that's gonna connect up. That's really kinda how we manage it. Now, to take it a step further, there are different things that we do, and this is a little bit of the secret sauce. On the initial well package, that kinda helps when you come back. At some point, you always have to offset a well, right? When you have a large contiguous acreage position. We do some things on the completion of the wells up front that kinda helps make it a little bit easier to come back and not suffer some of the issues from the production that have plagued the industry. Now, these are things that we've learned through almost 2 decades of unconventional development, right? We've been in just about every North American major unconventional resource play that there is, and we've learned a lot through trial and error. We've learned a lot through collecting data, through all the horizontal wells that we've drilled and completed, and that's how we approach it, in the Delaware Basin. Yeah. If you think about the Eagle Ford, and think about middle of the Cretaceous, in the middle of the Eagle Ford, there was volcanoes all across Texas, laid down this gumbo layer that ultimately becomes this beautiful frac barrier between the upper and the lower Eagle Ford. No such barrier, right? You look at the logs across a big stack of oil. What you're kinda saying is, you found the baffles that weren't obvious at first. Yeah, that's exactly right. It's a different level of scale, it's a different rock type, and it takes a lot of... You know, again, it kinda goes back to what we were talking about before, is being committed to continually learning, continual improvement. Continuing to think about: How am I gonna make this play better? After I drill the number 1, number 2, number 3 locations, how am I gonna make locations number 4, 5, and 6 just as good? Continuing to learn about the basin and starting with the geologic model and continuing to work it, we've been able to identify some of the mechanical units in there. One of the benefits also is, it goes back to our multi-basin portfolio. We're able to utilize data from across different basins, different geologic environments, different pressure regimes, that's really what continually helps our modeling and geologic understanding of any of the plays that we're in. It's not just one directional, it's bidirectional. Things that we've learned in the Eagle Ford have led to better understanding in the Permian. Things that we learned in the Permian go back and eventually help our understanding of the Eagle Ford, and help progress the development there as well. I'll ask a question on the Utica, and then the investors have some questions that I'll pivot to. On the thesis on the Utica is, here was a play early in the shale oil revolution that came and went quickly. We haven't drilled a decent well there, or a modern technology well in a dozen years, so it seems trivial to go back and apply today's technology to a place where we know that there's hydrocarbons. Why would the Utica not work? Yeah, That's exactly it. It's funny, right? When you take the blinders off, and you come with a different perspective from different basins, it's amazing the things that you can uncover. The key to exploration, right, has always been trying to figure out why something will work. Not why it won't work. There are a million reasons to find why an exploration play won't work, and a lot of those things You know, there are a lot of failures out there. The real beauty is trying to apply technology and innovation in a different perspective to try and figure out what will make something work. I'll be honest, it's not the first time that we've looked at the Utica, right? We've been in and out of looking at the Utica and the liquids rich window for a number of years. Again, as you are committed from, continual learning, and you're learning things about the Delaware, and you're learning things about, the western areas of the Eagle Ford that are less pressured, you start to apply these understandings to different basins, and that's when you start to unlock, you know, newfound value. If we kind of pivot to some investor questions, how does your CapEx guidance assume for service cost inflation or deflation or disinflation for the remainder of the year? Yeah, that's a great question. We started this year anticipating about 13%, 14% inflationary pressure year-over-year. We baked into our plan at 10%. That's our goal, because we believe that we can probably offset another, you know, 3% to 4% through just operational efficiency gains. Some of the softening that we're, well, you're hearing being talked about in the market right now, I'm not sure if that's really gonna show up for many operators this year, ourselves included. Things like casing, you end up buying so far out in advance that the softening you're seeing in the spot market today is really gonna show up late in the year. Wells that are being completed today have been drilled a few months back under a higher service price environment. Things are... I think softening is leading edge. You see rig rates pulling back and activity levels like that, but we'll just have to see how it progresses out throughout the year. For us, we still feel very confident with the model that we've played out there and the CapEx plan. I will start. The three big buckets of steel, fuel, which you can see on the screen every day, and labor. Talk to labor. Yeah, labor for us, you know, we increased activity last year, we got caught up in the labor squeeze. Labor, for us, hasn't really been about wages. You know, that's not it. Wages have gotten back to, you know, pre-COVID levels, it's nothing exorbitant. For us, those challenges were labor availability, right? Getting qualified personnel to show up on day 1, also to show up after, you know, after 2 on and 7 off, 2 weeks on, 1 week off, to show back up, right, on day 20, 22 as it would be. That's been the challenge with it. When you're running a drilling rig and you expect a 6-man crew and you have a 4-man crew come up, there's gonna be less efficiencies there. The challenge on the labor side last year was really, you know, cost creep due to non-productive time or inefficiencies that were there. This year, we've maintained a pretty consistent program, and so we're doing much better on the labor side. I think industry is in general, but the ability of being able to really run a consistent program from year to year has been the biggest impact on that. On that day 22 absence, where did that person go? To a different job in the patch, they went back... Did they do, you know? Yeah, that's a great question. I think last year, you know, you had a lot of new employees coming and basically trying out the oil field, and then going back, as part of probably just a more broad socioeconomic kinda, you know, demographic shift or job function shift. In general, what we saw with the labor workforce on the oil and gas side, during the pandemic were things like, you know, truck drivers were able to start driving trucks closer to home. Welders, construction foremen, things of that nature, all of a sudden found jobs closer to home in, like, you know, the housing construction boom, residential or commercial construction boom. Don't forget, just basically the, you know, the shift change that we saw throughout COVID, not just in the oil and gas industry, but in any of these industries, where you had people that were, you know, ready for retirement, retired. People that were supposed to enter the workforce didn't necessarily enter the workforce. People that were hanging on for a year or two past their retirement age went ahead and retired, and people within a year or two of retirement eligibility went ahead and retired at all. You just, in general, lost a lot of people from the workforce and didn't have a lot of backfilling on there. I think that's just starting to work through the system as basically part of the post-pandemic, you know, economic recovery that we're in. Another question: How do you think about reserve duration and portfolio mix, given factors such as EV adoption, which may be positive for nat gas over time, but detrimental for oil? Yeah, that's great. We are bullish long term on nat gas. We think that that will be a bigger portion of the basket of energy resources that I talked about earlier. We think it has the ability to displace coal, and it definitely has the reliability that many of the renewables can't quite offer. We're very bullish on that. On the oil side, regards to EVs, you know, what we see when we look at it, and this is, again, public information, there's a lot of models out there that kinda suggest your EV penetration rates almost offset the same amount of oil demand loss from just natural efficiency gains on ICE, on internal combustion engines. That's how we kind of look at it. As far as our product mix going forward, we're somewhat agnostic as long as we adhere to the $40 $2.50 pricing. You know, when we found South Texas Dorado natural gas play, we weren't necessarily discussing amongst ourselves that we should go find a massive natural gas play, because one day there could be a lot of LNG demand and offtake for it. What we really found was a reservoir in the Austin Chalk, and we found a way to identify the pay criteria or the reservoir quality that was providing very large wells overlying our Eagle Ford Oil window. What we did is we identified that through core and log work. We mapped it up, basically across the entire Gulf Coast, and we leased a number of different areas where we saw there was potential. The one that ultimately competed, again, that was additive to our portfolio, was at Dorado. The other ones certainly weren't dry holes, but they also certainly did not compete, were not additive to our portfolio. That's really how we forecast and move about on our exploration program. It's, it's really, again, comes back to a returns-based question and what's gonna create the most value for the shareholders. In our last minute, can you let the audience know, what's the value proposition for owning EOG stock, as a way to close? Yeah, I love it. We'll reiterate. We'll finish up the way that we started. It's still on the screen. We are focused on being a lower emissions, low cost, high return operator. That's what we think the world needs. That's what we think our consumers are wanting. We think that that's what the shareholders, that's the best way to create value for the shareholders. We do it through being committed to a multi-basin operator, right? We see significant, we've talked about it today, advantages, not only for geographic diversity and product diversity. Think of it as a rising tide lifts all boats. We can utilize learnings across all those basins that allows us to optimize development across each of our assets. We're committed to being a low cost operator. You've heard me talk about that. That's the critical thing going forward. Be a low-cost operator and do it through applying technology and innovation, encouraging our employees to put forth whatever they need to basically keep this a real simple mission, right? It's a real simple job. It's creating more hydrocarbon for less cost. We covered our pristine balance sheet and our transparent cash return strategy. It supports all of our strategic initiatives, including supporting that regularly continuing to grow sustainable regular dividend, and then our cash return strategy of at minimum, a 60% cash return to our shareholders. We're committed to sustainability on both the environmental and safety side. We utilize technology and innovation just to lower cost, but also to lower our emissions. We think that that's really the path forward, and we think the industry, in general, will play a big role in reducing emissions globally. Lastly, it comes down to the culture of the company, the people that we have here. We're committed to being a decentralized organization. I'm a big believer that any industry, any company, if you can execute on a decentralized strategy, that's the best way to do it. You push decision-making powers further down into the organization of the people that really touch the value proposition of the business every single day. For us, that's what we're committed to, and that's the value proposition you should be thinking about when you're looking at EOG. Well, ideal. With that, I thank you, Ezra. Thank you, the audience, and if we could thank Ezra for joining us. Thank you, everybody. Thank you both.